“An important consideration in determining both liability and the quantum of costs is whether any party has served or accepted an offer to settle. As indicated above, Rule 24(5) specifically requires that in assessing whether parties have behaved reasonably or unreasonably, the court must consider whether they have made offers to settle, the reasonableness of any such offers, and any offers that they withdrew or failed to accept. In addition, Rule 18(14) establishes costs consequences for failing to accept an offer to settle that complies with the specific requirements of that Rule, as follows:
Costs Consequences of Failure to Accept Offer
18(14) A party who makes an offer is, unless the court orders otherwise, entitled to costs to the date the offer was served and full recovery of costs from that date, if the following conditions are met:
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- If the offer relates to a motion, it is made at least one day before the motion date.
- If the offer relates to a trial or the hearing of a step other than a motion, it is made at least seven days before the trial or hearing date.
- The offer does not expire and is not withdrawn before the hearing starts.
- The offer is not accepted.
- The party who made the offer obtains an order that is as favourable as or more favourable than the offer.
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In order for these costs consequences to come into play, the offer to settle must be signed by the party making the offer and their lawyer (Rule 18(4)). Failure to comply with this requirement may result in the offer not being a valid formal offer that attracts the consequences outlined in Rule 18(14) (Riss v. Greenhough, 2003 CarswellOnt 1450 (S.C.J.); Jakubowski v. Kopacz-Jakubowski, 2008 CarswellOnt 2149 (S.C.J.)).
The costs consequences set out in Rule 18(14) do not automatically apply when the requirements set out in the Rule are satisfied. The Rule simply establishes a rebuttable presumption regarding costs, and the court ultimately maintains the discretion to determine whether the costs consequences are appropriate based on all of the circumstances of the case (M.(C.A.), at para. 43). With respect to the requirement that the order obtained be as or more favourable than the offer to settle, the court is not required to examine each term of the offer as compared to the terms of the order and weigh with microscopic precision the equivalence of the terms. Rather, what is required is a general assessment of the overall comparability of the offer as contrasted with the order that was ultimately made (Sepiashvili v. Sepiashvili, 2001 CarswellOnt 3459 (S.C.J.), additional reasons to 2001 CarswellOnt 3316 (S.C.J.); Jackson, at para. 47; Arthur v. Arthur, 2019 ONSC 938 (S.C.J.), at para. 21).
Rule 18(16) directs that in exercising its discretion over costs, the court may also take into consideration any written offer to settle, the date it was made and its terms, even if the conditions and presumptive consequences set out in Rule 18(14) do not apply. The court may in the exercise of its discretion compare portions of any offer to settle dealing with discrete issues to the terms of the order that was made.
A party’s failure to serve an offer to settle is also a relevant factor in determining both liability for costs and the appropriate amount of a costs award (M.(J.V.) v. P.(F.D.), 2011 CarswellOnt 13510 (O.C.J.), at para. 5; Menchella v. Menchella, 2013 ONSC 368 (S.C.J.), at paras. 19-21). As Zisman J. stated in Potter v. DaSilva, 2014 ONCJ 443 (O.C.J.), at para. 22:
Offers to settle play an integral role in saving time and expense by promoting settlements, focusing parties and often narrowing the issues in dispute. Offers to settle are therefore important in any consideration of the issue of costs. In my view, it is unreasonable behaviour for a party not to make an offer to settle.
Notwithstanding the foregoing principles, the absence of an offer to settle should not be used against a party in determining costs if the situation is one where it is unrealistic to expect offers to settle to be made. For instance, this factor should not play a material role in determining liability or the appropriate quantum of costs if there was no realistic way of compromising on the central issue(s) in dispute (Beaver, at para. 15).