Delaying acceptance of a reasonable offer to settle

means costs consequences down the road

It is well established that during the course of litigation in Ontario, rejecting a reasonable offer to settle can have serious cost consequences down the road. If a litigant rejects an offer to settle one or all of the main issues in the litigation, but then ends up faring worse at trial, they will very likely have to pay a portion of the other side’s costs from the date the offer was made. This is true, even if they were ultimately the winner of the dispute.

The rationale is that it encourages litigants to accept reasonable offers when they are made, rather than wasting the time, money, and resources (not to mention tax-payer’s dollars) to battle over something for no added benefit. Simply put, if an offer is as good as, or close, to what a party is going to get after a trial, they should accept it.

The recent decision in Milanovic v. Le et al. involved awarding costs after a reasonable settlement offer had been accepted, but 11 months after it was made. In that case, the defence made an offer to settle in July 2012; after the dispute had persisted for almost another year, the plaintiff accepted the offer in June 2013, one week before the scheduled trial.

With regards to costs, the plaintiff took the position that they should be entitled to costs from the defendant up to the date that the offer was accepted. The defence, on the other hand, argued that the plaintiff should only be entitled to costs up until the date the offer was made.

While there was case law supporting both position, the Court found that the principles underlying costs awards supported the defence’s position. By delaying so long in accepting the offer, the plaintiff had unnecessarily caused the defence to incur almost the full expense of preparing for trial. In the interest of forcing parties to weigh the merits of their case and consider reasonable settlement as early as possible, the Court held that the plaintiff was entitled to no costs after the date that the defendant’s reasonable offer was made.

This decision is an extension of existing principles around settlement offers and costs awards. It is important to remember that causing the opposing party (and yourself) to spend time and money unnecessarily will likely lead to costs consequences down the road. During litigation, when a reasonable settlement offer is made, the earlier it is weighed and seriously considered, the better.

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