Written By: Dale Orlando and Endrita Isaj, Student-at-Law
In Battiston v Microsoft Canada Inc., 2021 ONSC 1341, Justice Faieta highlighted that the refusal to provide an estimate of costs under a Rule 49 offer to settle meant that the trial judge may use their discretion with respect to costs. In the case of Battiston v Microsoft, this meant that substantial indemnity costs were not awarded to the successful plaintiff at trial by the trial judge.
Background:
The plaintiff had been terminated from Microsoft without cause after working there for close to 23 years. A judgment was granted with respect to the plaintiff’s notice period, payment of bonuses, and damages for stock options in the amount of $567,977.30.
The plaintiff also sought costs of $162,504.90 based on his partial indemnity costs to the date of his first offer to settle, and for his substantial indemnity costs thereafter.
The court held that the plaintiff was the successful party in the action for wrongful dismissal given that the amount awarded by the court exceeded the offers to settle made by the plaintiff.
The plaintiff made two Rule 49 offers to settle. The first offer was made on April 16, 2019, which stated:
The plaintiff offers to settle this proceeding with the defendant on the following terms:
- The defendant pay to the plaintiff the amount of $530,000 minus regular statutory deduction and minus amounts paid to date;
- The defendant shall pay to the plaintiff the costs, plus disbursements, for the action on a partial indemnity basis as agreed or as assessed by a judge of the Superior Court;
- The action shall be dismissed; and
- This offer is open to acceptance until five (5) minutes after the commencement of the hearing of the summary judgment motion in connection with this matter.
The second offer to settle, made on November 4, 2019, was identical to the first offer, but with a summary trial now replacing a summary judgment motion.
The defendant submitted that the plaintiff’s Rule 49 offers to settle were improper because the plaintiff refused to provide an estimate of its costs. On November 28, 2019, plaintiff’s counsel, Ms. Lucifora, advised defence counsel, Mr. Gorsky, that their Rule 49 offer to settle was still open for acceptance and offered to provide a quote of their legal fees. Mr. Gorsky requested that information. The next day, Mr. Monkhouse, also representing the plaintiff, responded by suggesting that both parties exchange their current partial indemnity costs. Mr. Gorsky refused to do so and consequently, the plaintiff did not provide its costs to defence counsel.
Justice Faieta was guided by the Ontario Court of Appeal’s decision in Rooney (Litigation Guardian of) v. Graham, [2001] OJ No 1055:
A party to whom an offer is made must be able to evaluate the offer at any time after it is made in order to decide whether to accept it. Thus, the party making the offer must be forthright and candid in disclosing the amount of solicitor- and-client costs incurred. A failure to cooperate may be dealt with by the trial judge’s overall discretion on costs.
Justice Faieta found that the plaintiff was not forthright when asked to disclose the amount of costs under the Rule 49 offer and failed to do so. Justice Faieta was clear that this conduct did not promote settlement and was inconsistent with the purpose of a Rule 49 offer.
As such, Justice Faieta awarded costs to the plaintiff on a partial indemnity scale only, finding “it would not be advancing the interests of justice to award substantial indemnity costs to the plaintiff in respect of either Rule 49 offer.”[1]
This case provides a fair warning to parties that substantial indemnity costs may not be awarded by the court when the successful party at trial fails to be forthright and candid by refusing to disclose their legal costs in their Rule 49 offer to settle.
[1] Battiston v Microsoft Canada Inc., 2021 ONSC 1341 at para 20.
