Settlement Offers - Costs and Double Costs

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Settlement offers before trial can result in large litigation cost reductions. The Rules encourage it yet it appears to be under-utilized as a strategy.

The purpose of the family law rules concerning settlement offers and double costs, is to encourage parties to carefully assess their respective claims and embrace reasonable proposals resulting in substantial savings in trial time and costs.

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Failure to accept reasonable settlement offers will often result in costs penalties.

 

Note (1):  Information and commentary below is taken from Hartshorne v. Hartshorne, 2011 BCCA 29:

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The double costs rule and its guiding principles

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An award of double costs is a punitive measure against a litigant for that party’s failure, in all of the circumstances, to have accepted an offer to settle that should reasonably have been accepted.

Litigants are to be reminded that costs rules are in place to encourage the early settlement of disputes by rewarding the party who makes a reasonable settlement offer and penalizing the party who declines to accept such an offer. 

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In addition to indemnifying a successful litigant, the purposes have been described  by the Court as follows:

   1. . Deterring frivolous actions or defences.

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   2. To encourage conduct that reduces the duration and expense of litigation and to discourage conduct that has the opposite effect: Skidmore v. Blackmore (1995).

 

   3. To encourage litigants to settle whenever possible, thus freeing up judicial resources for other cases.

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    4. requiring litigants to make a careful assessment of the strength or lack thereof of their cases at the commencement and throughout the course of the litigation and by discouraging the continuance of doubtful cases or defences. 

 

Reasonableness of the offers:

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The judge said: taking into account the considerations set out in Rule 11-1(4), (5) and (6), I am satisfied that the respondent’s offers were not ones that ought reasonably to have been accepted at any time before the trial began.

Each offer was made on a “standalone” basis and if accepted would not have resolved all of the issues.

Taken together, I am not satisfied the claimant could reasonably have accepted all four proposals.

”As an example of the difficulty faced by the claimant in considering the respondent’s offer, if he had accepted the parenting arrangements, the litigation would likely have continued on the question of parenting time, support and property division. The respondent’s parenting time offer was substantially less advantageous to the claimant than was awarded in the judgment.”

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Factors to be considered in making an award for double costs:

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(a)  whether the offer to settle was one that ought reasonably to have been accepted, either on the date that the offer to settle was delivered or on any later date;

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(b)  the relationship between the terms of settlement offered and the final judgment of the court;

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(c)   the relative financial circumstances of the parties;

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(d)   any other factor the court considers appropriate.

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The first factor – whether the offer to settle was one that ought reasonably to have been accepted – is not determined by reference to the award that was ultimately made. Rather, in considering that factor, the court must determine whether, at the time that the offer was open for acceptance, it would have been reasonable for it to have been accepted: Bailey v. Jang, 2008 BCSC 1372, 90 B.C.L.R. (4th) 125 at para. 24; A.E. v. D.W.J. at para. 55.

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“The reasonableness of the plaintiff’s decision not to accept the offer to settle must be assessed without reference to the court’s decision”.

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Instead, the reasonableness is to be assessed by considering such factors as the timing of the offer, whether it had some relationship to the claim (as opposed to simply being a “nuisance offer”), whether it could be easily evaluated, and whether some rationale for the offer was provided.

 

We do not intend this to be a comprehensive list, nor do we suggest that each of these factors will necessarily be relevant in a given case.

 

A finding that an Offer was one that ought reasonably to have been accepted was based on a number of factors:

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1. the Offer was presented 12 days before the date of trial;

2. the Offer was a comprehensive one that, if accepted, would have resolved the need to for the ten-day trial;

3. the Offer provided sufficient information to permit the appellant to understand the content of the order;

4.  accepting the Offer would not require the appellant to completely accept the respondent’s reasoning in support of the Offer; and,

5.  the litigation had been long and protracted and acceptance of the Offer would effectively have ended all outstanding disputes between the parties.

 

Because the amount and nature of the ultimate award is not considered in assessing whether the award ought reasonably to have been accepted, the trial judge’s conclusion with respect to that issue is unaffected by the change in the award on appeal.

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The trial judge considered all of the factors that were relevant to the question of whether the award was one that ought reasonably to have been accepted, and his conclusion on that issue, is, therefore, entitled to deference.  

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