The Cost of an Offer to Settle: Visual Design Consultants Inc. v. Royal and Sun Alliance Insurance Company of Canada
Litigation can be costly and time consuming. As a result, most personal injury claims in Nova Scotia are settled before trial. Most settlement negotiations are “without prejudice”, meaning neither side is allowed to refer to the negotiations at trial. This allows either side to make concessions in the negotiations that they will not be held to at trial.
Formal offers to settle
However, there are times when you may want your negotiations to be “with prejudice”. If the claim ends up going to trial, a “with prejudice” or formal offer to settle can have a major effect on the amount of costs awarded, even if the offer is rejected.
I recently posted about the effects that an offer to settle can have on legal costs.
As I discussed, making a strategic offer to settle well in advance of trial can result in the other side paying a substantial portion of your legal costs.
In a recent case: Visual Design Consultants Inc. v. Royal and Sun Alliance Insurance Company of Canada, Justice Wright of the Nova Scotia Supreme Court dealt with the amount of costs should be paid to the successful plaintiff.
Visual Design was a graphic design firm whose property was demolished by Hurricane Juan. Their insurance policy included coverage for “business interruption loss”. The two parties were unable to agree on the amount to compensate Visual Design for the hurricane’s interruption of business.
A six-day trial resulted in a judgement of $275,265.00 (inclusive of interest) being awarded to the Plaintiff. The parties were not able to agree on legal costs.
Counsel for the plaintiff requested costs of $70,766.00 as a contribution to the plaintiff’s legal fees, while Counsel for the Defendant argued that $34,750.00 was appropriate.
The main issue decided by the Court was whether or not they should increase the standard tariff costs from $34,750.00.
Justice Wright applied the principles from Civil Procedure Rule 77 which specifically notes:
(d) A judge who fixes costs may increase or reduce tariff costs, for example, when a written offer of settlement, whether made formally or otherwise, is not accepted or where the conduct of a party affects the speed or expense of the proceeding.
Beating the offer
In deciding appropriate costs, the Court considered the effect of the Plaintiff’s formal offer to settle. Before the case was set for trial the Plaintiff made a formal offer to settle the matter for $235,000.00 inclusive of costs. This offer was never accepted by the defendant.
The court recognized that the Plaintiff received a more favourable judgment at trial.
Since the plaintiff did better than their pre-trial offer to settle, the Court ordered a 75% increase to the Tariff A costs (pursuant to Civil Procedure Rule 10.09). This comes to $60,812.50 plus disbursements for a total of $85,152.00.
The Court specifically noted that the increased cost award “reflects a substantial contribution to the plaintiff’s legal costs which is the overall objective of our costs regime.”
This case is simply another example of the strategic value of making a considered offer to settle.