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    Papers on The Settlement Conference and Written Offers to Settle (11/12)
    Posted: 2010-11-18 08:05:23


    By Marcel D. Mongeon



    The following is a passage from an essay by Marcel D. Mongeon, Deputy Judge, Small Claims Court of Ontario. We’ve divided this paper into a series of 12 posts.

    When to make the offer

    A written offer to settle can be made at any time in the proceeding. Rules 14.02(2), 14.07(1)2. and 14.07(2)2. suggest the double costs consequences may only be invoked if the offer was made at least seven days before the trial. Ultimately though, rule 19 on Costs provides for a number of orders to made for costs in the court's discretion.

    Because courts usually want to see the parties settle matters where reasonable offers to settle have been made, parties should always be prepared to make representations to the court after trial that the court should consider making an order because the party who did not accept an offer “acted unreasonably.”

    The phrase “acted unreasonably” shows up in the rules of the small claims court in the following contexts relating to costs:

    r. 19.06 – if a party acted unreasonably, 'an amount as compensation' to another party with no limit can be made

    s. 29 Courts of Justice Act – 15% limit on costs unless necessary to punish 'unreasonable behaviour' in the proceeding

    A settlement offer could be made at any of the following time points:

    • If a Plaintiff, served with the claim even before a defence is required

    • After a defence is filed

    • After receiving a notice of settlement conference but before the settlement conference

    • At the settlement conference

    • In the 30 day 'cooling off' period after a settlement conference

    • After the matter is set down for trial but before the 7 day period before the trial

    • Less than 7 days before trial

    • During the trial


    Each of these time periods has different merits and implications. What will be important is to subsequently show to the court after trial that you were acting in a reasonable fashion in making the offer when you did and that the other party was not unreasonable.

    Full Indemnity Costs?

    Rule 19.06 and s. 29 could be argued to support the contention that the costs award in the face of an unaccepted offer could exceed any other limit if the party acted 'unreasonably'. In the superior court, the applicable rules include the concept of 'solicitor-client costs' which is intended to provide an almost full indemnity for the costs paid by someone. Although, in the small claims court, there is no such notion, in specific cases with offers to settle that 'should have been accepted' in the opinion of the judge, one wonders if a small claims court could not invoke r. 19.06 and s. 29, make a finding of a party's unreasonableness and then award 'compensation' equivalent to solicitor-client costs.

    In Niagara Structural Steel (St. Catharines) Ltd. v. W.D. Laflamme Ltd. (1987) 58 OR (2d) 773, the court of appeal noted in a superior court action that there should be a consistent application of the costs consequences rules if they are going to be effective in encouraging settlements. This has been applied in the small claims court in Beatty v. Reitzel Insulation Co. OJ No. 953.

    The following written form is suggested for an offer to settle where there might be an intention to seek compensation on the solicitor-client scale:

    Dear opposing party:

    The purpose of this letter is to offer to settle our outstanding matter. You are the plaintiff in this action and you are seeking the payment from my client of $7,500 plus interest at 18% from Dec. 21, 2008 and costs.

    Even though my client continues to believe that they have a valid defence, I have also discussed with them that there is risk in a trial not to mention the costs that will be involved from this point forward.

    I am instructed to offer you $2,500 to settle this amount. This amount is all-inclusive of all costs and interest and, is conditional on receiving a full and final release and a dismissal of the current action without costs.

    This offer is open for acceptance until just before the judge pronounces judgement in this case.

    In the event that you do not accept this offer and, subsequently, a judgement is obtained either dismissing this action or providing you an amount less than the amount in this offer, it is our intention to make costs submissions to the court that:

    • You should be considered to have 'acted unreasonably' in not accepting this offer within the meaning of that phrase within r. 19.06 of the Rules of the Small Claims Court and this constitutes “unreasonable behaviour” within the meaning of the phrase in s. 29 of the Courts of Justice Act

    • All costs incurred by my client after the time of making this offer to you will assessed at his actual out-of-pocket amounts (solicitor client basis)

    • We are seeking compensation for those costs under r. 19.06

    • We are seeking an order doubling all costs in the action (including the r. 19.06 compensation) under r. 14.07 (2)

    • All costs may exceed the 15% limit of s. 29


    As you can see, there will be serious potential costs consequences to you if my client is more successful at trial than this offer to you. I would urge you to give serious consideration to this offer and obtain appropriate legal advice.

    DO GOVERN YOURSELF ACCORDINGLY

    As will be realized, this form of letter is from a represented party to a self-represented party. Modifications can be made as required to its form. Clearly, any costs award will be in the discretion of the presiding judge in accordance with the governing law and rules. However, if properly set up, there is no reason why an attempt could not be made for a full indemnity against costs in the face of not accepting an offer to settle. Although the rules of the small claims court have been written to dissuade requests for costs, settlement offers are certainly something that courts are looking to encourage. Accordingly, the submissions be made.



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