Milanovic v. Le et al.

[Indexed as: Milanovic v. Le]

Ontario Reports

Ontario Superior Court of Justice,

Kent J.

April 8, 2015

125 O.R. (3d) 758

Case Summary

Civil procedure — Costs — Offer to settle — Plaintiff accepting defendants' offer to settle 11 months after offer was made and shortly before trial — Costs payable by defendants only to date of offer to settle.

The defendants made an offer to settle. The plaintiffs accepted the offer 11 months later, shortly before trial. The defendants brought a motion for an order that costs were payable by them only to the date when their offer to settle was made. The plaintiff submitted that the costs should be payable until the offer was accepted.

Held, the motion should be granted.

The defendants' position was in tune with the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 and with the underlying purpose of settlement offers, which is to bring litigation to an early conclusion without incurring further costs. To accept the plaintiff's interpretation would discourage the making of offers to settle and their acceptance at an early stage.

Cases referred to

Gammell v. Sobeys Group Inc., [2011] N.S.J. No. 459, 2011 NSSC 190, 306 N.S.R. (2d) 61, 21 C.P.C. (7th) 399; Lamprakos v. Pickering (1987), 1987 CanLII 4392 (ON SC), 63 O.R. (2d) 649, [1987] O.J. No. 1238, 9 A.C.W.S. (3d) 9 (H.C.J.); Rosero v. Huang (1999), 1999 CanLII 14806 (ON SC), 44 O.R. (3d) 669, [1999] O.J. No. 1964, 96 O.T.C. 302, 88 A.C.W.S. (3d) 763 (S.C.J.)

Statutes referred to

Courts of Justice Act, R.S.O. 1990, c. C.43, s. 131(1)

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 49

Authorities referred to

Tighe, Gavin, "Concerning Offers to Settle" (2000), 22 Adv. Q. 500

MOTION for a ruling on costs. [page759]

D. Colangelo, for plaintiff.

T. Madison, for defendants.

KENT J. (orally): —

Introduction

[1] This is a motion pursuant to s. 131(1) [of the Courts of Justice Act, R.S.O. 1990, c. C.43] to determine the extent to which costs in the instant case shall be payable. More specifically, counsel for the defendants seeks an order that costs are payable by the defendant to the plaintiff only to the date of the defendant's offer to settle, which offer was later accepted by the plaintiff. Counsel for the plaintiff submits that the costs should be payable until the date of the plaintiff's acceptance of the offer, some 11 months after the offer was made and only shortly before trial.

Facts

[2] The defendant's offer was made July 5, 2012. It provided as follows:

(1) payment to the plaintiff in the amount of $12,500;

(2) costs to be agreed upon or assessed;

(3) dismissal of the court action on a without-costs basis;

(4) to remain open until one minute after the commencement of the trial in this matter.

[3] The plaintiff's acceptance of that offer was made on the 6th day of June 2013 by way of letter from counsel for the plaintiff, which stated: "Please be advised that our client, Zdravo Milanovic, the plaintiff herein, hereby accepts the defendant's offer to settle, dated July 5, 2012."

[4] The trial was scheduled to proceed at Kitchener at the sittings commencing June 10, 2013, one week after the acceptance was made. The difference between counsel's positions then amounts to approximately 11 months of costs, including preparation for trial.

Law

[5] There is case law to support the position of each counsel. The case relied on by the plaintiff is Lamprakos v. Pickering (1987), 1987 CanLII 4392 (ON SC), 63 O.R. (2d) 649, [1987] O.J. No. 1238 (H.C.J.). At para. 1 of that decision, Mr. Justice Sutherland observed, and I quote: [page760]

We have here, I think, a classic confrontation between a social interest in having cases settled and parties not being able to be in the position to not accept an offer to accrue costs as if they are going to go for trial, and then, at the last minute, to accept an offer and thereby get, because of the interpretation of the language of the offer itself, their costs that could have been avoided if they had accepted the offer in the first place. That is on one side. That is contrary to what is hoped for under the rules and policies relating to offers, where it is hoped that an offer will be accepted and will get the case off the list early in the game.

[6] Mr. Justice Sutherland concluded, at para. 5, as follows:

In my opinion, the matter should be settled by analogy to contract principles. The offer is an offer that is outstanding as long as it is left outstanding; it was not withdrawn and so was capable of being accepted and it was accepted. The defendant could have protected himself from the consequences, but did not. The offer, therefore, as accepted, will include the payment to the plaintiff of his party-and-party costs to the date of acceptance.

[7] Almost 12 years later in a 1999 decision, Rosero v. Huang (1999), 1999 CanLII 14806 (ON SC), 44 O.R. (3d) 669, [1999] O.J. No. 1964 (S.C.J.), Mr. Justice Nordheimer took the opposite position. And, again, I quote from paras. 8, 9 and 10 of his decision:

It is only with the greatest reluctance and hesitation that I say that I respectfully disagree with the conclusion reached by Sutherland J. in the Lamprakos case. I reach the opposite conclusion for a number of reasons. First, as between the contractual position and the thrust of the rules regarding settlement offers, I would favour the result that flows from the thrust of the rules. While I do not accept the defendants' contention that the costs were not "disposed of' and that therefore rule 49.07(5) applies, I do think that the offer to settle, having expressly been made in accordance with the Rules of Civil Procedure, ought to be interpreted in light of the principles that the rules establish. Given that rule 49.07(5) contemplates the two possible alternatives and expressly provides that in the case of an offer by a defendant the operative date for the recovery of costs by the plaintiff should be to the date the offer was served (which in most circumstances would be the same as the date of the offer), I conclude that the ambiguity here ought to be resolved in a manner consonant with that provision. I should note on this point that it does not appear that the provisions of rule 49.07(5) were drawn to the attention of Sutherland J. when he was considering this matter.

Secondly, it does not strike me as logical or consistent with the underlying purpose of settlement offers (which is to bring litigation to an early conclusion without incurring further costs) to interpret an offer to settle such as this one as giving a "costs holiday" to the plaintiff by which the plaintiff can mull over the offer for whatever period of time while at the same time continuing to expend costs, all for the account of the defendant.

Thirdly, the interpretation contended for by the plaintiff would, in my view, discourage the making of offers to settle and their acceptance at an early stage rather than promoting the opposite and more desirable objective of having settlements occur as early as possible and with the least expense to the parties. [page761]

[8] Both counsel acknowledge that there is a dearth of other case law, save and except a 2011 Nova Scotia decision, Gammell v. Sobey's Group Inc., [2011] N.S.J. No. 459, 2011 NSSC 190. At para. 21 of that decision, the court follows the rationale of the Rosero decision from Ontario. In Gammell, the court recognized that the plaintiff forced the defendant to incur nearly all trial preparation costs by accepting the offer mere days before trial. The court refused to sanction the plaintiff's behaviour and awarded the plaintiff costs to the date the offer was made.

Considerations

[9] While the offer/acceptance contractual approach has an appeal, the decision of Justice Sutherland was arrived at in the early years after Rule 49 [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194] came into being. The decision of Justice Nordheimer is more consistent with the thrust and purpose of the rule. It is also consistent with the comment of Gavin Tighe in his article "Concerning Offers to Settle", published in 2000, (2000), Adv. Q. 500, at p. 513:

Counsel must take the time to assess the strengths and weaknesses of the case in order to determine whether an offer to settle should be made or accepted depending on the circumstances. The earlier an offer is made, the greater the cost consequences that flow from such an offer. This process forces counsel to fully acquaint themselves with the facts of the case, without which effort it would be difficult to accurately and fairly assess the terms of an offer and to draft an offer or counter offer where necessary.

[10] For all of the above reasons, I prefer and accept that the Rosero decision should be determinative of the issue before me and I order accordingly.

[11] Any submissions on costs?

[12] MR. MADISON: Well, we've been successful so I'd ask that costs flow with the event. I've looked at the time here and I think that something in the area of $5000.00 is probably appropriate.

[13] MS. COLANGELO: Your Honour, I would submit that this was a novel issue and it hasn't been considered since Rosero in Ontario and I would submit that there be no costs from this.

[14] THE COURT: Any reply to that, Mr. Madison?

[15] MR. MADISON: Pardon me?

[16] THE COURT: Any reply to that?

[17] MR. MADISON: Well, she's somewhat right. There is a dearth of law and I think we needed something more current and . . .

[18] THE COURT: Well, there used to be two cases; now there are three. [page762]

[19] MR. MADISON: I still think that, even considering that, we should be entitled to costs because, you know, we weren't going to get to the next step of assessing costs unless we did this and it was done in a very amicable arrangement, however, it's a step in the process and the successful party usually is entitled to costs so I'd submit that if Your Honour feels that the novelty of the issue might detract from a substantial indemnity award on costs, I certainly think that some partial indemnity award for the costs of the motion would be appropriate.

[20] THE COURT: The endorsement reads as follows: for reasons delivered orally, order to go as sought by counsel for the moving party. In view of conflicting decisions, a further decision of this court was necessary in order that the parties could proceed to have costs assessed. No order therefore is made as to the costs of this motion. I am grateful to counsel for their assistance in this matter.

Motion granted.

End of Document