Proportionality and Offers to Settle – The Court of Appeal for Ontario gets it right

In the recent decision in Elbakhiet v. Palmer, the Court of Appeal for Ontario considered a defendant’s offers to settle, and found that the trial judge erred in awarding the successful Plaintiff costs on a partial indemnity basis in the amount of $578,742.28 despite their modest success at trial ($144,013.07), and the offers to settle made by the appellants, which were “close” but did not exceed the Plaintiff’s damage award.

The appeal considers some interesting issues on Rule 49 Offers, such as (1) case law which states that in a jury trial, when considering whether an Offer is made in time before trial starts, the time should only begin to run with the calling of evidence, (2) when an Offer states “plus prejudgment interest in accordance with the Courts of Justice Act”, whether this means at the rate of 5% per year on all of the monies offered or not (5% being the higher rate applicable to non-pecuniary damages/general damages), and (3) given that the offer to settle was virtually the same as the Judgment, the court had to consider the impact of rule 49.13.

Importantly, this decision also reminds all of the overriding principle of proportionality, and that costs claimed that are over 3 times the amount of damages recovered at trial are grossly excessive.  As a defence counsel who often finds his opponent attempting to “pump up” minor injury claims by presenting excessive “future income loss” reports, the following finding by the Court of Appeal is comforting:

“The respondents sought damages of approximately $1.9 million, most of it in relation to loss of future earnings and cost of future care totalling, approximately $1.6 million. The jury awards for those items were approximately $94,000. The amounts claimed and the amounts recovered were completely different. Rule 57.01 required those facts to be taken into consideration, not discounted because the trial judge believed the case was worth potentially more. It was not fair and reasonable to award the respondents costs of almost $580,000 for a claim the jury valued at just under $145,000.”

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