Shelley J

4.24: Formal offers to settle
4.29: Costs consequences of formal offer to settle
15.1: Definitions
15.11: Formal offer to settle
15.2: New rules apply to existing proceedings
15.6: Resolution of difficulty or doubt
SCHEDULE C: Tariff of Recoverable Fees

Case Summary

After the Plaintiff’s Action was dismissed as a non-suit, the parties returned to Court to determine the quantum of Costs the Defendant was entitled to. The Defendants sought party-party Costs under Column 5 of Schedule C plus disbursements, and argued that double Costs should be ordered from the date of a formal offer made by the Defendants in 2010, or alternatively, the date that a second formal offer was made by the Defendants in 2017. They noted that the second formal offer was left open for two months, as required by Rule 4.24(3) and 4.29(3) of the Rules. The Defendants also sought second counsel Costs and expert witness fees.

Shelley J. first noted that pursuant to Rule 4.29(2) to (3), if a formal offer to settle is not accepted and is later “beaten”, then the party making the formal offer is entitled to double Costs for steps taken after serving the formal offer. However, the formal offer must have been genuine at the time it was made. An offer to discontinue without Costs is more likely to be “genuine” where it was made after the offeror had already incurred a substantial legal bill, or where the Action has no obvious merit. If an offer of settlement is held to be genuine, the Court must then ask if there are circumstances which warrant departing from the double Costs rule. Shelley J. held that the offer made in 2010 was not a genuine offer of compromise, because at the time it was made the litigation was in its early stages and the facts had only been minimally tested. Instead, it held that the 2017 offer more realistically reflected the merits of the parties’ strengths and weaknesses in the Action. As such, double Costs were awarded only after the 2017 offer was made.

Shelley J. then considered whether the Defendants’ second counsel Costs were appropriate. In doing so, it considered the following factors: (1) the general importance of the issues to the parties or others; (2) the value of the case; (3) the complexity and scope of the issues, (4) the size of the Trial record; (5) the manner in which the Plaintiff conducted the case; and (6) whether second counsel addressed the Court. Shelley J. held that second counsel Costs were appropriate, because although the sums at issue were relatively small, the case was important to both parties, the Defendants’ second counsel addressed the Court, six defence witnesses were required to be prepared, and other witnesses were required to be cross-examined.

Shelley J. also held that the fees claimed for two expert reports were reasonable. The main consideration in determining the reasonableness of expert witness fees is whether the fees were reasonable at the time they were incurred. The Court held it was reasonable to retain two experts to prepare expert reports, especially since the claim sought to recognize a novel duty of care.

Shelley J. also held that Column 5 Costs should be awarded, rather than Column 4. A Defendant is “entitled to take seriously the [P]laintiff’s pleadings and to think that it is for the larger sum” until he is advised that the Plaintiff is seeking less. Since the Plaintiff sought damages of over $1.5 million and did not amend his claim, Column 5 was the appropriate column to use. Shelley J. also ordered the parties to attend before a Review Officer if they could not reach agreement regarding disputed items in the Defendants’ Bill of Costs. 

Lastly, Shelley J. noted in obiter that, although the litigation began prior to the new Rules coming into effect in November, 2010, the new Rules apply to matters that existed at the time they came into effect pursuant to Rules 15.1 and 15.2. Rule 15.11 mandates that a formal offer that existed and was not withdrawn or accepted prior to the new Rules coming into effect “remains open for acceptance in accordance with the former rules”. Additionally Rule 15.6 allows the Court to modify or suspend the new Rules or substitute one of the old Rules if there is doubt about the application of the current Rules. Shelley J. commented that a strict application of the current Rules to the offer made in 2010 would not be just, as the 2010 offer was made when the previous Rules were in place and therefore was not withdrawn using the procedure permitted by the new Rules. The fair thing to do would be to allow the Defendants to receive the benefit of the old Rules. This analysis did not affect the Court’s Decision because it held that the 2010 offer made by the Defendants was not a genuine offer of compromise in any event.

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