Written by Soumyaa Sharma
The term “walk away” or “zero-dollar settlement” under Rule 49 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”) [i] can be understood as a situation where both parties walk away from the litigation without cost. Ever wonder how the costs consequences (partial and substantial costs) play in this, if the matter proceeds to trial and the Court decides in favour of the defendant and rejects the plaintiff’s claim?
Any offer to settle made under Rule 49 must meet specific conditions to attract costs consequences. These conditions are crucial to understand as strictly spelled by the rule and developed by legal precedents. If these conditions are not satisfied, the Court can still grant costs under Rule 49.13 or Section 131 of the Courts of Justice Act (“CJA”)[ii] read in conjunction with Rule 57 of the Rules.
Partial or Substantial Costs: Which is the defendant entitled to?
Regarding costs consequences, it is important to understand that a difference exists between the plaintiff and the defendant under Rule 49.10. Unlike the plaintiff, the defendant is only entitled to partial indemnity costs. The Court can grant a substantial indemnity cost to the defendant, which is discretionary and guided by the principles under Rule 57[iii].
In the 1990 case of S & A Strasser Ltd. v. Richmond Hill (Town)[iv], the Ontario Court of Appeal (ONCA) was faced with a pivotal question: does Rule 49, which deals with offers to settle, apply in cases where an action is dismissed? The Court’s ruling was significant, stating that the rationale of rule 49.10(2) does not align with a case where a plaintiff is totally unsuccessful because without the rule, the defendant would typically be entitled to partial indemnity costs.[v] Understanding this ruling is key to navigating similar cases. Moving forward in a plethora of cases, and as it now stands established. Rule 49.10(2) only provides partial indemnity costs to a defendant “where the plaintiff obtains a judgment in some amount“[vi], whether as favourable as or less than the terms of the defendant’s offer.[vii]
If the outcome of costs consequences in any offer (including a walk-away) that is made in writing and caters even to offers that do not lie under Rule 49.10 conditions, the Court has wide discretion to grant costs from the date the offer was made under Rule 49.13. Furthermore, Section 131 of the CJA[viii] allows the Court to award fair and reasonable costs. Such discretion, though wide, is not completely unfettered since it is to be exercised by the considerations set out in Rule 57.01(1) of the Rules.[ix] The Court may consider granting indemnity costs, especially the substantial indemnity costs under Rule 57.
In the subsequent case of Crete v. Carleton Condominium Corp.[x] (where the plaintiff’s claim was entirely dismissed), the Court observed the same opinion relying on the case of Strasser and Dunstan for the Defendant’s Offer under 49 of dismissal without costs. Further, the Court observed that Strasser opened the door to an enriched award of costs to a defendant where a plaintiff’s claim was dismissed at trial; the principle upon which such costs have been awarded to a defendant continues to be construed narrowly. Additionally, the Superior Court of Justice in Chandra v Canadian Broadcasting Corp[xi] (focusing on the trial jury dismissed the plaintiff’s claim for invasion of privacy), confirmed that, while regarding the Courts exercising its discretion for costs, the Court may take into account any offer award of substantial indemnity costs, which ” usually only be warranted where there are exceptional circumstances”.[xii]
A curveball to such walk-away offers is that it may be argued and even viewed by the Court as a ‘hard-ball approach’ to settlement or one that may lack reasonableness; however, the Ontario Courts have observed recent contrary views.[xiii] Against this backdrop, the judgement of the three-judge bench of the Hon’ble ONCA the case of Przyk v Hamilton Retirement Group Ltd[xiv] (Plaintiff’s slip and fall case was entirely dismissed; there was never offer to a settlement to Ms. Przyk, other than a no costs dismissal of her claim.), is noteworthy. In this case, while clarifying the error in principle by the trial under Rule 49.10, the Honourable ONCA held that “the refusal to offer a financial settlement was not a valid basis to deny costs where the refusal was proven reasonable by the verdict.”[xv]
In case of a counterclaim?
As per Rule 49.14[xvi], all Rules 49.01 to 49.13 apply, with necessary modifications, to counterclaims, crossclaims and third-party claims. Offers to settle a counterclaim, crossclaim, or third-party claim must satisfy the r requirements Rule 49.10 to trigger the costs consequences. Merrill Lynch Canada Inc. Cassina[xvii], the defendant, made an oral offer to settle (the parties remove their claims and counterclaims, and each pays their own expenses). The plaintiff’s claim was dismissed, and the defendant’s counterclaim was successful, with the defendant receiving $15,000. The Court used its discretion to award considerable indemnity costs to the defendant since the trial outcome was far more advantageous to the defendant than their offer.
Conclusion:
In conclusion, as held by the ONCA in Strasser and as followed in subsequent cases, the offer to settle in the case where the plaintiff’s claim in judgment is entirely dismissed (regardless of whether it is a walk-away offer of the defendant or not), the defendant would be liable for partial indemnity costs (though may not be under Rule 49.10). The Court will have the discretion to grant the indemnity cost. Rule 49 is clearly established that the plaintiff does not accept the offer to walk away and proceeds to trial. Judgment comes in favour of the defendant; the Courts have observed that “everyone is entitled to their day in Court and… [not]obliged to accept any of the offers before [them]. However, such decisions have consequences,“[xviii] and such consequences imply to pay the defendant the indemnity costs.[xix]
Nevertheless, in cases where Rule 49.10 is not applicable, the Courts have granted such costs under either Rule 49.13 or as per Section 131 of the CJA read with Rule 57.
The foregoing is for informational purposes only and should in no way be relied upon as legal advice. If you have any further questions, or would like to schedule an appointment for legal advice tailored to your circumstances and business, please contact me at dan@fridmar.com.
[i] Rules of Civil Procedure, RRO 1990, Reg 194, r. 49 [Rules].
[ii] Courts of Justice Act, R.S.O. 1990, c. C.43, s131 [CJA].
[iii] Rules, supra note 1 at s.57.
[iv] S & A Strasser Ltd. v. Richmond Hill (Town) 1990 CanLII 6856 (ON CA) [Strasser].
[v] Strasser, Ibid at 4.
[vi] Strasser, Ibid at 4.
[vii] Dunstan v. Flying J Travel PlazaInline [2007] O.J. No. 4089 (Ont. S.C.J.),
[viii] CJA, supra note 2, s.131.
[ix] Liddy, supra note 18 at para 17,73.
[x] Crete v. Carleton Condominium Corp, 2008 CarswellOnt 77.
[xi] Chandra v Canadian Broadcasting Corp, 2015 ONSC 6519. see, generally, Davies v. Clarington (Municipality), 2009 ONCA 722 (Ont. C.A.)
[xii] Chandra, Ibid at 15,40.
[xiii] Mundinger v Ashton, 2020 ONSC 2024 at para 13,19 and 20. RC v Western Assurance Co, 2022 ONSC 899 at para 8-13.
[xiv] Przyk v. Hamilton Retirement Group Ltd. (c.o.b. Court at Rushdale) 2021 ONCA 267 [Pryk v. Hamilton].
[xv] Pryk v. Hamilton, Ibid at para 7.
[xvi] Rules, 1 at s.49.14.
[xvii] Merrill Lynch Canada Inc. Cassina , [1992], O.J. No. 2230, 15 C.P.C. (3d) 264 (Ont. Gen. Div.)
[xviii] Liddy v. Mauro 2020 ONSC 4345 at para 31 [Liddy]. See also Clark v. Zigrossi 2010 ONSC 6357 at para 13,14.
[xix] Clark v. Zigrossi, Ibid, at para 14.
