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Interesting cost decision from the Court of Appeal

3 minute read

The Ontario Court of Appeal recently released an important decision on the issue of costs in Elbakhiet v Palmer.

The case involved a rear end motor vehicle accident. The plaintiff claimed that she sustained headaches, whiplash related symptoms, depression, and a traumatic brain injury. She claimed damages of almost $2,000,000.00. At the conclusion of her jury trial she was awarded only $144,013.07.

Prior to the trial, the plaintiff offered to settle the case for $600,000.00, plus costs. The defendant made two offers to settle prior to trial, the second offer, served February 10, 2012 for the amount of $145,000.00, plus pre-judgment interest and costs.

In deciding the issue of costs, the trial judge had to consider two key aspects of Rule 49, which involves offers to settle.

Rule 49 provides amongst other things, that an offer must be made at least seven days before the commencement of the hearing. Additionally, a defendant must prove that the judgment is less favourable then the offer.

The trial judge first dealt with whether the offer was served at least seven days before the commencement of the hearing. Rule 3.01 (1) (b) of the Rules of Civil Procedure provides that holidays, including weekends and statutory holidays, are not to be counted in calculating the seven days. In this case jury selection, opening statements and rulings were dealt with on February 21, 2012. The evidence was not called until February 22, 2012. It was conceded by the parties that the seven day requirement was met only if the hearing commenced on February 22, 2012.

The trial judge found that the offer was made within seven days before commencement of the hearing. This was upheld by the Court of Appeal which ruled that a trial commences on the first day of evidence.

On the second issue, namely, whether the judgment was as favourable as or less favourable than the terms of the second offer, the trial judge determined that the defendant's second offer was not fixed, certain, and capable of clear calculation because it was not certain if the offer was intended to mean pre-judgment interest on the entire $145,000.00, and what the interest rate was. Consequently, she declined to award the defendant costs following the offer, and instead she awarded the plaintiff costs of almost $580,000.00.

The Court of Appeal upheld the trial judge's decision that the terms of the offer were not certain and capable of clear calculation. The reason for this was that the provision for pre-judgment interest in the offer neither provided a specified amount, nor a specified rate of the interest. The pre-judgment interest rate would vary depending on the element of the claim.

The Court of Appeal did however grant relief to the defendant by virtue of Rule 49.13, which says "the Court, in exercising its discretion with respect to costs, may take into account any offer to settle made in writing, the date the offer was made and the terms of the offer." The Court of Appeal determined that it was not fair and reasonable to award the plaintiff costs of almost $580,000.00 for a claim the jury valued at just under $145,000.00. As a result, the Court of Appeal reduced the amount of costs payable by the defendant to the plaintiff to $100,000.00.

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Stephen R. Schenke

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