In Ontario civil and estate litigation, offers to settle are a daily and welcome occurrence.  What is clear is that if the offer is later found at trial to have been reasonable, the unreasonable party will suffer cost consequences. What has not always clear is what will happen if the offer to settle is simply ignored and then snapped up on the eve of trial. Now we have an answer.

The drafters of the new Rules of Civil Procedure of 1985 introduced the concept of formal offers to settle.  Of course, legal settlements had been occurring for centuries, but there was no format and there were no consequences outlined in the Rules.

The adoption of the principles underlying the new Rules has only gained strength in the last 30 years.  The civil litigation process is now heavily biased towards encouraging settlement in order to save the resources of the state (the costly court system) and to achieve the societal goal of reconciliation among its members.

With all these offers to settle flying around and a clear new Rule, one would have thought that the consequences of ignoring an offer until the last minute would be clear.  But it was going on and no one knew what to do.

The Rule has always been clear that if the plaintiff served an offer to settle and beat it at trial, his costs from the date of the offer to the end of the trial would be awarded on the highest level – what is now called substantial indemnity, formerly called solicitor-client costs.  It was also clear that if the defendant served an offer to settle and beat it at trial, he would be awarded his costs from the date of the offer forward at the lower level – what is now called partial indemnity and was formally called party and party costs.

The gap in the Rule occurred in the scenario where an offer is served well in advance of trial and accepted just prior to trial.  What then? What about the tens of thousand of dollars wasted in taking further steps and trial preparation? The recent decision of the Superior Court of Justice of Ontario in Milanovic v. Le 125 O.R. (3d) 158, provides the answer.

Consistent with the principle of encouraging offers, the court denied over a year of costs to a plaintiff between the time the defendant served the reasonable offer and the time the plaintiff accepted the offer on the eve of trial. Delay was financially punished.

The Milanovic decision reminds us that serious and timely consideration must be given to any offer or a litigant will pay the price.

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