Rule 49: Cost Consequences and Offers to Settle During Litigation

Many individuals pursuing litigation against their former employers for wrongful dismissal or other employment-related issues are not aware of the potential cost consequences relating to offers to settle that may arise during the litigation process.

Below we review these potential consequences, which are codified within the Ontario Rules of Civil Procedure.

What is Rule 49?

Under Rule 49 of the Rules of Civil Procedure, rejecting an offer to settle in a civil proceeding may lead to significant consequences when it comes time for the court to award costs. If the party that rejects the offer to settle would have been in the same position or better if it had accepted the offer to settle, then a higher rate of costs may be awarded to penalize that party for unnecessarily lengthening the proceeding.

The purpose of Rule 49 is to encourage settlement and, whenever possible, avoid a trial.

The Test Under Rule 49

For the cost consequences under Rule 49.10 to be triggered, an offer to settle must meet strict requirements, including:

1. The plaintiff or defendant must make its settlement offer at least seven (7) days before the commencement of the hearing;
2. The offer must not be withdrawn or expire prior to the commencement of trial;
3. The offer must not have been accepted by the other side; and
4. The judgment must be as favourable or more favourable than the terms of the settlement offer.

The offer to settle must also be fixed, certain and capable of clear calculation in order to attract Rule 49 cost consequences.

Plaintiff Versus Defendant

Under Rule 49.10:

• If the plaintiff makes an offer to settle and then obtains a judgment that is as favourable as or more favourable than its own offer, the plaintiff is entitled to partial indemnity costs to the date of its offer as well as substantial indemnity costs from that date forward, unless the court orders otherwise.
• If the defendant makes an offer to settle and the plaintiff obtains a judgment that is as favourable as or less favourable than the defendant’s offer, the plaintiff is entitled to partial indemnity costs to the date the offer was served. The defendant is then entitled to partial indemnity costs from that date forward, unless the court orders otherwise.

The Court’s Discretion

Despite the strict requirements under Rule 49.10, the court does have discretion when it comes to applying cost consequences under the rule. Courts also have discretion when it comes to applying cost consequences to settlement offers that do not conform to the strict Rule 49 requirements.

Generally speaking, the courts have to maintain a narrow interpretation of Rule 49.10 and tend only to depart from its requirements “in exceptional circumstances” where the interests of justice require it. However, there are cases where an offer to settle that does not meet the strict requirements of the rule will trigger the consequences of the rule.

Contact Sultan Lawyers in Toronto for Advice on Offers to Settle

Settlement discussions can take place throughout the litigation process. Litigants must consider offers to settle very carefully to avoid potential cost consequences of Rule 49.10. Ultimately, litigants should consider settlement and avoid, wherever possible and reasonable, wasting the court’s time by pursuing a trial.

At Sultan Lawyers, we are committed to advocating for our employee clients in a manner that maximizes the potential takeaway and avoids added cost consequences.

If your employment has been terminated, whether by unjust dismissal, wrongful dismissal or otherwise, we strongly urge you to have your termination package reviewed to determine if there may be an opportunity to request or argue for a more favourable exit package. We can advise throughout the litigation process to ensure you have the guidance you need to make reasonable and legally sound decisions.

Please contact Toronto employment and immigration lawyers, Sultan Lawyers, at (416) 214-5111 or here.