Should I Settle Or Not? Formal Offers To Settle

Some of the most common questions asked by my clients are whether they should engage in settlement discussions with opposing parties and whether a settlement offer made to them is reasonable to accept.

In my time as a lawyer, I’ve heard the oft-repeated expression that “a good settlement is one that leaves both parties equally unhappy.” While I disagree that a good settlement must always leave parties unhappy, there is truth in the expression since a good settlement requires both parties to accept certain risks and potentially give up certain rights in order to avoid further conflict.

Settlement offers are an effective tool in the litigation belt and should be utilized whenever they might effectively resolve matters in a way that protects your interests.

A settlement will usually entail the claimant agreeing to accept compensation or a remedy that is less favourable than what the claimant might otherwise achieve in their best day in court. Conversely, a settlement will also usually entail a defendant agreeing to provide more compensation or a greater remedy than if the defendant is successful. Both sides of a dispute have to consider the relative strengths of their claims (including documents, their witnesses and how much they rely on “he said, she said”), the anticipated costs and time of pursuing the dispute to its conclusion, that Courts are not predictable and the cost of continuing to pour energy into the dispute.

In the context of disputes in the Supreme Court, Rule 9-1 of the Supreme Court Civil Rules provides that the Court can consider any settlement offers made during the course of litigation with respect to payment of litigation costs at the conclusions of trial. Generally, if an offer is reasonable and ought to have been accepted, the Court can deprive the rejecting party of its costs, increase the costs payable to the offering party or make any other adjustment to costs awards that it deems appropriate. This rule is generally applied when, at trial, a party does not “beat” the offer that was made to them prior to trial (for example, a plaintiff being offered a settlement of $50,000.00 who only is awarded $30,000.00 at trial).

The purpose of Rule 9-1 is to utilize potentially adverse cost consequences as a winnowing function in the litigation process. That is, to discourage parties with weak or doubtful cases from proceeding to trial and even to encourage those with strong cases to accept a modest compromise of what they might otherwise be awarded at trial.

Hawes v. Dave Weinrauch and Sons Trucking Ltd., 2015 BCSC 2070 (CanLII) is a recent case in which the Supreme Court had the opportunity to consider whether the settlement offer made was one that ought reasonably to have been accepted. The offer was made prior to the parties concluding discovery (essentially disclosing and exploring each other’s’ evidence prior to trial), was open for acceptance for a limited time, did not amount to a full and final settlement and did not address all issues arising out of the litigation. As such, the Court denied the plaintiff’s request for increased costs despite its success at trial and having made an offer to settle.

It has been held that the Court ought to look at the offer at the time it was made to determine if it was reasonable or not to accept or reject the offer. Context will determine whether the amount offered, the time for which the offer remains open and the nature of the offer itself are such that the offer ought to be reasonably accepted.

Legal counsel can assist you in understanding the risks or rewards of making or accepting a settlement offer; however, the decision to make or accept a settlement offer always remains with the client. Every party is entitled to pursue its claims or defence to their logical conclusion; however, providing or accepting a reasonable settlement which represents a fair compromise of the offeror’s position almost invariably results in a net benefit to both the offering party and the accepting party. Every settlement offer represents a cost/benefit analysis.

While effective counsel are always prepared to pursue your claim or defence vigorously, they should also be exploring settlement options with you at each stage of the proceeding to ensure your best interests are always protected.

Settlements can be tailored in almost any fashion to meet your interests or incentivize the other party to accept the offer and can include, for example, confidentiality agreements, agreements that there will be no admissions of fault and even liquidated damages in the event that a party breaches the settlement agreement.

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