Ontario is a jurisdiction where parties are encouraged to settle their legal disputes well before reaching the ultimate hearing of a matter, and as such it is not uncommon for opposing parties to exchange offers to settle throughout the duration of the dispute.
An additional incentive provided for under the Rules of Civil Procedure to settle the matter is what is called a “Rule 49” offer to settle. Generally, it operates by ensuring a costs award that is favourable to a party who:
(i) makes an offer to settle that complies with the specifications of Rule 49; and
(ii) achieves a more favourable result at the hearing than offered under the offer to settle.
An offer to settle under this rule can be served by a plaintiff, defendant, applicant or respondent in an action, application, counterclaim, third party claim, crossclaim or motion. This means that this rule is applicable to motions on discrete issues within a legal dispute and is not limited only to offers made to settle the entire dispute.
In order to be eligible for the benefits provided under Rule 49, the following requirements must be met:
(i) the offer to settle must be made at least 7 days prior to the commencement of the hearing;
(ii) the offer to settle must be fixed, certain and understandable; and
(iii) it cannot be withdrawn or expire before the commencement of the hearing.
In deciding whether or not to make an offer to settle under this rule, it is important to take into account the fact that the court, in exercising its discretion with respect to costs, may take into account any offer to settle made in writing, the date the offer was made and the terms of the offer.
Where a plaintiff or applicant makes an offer under this rule and the judgment is as or more favourable to that party than the offer to settle, the plaintiff or applicant is entitled to the following:
(i) costs on a partial indemnity basis to the date of the offer to settle; and
(ii) costs on a substantial indemnity basis from that date forward.
Where a defendant or respondent makes an offer under this rule and the judgment is as or less favourable to the plaintiff or applicant than the terms of the offer to settle, the following applies:
(i) the plaintiff or applicant is entitled to partial indemnity costs to the date that the offer to settle was served; and
(ii) the defendant or respondent is entitled to partial indemnity costs from that date forward.
In the event that a party that made an offer to settle under this rule wishes to withdraw it, such withdrawal must be clear and unequivocal.
For more information on the manner in which Rule 49 operates, the Ontario Bar Association summarized the general rules and case law related to it here: https://www.oba.org/getattachment/Sections/Civil-Litigation/Resources/Resources/Litigation-Fundamentals-Sunrise-Series/Offers-to-Settle/Rule49OffersToSettle.pdf
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