Litigation can often be an uphill battle. Aside from the general requirements to establish your own case, trying to work with opposing parties that take an unrealistic review point of the merits of their case can be a frustrating and time-consuming endeavour. The “hardball” tactic has been a firm and well utilized tool in the arsenal of many litigants and continues to be so. However, recent decisions of the courts are drawing a line in the sand and, especially in insurance cases, the court is imposing significant cost awards against those that do not take proactive and reasonable steps to attempt to settle litigation.
Recent Ontario Decision:
In Ontario, recent court decisions have shed light on the significance of making reasonable settlement offers in the assessment of costs. In Lawless v Joanovits, 2024 ONSC 1561, presided over by Justice Edwards of the Ontario Superior Court of Justice, exemplifies this principle.
The case revolved around a personal injury claim and centered on the defendant’s liability under the Occupier’s Liability Act and the quantum of general damages. Despite the plaintiff’s attempts to settle the matter through a number of settlement offers, which included costs and disbursements, the defendant refused to engage in meaningful negotiations and did not make any counteroffers. Consequently, after a five-day jury trial, the defendant was found to be 30% liable for the injuries sustained by the Plaintiff ($18,000.00). The significant reduction was due to contributory negligence.
In addressing costs, the plaintiff sought to recover substantial indemnity costs and disbursements, arguing that the defendant’s uncompromising stance necessitated extensive litigation expenses. Justice Edwards emphasized the importance of parties making informed and realistic assessments of risk, particularly when formulating formal offers. He highlighted the defendant’s failure to acknowledge the inherent risks of litigation by adopting a no liability position, which ultimately led to adverse cost consequences. 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 awarded costs in the amount of $50,000.00, plus applicable taxes and disbursements in the amount of $18,677.00.
Similarly, in Barry v Anantharajah, 2024 ONSC 1267, Justice Mandhane of the Ontario Superior Court of Justice reiterated the significance of reasonable settlement offers in cost assessments. In this case, the defendant’s refusal to make any monetary offers before or during trial compelled the matter to proceed to trial, resulting in substantial costs awarded against them.
Justice Mandhane emphasized that defendants who employ aggressive litigation strategies, such as offering zero settlement, do so at their own peril. She underscored the importance of proportionality in cost assessments but noted that the defendant’s unreasonable refusal to make any offer necessitated the matter going to trial, thereby justifying the substantial costs awarded against them. Justice Mandhane ordered the defendant to pay the plaintiff a total of $300,000 inclusive of costs, disbursements, and applicable taxes.
Conclusion
These decisions serve as reminders that litigation inherently involves risk, and parties should approach settlement negotiations with a willingness to engage in meaningful dialogue. Refusal to make reasonable settlement offers, as highlighted by Justices Edwards and Mandhane, can have significant cost consequences and may be viewed unfavorably by the courts. Therefore, parties are encouraged to consider the potential cost implications and adopt a pragmatic approach to settlement negotiations, thereby promoting the efficient resolution of disputes.
Your legal counsel should be taking substantial steps throughout the course of the litigation to assess the risks of proceeding. Rarely, if even, is a case a slam-dunk. As such, serious consideration should be made toward the likelihood of success (risk assessment) and the potential awards if successful (quantum assessment). Based upon those assessments, a reasoned offer should present itself. Failure to take these steps and provide a reasonable offer within the litigation process could result in a significant costs award being levied against you.
The information in this article does not constitute legal advice. The law may have changed since this article was first published. You should consult with your lawyer to confirm the current state of the law and obtain advice specific to your situation.