Henley Estate (Re), 2024 NLCA 45
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By: Krista Nasartschuk
A recent Newfoundland and Labrador Court of Appeal case has highlighted the importance of consistency and predictability when considering cost awards relating to an offer to settle under Rule 20A of the Rules of the Supreme Court, 1986, SNL 1986, c. 42, Schedule D.
Rule 20A.08 provides that where an offer to settle is made in a prescribed form at least 7 days prior to the commencement of a trial or hearing, and is not revoked or accepted, and a judgment is rendered which is as favorable or more favorable than the offer to settle, then the offeror is “entitled to party and party costs plus taxed disbursements to the date of service of the offer to settle and thereafter to double party and party costs plus taxed disbursements” [para 36]. The most important aspect of this rule is the requirement of a comparison between the outcome reached in the Court’s Decision and the outcome that would have been reached had the offer to settle been accepted.
Rule 20A.10 allows a judge to exercise discretion with respect to any deficiencies in service or other relevant matters when granting party and party costs.
The original application in this matter entailed lengthy litigation between siblings regarding the disposition of their father’s estate. At the conclusion of an application to the Supreme Court regarding the resolution of certain issues, it was determined that each party would bear its own costs. The judge stated that all parties were acting in good faith, were credible, and had not engaged in any obfuscation. The parties did not appeal the decision or the determination with respect to costs.
Brian A. Henley and Janet M. Henley K.C., the Respondents in this matter, subsequently brought a Rule 20A Application with respect to an offer to settle which they had made on February 9, 2022. The Rule 20A Hearing Judge determined that the offer was more favorable to the opposing parties than the outcome they had obtained from the Court – specifically, had the offerees accepted the Rule 20A Offer, they each would have received $8,522.35 more than they received in the Decision.
However, the Respondents’ offer to settle had included a provision that would have required the offerees to pay costs. In the Rule 20A Decision, the Judge stated that it was inappropriate for him to consider the costs provision of the offer because the plaintiffs could not have anticipated that he would exercise his discretion not to award costs.
On appeal, F.P. O’Brien J.A. stated that cost awards are discretionary, but discretion must be exercised judicially and according to principle. He held that the Application Judge’s disregard of the costs component of the Rule 20A offer to settle was an error in principle.
It was held that the Rule 20A Judge had misconstrued what is required in a Rule 20A application – that is, comparison between what was decided in the original application and what was included in the offer to settle. Speculation, such as whether higher costs than those considered in the offer might have been awarded by another judge, acts to undermine the Rule’s intended predictability and consistency.
In his analysis, F.P. O’Brien J.A. stresses that Rule 20A is designed to foster the settlement of litigation. In order to be an effective settlement tool, following Rule 20A with consistency and predictability is crucial. As such, all terms of an offer to settle must be considered in a Rule 20A Assessment. He went on to say that “Offers to settle are not assessed on a piecemeal basis. All parts of an offer to settle must be considered in determining whether the offer to settle is more or less favorable than the outcome of the litigation” [para 76].
Specifically, where a provision on costs is present in an offer to settle, it is meant to alert the offerees that the proposal in the offer relating to costs will be compared to the ultimate costs result ordered. F.P. O’Brien J.A. found that the costs provision was duly considered by the offerees, who had concluded that the provision would require payment of approximately $42,000 thereby eliminating any advantage the other terms of settlement had offered.
Based on the foregoing F.P. O’Brien J.A. granted leave to bring a further application for a Rule 20A analysis subject to the limitation that the Court would consider all the terms of the offer and that the assessment would be primarily a mathematical one restricted to determining whether the amount the offerees “lost” by not accepting the offer is greater than or less than the amount the offerees saved in costs by not accepting the offer.
An additional issue raised was the Rule 20A application judge’s failure to consider a separate offer made by the offerees on November 2, 2020. This argument was dismissed as the offer was not made under Rule 20A or in the prescribed format and as such was not mean to invoke the formal cost consequences of Rule 20A.
A further argument that the offer should be considered under the discretion granted by Rule 20A.10 was also dismissed as undermining the need for consistency and predictability in following Rule 20A. F.P. O’Brien J.A. stated, “…parties should know that a Rule 20A offer to settle will be judged against the outcome of the litigation only. It will not be measured or assessed in comparison to the terms of ‘non-Rule 20A’ proposal” [para 128].
In conclusion, the Newfoundland and Labrador Court of Appeal has clarified that a strict comparison of a Rule 20A offer to settle and a Decision rendered by the Court is necessary to ensure a consistent and predicable application of Rule 20A and its success as a tool in promoting settlement.
