Under Rule 49 of the Ontario Rules of Civil Procedure, if a defendant makes an offer to settle and the plaintiff is awarded less than that offer at trial, the defendant is entitled to partial indemnity costs from the date of the offer. This notably took place in the case of Davies v. Clarington (Municipality), in which the Court had to decide whether they would order such payments from non-parties that had made loans to the plaintiff.
In November 1999, a Via Rail Train derailed while en route from Montreal to Toronto. The next year, a class action was filed on behalf of the train’s passengers. A settlement was reached in 2006, providing a payment of $252,000 to be divided among the class members. The only outstanding claim in the lawsuit was that of Christopher Zuber, who sought $50 million in damages.
Despite the defendant’s numerous settlement offers of up to $500,000, Mr. Zuber’s claim went to a 106-day long trial in November 2014, and he was awarded only $50,000 dollars for general damages. During the proceedings, the defendants learned that his litigation had been funded by several loans, many of which quickly accumulated interest at rates of up to 30% per year. This explained his refusal to settle, as his debt exceeded any offer the defendants were willing to make. The judge bemoaned Mr. Zuber’s “intransigence in pursuing a hopeless theory of his damages claim” and ordered him to pay the defendants’ costs of over $3.4 million.
It was understood that Mr. Zuber would not pay the costs to Via Rail, so the defendants sought to receive the award from his lenders instead. Pursuant to Ontario Ltd. v. Laval Tool & Mould Ltd., non-party costs can be awarded when the non-party was the true litigant and uses a “person of straw” to avoid liability, or when the non-party commits an abuse of process. The judge “carefully considered the terms of the loans, including that they did not give the lenders any share of the proceeds,” and found that the lenders had not committed an abuse of process. Accordingly, costs were not awarded against the lenders.
With the high costs of modern litigation, parties often have no choice but to incur debt while pursuing a claim. However, debt can prove to be an impediment to settlement, leading someone to pursue excessive damages through a trial. In the case of Mr. Zuber, the Court astutely noted that he would have ended up with “substantially more money in his pocket had he accepted either one of the offers.”
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