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Cost Implications in Failing to Make a Reasonable Offer to Settle

May 17, 2024

In assessing costs, in Ontario, there have been two recent decisions where the Court has awarded costs on the basis that the defendants failed to make reasonable offers to settle.


In Lawless v Joanovits, 2024 ONSC 1561, Justice Edwards of the Ontario Superior Court of Justice awarded costs exceeding the general damages in a personal injury claim.

The primary issues in dispute were whether the defendant was liable under the Occupier’s Liability Act and the quantum of general damages. Prior to trial, the plaintiff made two Rule 49 offers to settle at $150,000 and $ 100,000, respectively. Both offers also sought costs and disbursements. The defendant refused both offers and did not make a Rule 49 offer.

Following a five-day jury trial, the jury apportioned a liability split of 70/30 % as between the plaintiff and defendant. The plaintiff was awarded $60,000 in general damages which was reduced to $18,000 after consideration of the apportionment of liability.

In addressing costs, the plaintiff sought partial indemnity costs at approximately $114,000, and disbursements of $18,677. The plaintiff argued that the defendant’s hard ball approach was a “bullying strategy” which is inconsistent with the goals of the civil justice system and as a result the plaintiff incurred significant costs for which it sought. In response, given the plaintiff’s recovery, the defendant took the position that costs should not be awarded to the plaintiff as the plaintiff’s recovery fell within the jurisdiction of the Small Claims Court and the Simplified Procedure under Rule 76 of the Rules of Civil Procedure.

It is recognized that while an award for costs must be proportionate, reasonable, and fair, it must also reflect an amount that the losing party might reasonably have anticipated paying in the event of a non-successful trial.[1]  Justice Edwards concluded that courts are occupied with personal injury jury trials that could have been avoided had the parties taken a more realistic position on liability and damages. He noted that in this case, the defendant took a no liability position when it failed to make a Rule 49 offer. Justice Edwards wrote that by doing so the defendant failed to recognize the risks associated with all litigation. Specifically, Justice Edwards stated the following:

There are few, if any, cases which can be described as having no risk.  Resolution of cases requires all parties (and this includes the insurers who instruct defence counsel in most personal injury cases) to make an informed and realistic assessment of risk.  That risk should be reflected in a party’s Rule 49 offer.  The defence position in this case did not reflect any realistic assessment of risk. If the defence advances a no risk position the defence must expect that such a position may ultimately result in a costs award in favour of the plaintiff even when the jury awards the plaintiff something that falls within the jurisdiction of the Small Claims Court or the Simplified Rules.[2]

[Emphasis added]

Justice Edwards held that the general damages awarded reflected both parties’ strategies. The plaintiff sought an outcome that failed to account for the plaintiff’s contributory negligence, where as the defendant adopted a position of no liability. Had the parties appropriately reflected on the risks associated with litigation, this matter would have been resolved outside of court.

Justice Edwards awarded costs in the amount of $50,000, plus applicable taxes and disbursements in the amount of $18,677.

Similar to the decision of Justice Edwards in Lawless, Justice Mandhane of the Ontario Superior Court of Justice in Barry v Anantharajah, 2024 ONSC 1267awarded costs exceeding the general damages awarded by the jury.

In this case, the plaintiff was injured as a pedestrian by a motor vehicle turning left at an intersection as crossed the street within the crosswalk. Prior to trial, the plaintiff made an offer to settle her claim at $500,000 in damages, plus costs and disbursements. In turn, the defendant responded the same day with an offer to have the plaintiff’s action dismissed without costs. The defendant never made a monetary offer before or during trial.

Following the three-week jury trial, the plaintiff was awarded $21,166 in general damages and $26,000 in special damages. The jury found the plaintiff to be contributorily negligent by 15%. After accounting for the contributory negligence of the plaintiff and the statutory deductible for general damages of $46,053.20, the plaintiff received only $16,160.50 in damages.

When assessing costs, Justice Mandhane stated the following:

Where a defendant insurer plays “hardball” by offering zero prior to trial rather than even a modest sum, it leaves the plaintiff in a bind: Either she has to abandon her claim entirely and face a claim for costs or take the case to trial at great cost. As stated by the McKelvey J. in Wray, at para 12: “In deciding not to make any offer, the defence was setting a clear demarcation line or a ‘line in the sand’ which can be used to identify success or failure in an action.” Having set a line in the sand, the Defendant must accept that she lost on her own measure.[3]

[Emphasis added]

As such, Justice Mandhane determined that proportionality was not determinative in her decision on the quantum of damages as it was the defendant’s unreasonable decision not to make an offer that effectively necessitated the matter to proceed to trial.

Justice Mandhane ordered the defendant to pay the plaintiff a total of $300,000 inclusive of costs, disbursements, and applicable taxes. In ordering this amount, Justice Mandhane explained that the defendant’s tactic “to force the matter to trial in the hopes that the plaintiff would either withdraw or settle her claim for no monetary compensation”[4] was unreasonable and so the defendant must bear the costs of this aggressive litigation strategy.

It is evident from these recent decisions that although a defendant may have a basis to refuse to make any monetary offers, taking such positions is not being looked upon favorably by the Court. These decisions are reminders that all litigation involves some risk, and a defendant should seriously consider the costs implications when it refuses to make any offer to settle or makes an offer to settle on the basis that the claim be dismissed on a without costs basis. In Ontario, a Rule 49 offer encourages settlement by imposing costs consequences on a party who fails to accept a reasonable offer. As Justice Edwards noted, a refusal to make a Rule 49 offer is a failure to recognize the inherent risks of litigation and can lead to significant cost consequences.  As Justice Mandhane stated, this “hardball” approach in an attempt to force the matter to trial or to force the plaintiff to abandon their claim may be an unreasonably aggressive litigation strategy, which in turn can lead to significant cost consequences.


[1]  Lawless v Joanovits, 2024 ONSC 1561 at para 16.

[2] Ibid at para 14.

[3] Barry v Anantharajah, 2024 ONSC 1267 at para 19.

[4] Ibid at para 33.

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