In this appeal, the Court of Appeal found that even if the plaintiff’s offer to settle does not specifically provide for the inclusion of costs, the plaintiff would be entitled to it pursuant to rule 49.07(5)(b). Further, even if words in the offer are believed to be ambiguous or unambiguous, the meaning of those words can only be properly ascertained by considering the entire context in which the offer was made.
Decision released October 29, 2015| Full Decision
The issue in this appeal was the interpretation of an accepted offer to settle. The parties were engaged in litigation, which commenced in March 2013, over an outstanding account for services rendered. In December 2013, the appellant served a written offer to settle under Rule 49 which stated:
The plaintiff, Puri Consulting Limited, offers to settle this proceeding on the following terms:
- payment by the defendant to the plaintiff in the amount of $50,000, plus HST, in full and complete satisfaction of the plaintiff’s claim; and
- this offer will remain open for acceptance until one minute after the beginning of the trial of this action.
At the pre-trial conference in May 2014, the parties disagreed as to the meaning of the Offer. The appellant’s counsel made it clear that acceptance of the Offer would require the respondent, Kim Orr, to pay costs, but the respondent interpreted the Offer as inclusive of costs. Shortly before the trial was set to commence in September 2014, the respondent accepted the Offer and subsequently paid $50,000 plus HST. The appellant asserted that she was entitled to costs in addition to the amount paid by the respondent, and moved under R. 49.09 to enforce the settlement.
The issue at the motion was whether the Offer provided for the disposition of costs. If the Offer did not, then R. 49.07(5)(b) was engaged which states: Where an accepted offer to settle does not provide for the disposition of costs, the plaintiff is entitled… (b) Where the offer was made by the plaintiff, to the plaintiff’s costs assessed to the date that the notice of acceptance was served. The motion judge held that the meaning of the words “in full and complete satisfaction” in the Offer were unambiguous, and that those words provided for the disposition of costs. She also refused to consider evidence from the pre-trial discussions as R. 50.09 contains a prohibition against disclosing statements made in a pre-trial conference.
The Court of Appeal allowed Puri Consulting’s appeal. It found that the motion judge erred in her interpretation of the offer to settle. The motion judge took a literal approach to the Offer and acceptance, by focusing only on the words “in full and complete satisfaction” and ignoring other words in the Offer. As the Court of Appeal found in Dumbrell v. The Regional Group of Companies Inc., even where words in a written agreement are believed to be unambiguous, the meaning of those words can only be properly ascertained by considering the context in which the agreement was made. In this case, the motion judge should have considered the other words in the Offer, such as the word “claim”. The motion judge treated “claim” as synonymous with “action”. A statement of claim contains “a claim for relief” in which various claims are set out including a claim for costs. As the offer to settle referred to the settlement of the appellant’s “claim”, there is ambiguity as to which “claim” the appellant meant to settle.
Further, the Court of Appeal indicated that the motion judge failed to consider the facts of the Offer and its acceptance. She should have considered the Rule 49 context, including the purpose of that rule, the timing of the Offer and its acceptance in the litigation, and that the parties were lawyers and represented by counsel, so that they knew and appreciated the context in which they concluded their agreement. According to the Court of Appeal in Rooney (Litigation Guardian of) v. Graham, the purpose of Rule 49 is to encourage parties to make reasonable efforts to settle and to facilitate the early settlement of litigation. Rule 49.07(5) gives an incentive for the defendant to accept an offer to settle promptly as the later that an offer that does not provide for costs is accepted, the more costs that will have to be paid. The timing of the making of the Offer and its acceptance also do not favour the respondent’s interpretation of the Offer. The Offer was made relative early in the proceeding, after examinations for discovery were conducted, and was outstanding at the pre-trial conference when the parties knew that a trial date was scheduled in nine months. The respondent would have known that the appellant would have incurred additional legal costs to prepare for the trial as it approached yet it took no steps in the action. Furthermore, as a law firm, the respondent would have understood the implications of an offer to settle under Rule 49, and the default provision under Rule 49.07(4) that provides for costs.
With respect to the denial for consideration of what was said at the pre-trial conference, the Court of Appeal found that it was unimportant. Had the evidence from the pre-trial conference been considered, it would have only indicated that the parties did not agree on whether costs were included in the Offer and would not have clarified the meaning of the agreement.