Do Rule 49 offers still work?
With the loser-pays costs model firmly entrenched in civil litigation, and, for some time now, also consistently applied in most estate litigation cases, it behooves counsel to give early and ongoing consideration to putting forward an offer to settle under Rule 49 of the Rules of Civil Procedure with the objective of obtaining a more favourable costs outcome.
In order to get the benefit of the cost consequences under the Rule, such an offer (i) must be made at least seven days before the hearing, (ii) cannot be withdrawn and cannot expire before the commencement of the hearing, (iii) must not be accepted by the opposing side, and (iv) the offeror must meet or beat the offer at the hearing. However, even if this criteria is met, the court has the discretion to depart from the cost presumptions under the Rule.
Taking into account the court’s discretion, and given what feels like the release of more and more decisions where cost awards seem to bear little reflection to the costs incurred or the Rule 49 offers made, I wonder whether making a Rule 49 offer actually provides the expected benefit of a better costs outcome for the offeror.
In reading a recent article on the issue, I am reminded that there is some predictability in place. The authors review some relevant authorities, including Niagara Structural Steel (St. Catharines) Ltd. v. W.D. LaFlamme Ltd. and Barresi v. Jones Lang Lasalle Real Estate Services Inc., two Court of Appeal cases where it was held that the courts of first instance erred in resorting to the exception in Rule 49, and where the Court of Appeal reasoned as follows:
- the purpose of the Rule is to be an incentive to encourage settlement;
- a judge’s discretion to depart from the costs presumption under the Rule is not unfettered, and should not be exercised in such a widespread manner so as to render the general rule ineffectual; and
- a judge should only depart from the Rule “where the interests of justice require a departure”, after giving weight to the policy of the Rule, the importance of predictability and the even application of the Rule.
Thanks for reading and have a great day,