So I made an offer to settle, then I won at trial, but I don't get my full legal costs? What to do?Barresi v. Jones Lang Lasalle Real Estate Services Inc., 2019 ONCA 884 (CanLII)
In Barresi v.Jones Lang Lasalle Real Estate Services  O.J. No. 2161, Jones induced Barresi away from a competitor to become Jones’ Ottawa Lead’. The ‘go-to’ guy for big investments in Ottawa.
A year after coming over to Jones, Jones changed the terms of Barresi’s contract. He could no long work on any deal above $10M.
Ultimately, Aitken J. found that Jones breached the contract by imposing this limit which in effect destroyed the big commissions that Barresi had initially been induced over for.
Barresi’s measure of damages was that his company-loan ($225,000) should be forgiven (which Aitken J. granted).
So Barresi won judgment for $225,000.
Should Barresi get his full legal costs?
Barresi had made his first offer to settle agreeing to repay Jones $50,000 of the $225,000 loan.
Barresi then upped his offer to $100,000.
Jones rejected all offers.
According to rule 49 Barresi should get partial indemnity to the date of the first offer and then full-indemnity. (COA: para 13)
In other words Barresi should have gotten $113,000 in costs.
Aitken J. said No! She said:
- there was divided success because Barresi had not won all his claims;
- Barresi was ‘misleading’ at trial and dilatory on production;
The Court of Appeal rejects the ‘divided success’ factor in rule 49
The Court of Appeal strongly corrected Aitken’s ‘divided success’ theory. This is a critically important point. Because the ‘divided success’ factor is strong in non-rule 49 cost analysis, it creeps into rule 49 analysis and it should not. Here is what the Court of Appeal said:
- 20 First, it was an error in principle and plainly wrong for the trial judge to depart from the presumption in r. 49.10(1) on the basis that success at trial was divided in this case. An offer to settle often involves compromise, premised on the notion of divided success in order to avoid trial. Here, the claim that did succeed at trial -- the $225,000 loan that was forgiven -- was more favourable than the offer to settle, and therefore triggered r. 49.10(1). As this court has noted in Skye v. Matthews (1996), 87 O.A.C. 381 (C.A.), at para. 17, "[t]here is nothing in the offer to settle rules, or the relevant policy considerations, which suggests that eligible offers should be viewed on an issue by issue basis." Once the respondents obtained a judgment more favourable than their offer to settle, thereby triggering the presumption in r. 49.10(1), the trial judge erred by essentially relying on the extent to which the judgment was more favourable than their offer as a basis to rebut that same presumption. Relying on divided success to rebut the presumption in r. 49.10(1) would mean that successful parties would obtain the higher costs contemplated by r. 49.10(1) only if they obtain a judgment that is more favourable than their offer to settle by a sufficiently wide margin. This would frustrate the reasonably predictable application of the rule and distort the incentives to induce settlements and avoid trials.
The Court of Appeal then corrects the trial judge a second time by rejecting the trial judge’s assessment that Barresi had been ‘misleading’ in evidence whereas a few paragraphs before, the trial judge had insisted that Barresi was not misleading in his evidence. (para 21)
The Court of Appeal isn’t strict about late undertakings
The Court of Appeal made a third correction: late answers to discovery undertakings were not serious enough to displace rule 49 (para 22)