In three sentences: A Rule 49 offer to settle is a written settlement proposal that one side in an Ontario civil lawsuit serves on another, and it can stay open for acceptance until it is withdrawn, expires or the court decides the claim. If the offer is not accepted and the final judgment turns out to be at least as good for the offering side as the offer was, the Rules point toward a shift in who pays legal costs from the date of the offer. What a judge actually orders on costs is a matter of discretion, so the effect in any given case depends on the facts and should be confirmed with a lawyer.
What is a Rule 49 offer to settle?
An offer to settle is a written proposal, served on another party in a lawsuit, that sets out terms on which one or more claims would be resolved. The Ontario Rules of Civil Procedure deal with these offers in Rule 49. They apply to actions and applications, and with the necessary changes to motions, counterclaims, crossclaims and third party claims (Rule 49.01.1).
Any party may serve an offer on any other party (Rule 49.02(1)). The offer is made on a prescribed form, Form 49A. A plaintiff can make one, and so can a defendant.
It can end the case if accepted, and if not accepted it can affect the costs order at the end.
What are "costs" and who decides them?
"Costs" are the amounts of legal expense that a court can order one party to pay another in a lawsuit.
Section 131(1) of the Courts of Justice Act leaves costs, subject to any Act or rules of court, to the discretion of the court, which may decide who pays and how much. Rule 57.01(1) lists matters a judge may weigh, including the result of the case, any written offer to settle, and:
- the amount claimed and the amount recovered (Rule 57.01(1)(a));
- conduct that shortened or lengthened the case unnecessarily (Rule 57.01(1)(e)); and
- complexity and the importance of the issues (Rule 57.01(1)(c), (d)).
The Rules also recognize that a party who wins can still be ordered to pay costs in a proper case (Rule 57.01(2)). In outline, an offer to settle is one factor among several, and Rule 49.10 sets out presumed costs results that can follow from it.
How is an offer to settle made and accepted?
- Serving the offer. The offer is served in writing on the party it is directed to (Rule 49.02(1)).
- Timing. An offer can be made at any time. If it is made less than seven days before the hearing begins, the special costs consequences of Rule 49.10 do not apply (Rule 49.03).
- Acceptance. The other side accepts by serving an acceptance, Form 49C, on the party that made the offer (Rule 49.07(1)).
- Rejection or counter-offer. Turning an offer down, or replying with a counter-offer the other side does not take up, does not by itself close the door. The original offer can still be accepted later, as long as it was not withdrawn and the claim has not yet been decided (Rule 49.07(2)).
- Costs inside an accepted offer. If an accepted offer says nothing about costs, the Rules supply a default. Where the defendant made the offer, the plaintiff gets costs assessed up to the date the offer was served. Where the plaintiff made it, the plaintiff gets costs assessed up to the date the acceptance was served (Rule 49.07(5)).
- If someone does not honour the deal. The other party may ask a judge for judgment on the terms of the accepted offer, or may carry on with the case as though no offer had been accepted (Rule 49.09).
Where a party is under a disability, acceptance is generally not binding without a judge's approval (Rule 49.08).
How long does an offer to settle stay open?
| How the offer comes to an end | What the Rules say |
|---|---|
| Withdrawal | The offering party can withdraw it until it is accepted, by serving a written notice of withdrawal (Rule 49.04(1)); Form 49B may be used (Rule 49.04(2)) |
| Time limit in the offer | If the offer states a period for acceptance and it is neither accepted nor withdrawn, it is treated as withdrawn when that time ends (Rule 49.04(3)) |
| Court decides the claim | No acceptance is possible after the court disposes of the claim the offer covers (Rule 49.04(4)) |
Whether a particular offer is still open depends on its own wording and the facts, and should be confirmed with a lawyer immediately.
What happens to costs in Ontario if a Rule 49 offer to settle is not accepted?
Rule 49.10 sets out the main consequences. Both versions require that the offer was made at least seven days before the hearing began, and that it was not withdrawn and did not expire before then.
| Who made the offer | Result at judgment | Presumed costs result (unless the court orders otherwise) |
|---|---|---|
| Plaintiff | Plaintiff's judgment ends up equal to or better than the offer (Rule 49.10(1)) | Partial indemnity costs to the offer date, then substantial indemnity costs after it |
| Defendant | Plaintiff's judgment ends up equal to or worse than the offer (Rule 49.10(2)) | Plaintiff receives partial indemnity costs to the offer date; the defendant receives partial indemnity costs after it |
The Rules name the two levels, partial indemnity and substantial indemnity; what a given amount works out to is for the court.
Two features are worth noticing. First, the phrase "unless the court orders otherwise" in both subrules means these are starting points and not automatic results. Second, the party relying on the rule carries the burden of showing how the judgment compares with the offer (Rule 49.10(3)).
Even where Rule 49.10 does not apply, for example because the offer was served too close to the hearing, a court may still take a written offer, its date and its terms into account when deciding costs (Rule 49.13).
Why is an offer to settle "without prejudice", and who gets to see it?
An offer to settle is treated as an offer of compromise made without prejudice (Rule 49.05).
The Rules also keep the judge from learning about it too early. No pleading may mention it (Rule 49.06(1)), and an unaccepted offer is not communicated to the court until liability and relief, other than costs, are decided (Rule 49.06(2)). The offer is also not filed until those same questions are decided (Rule 49.06(3)).
What changes when there is more than one defendant?
Where defendants are alleged to be jointly liable and may have contribution or indemnity rights against each other, Rule 49.11 adds conditions before the Rule 49.10 consequences apply, so the wording of the offer matters a great deal. Where defendants are alleged to be jointly liable, one defendant can also serve an offer to contribute on another (Form 49D), which a court may weigh on costs between them (Rule 49.12).
What else affects the final costs order?
An offer is only one input. The court's authority includes awarding or refusing costs on a particular issue, awarding a percentage of assessed costs, and awarding all or part of costs on a substantial indemnity basis or in an amount that represents full indemnity (Rule 57.01(4)). No single offer fixes a particular costs outcome in advance.
When it is worth talking to a lawyer
A person in this position typically benefits from legal advice when:
- an offer to settle has been served and it states a deadline;
- a court document, such as a notice of trial or a costs outline, has arrived;
- the amount offered and the amount in dispute are far apart;
- more than one defendant is involved, or an insurer is paying for the defence;
- a party under a disability is involved; or
- a previous offer has been withdrawn, or a counter-offer is being considered.
Because dates drive the costs consequences, how long an offer remains open depends on the facts and should be confirmed with a lawyer immediately.
What to gather
- The offer to settle itself (Form 49A) and any notice of withdrawal (Form 49B)
- Any acceptance (Form 49C) or counter-offer
- The pleadings: statement of claim, statement of defence
- The dates on which each document was served, and proof of service
- Records of the amounts claimed, and any recent settlement discussions
- Any insurance policy and letters from an insurer about the case
Related reading: what happens after a statement of claim is served, how mediation and pre-trial conferences work, examinations for discovery and how settlement value is assessed in car accident claims.
Frequently asked questions
What is a Rule 49 offer to settle in Ontario?
It is a written proposal, served on another party in a lawsuit, to resolve one or more claims on stated terms (Rule 49.02(1)). It can be accepted by serving a Form 49C. If it is not accepted, it may influence costs at the end of the case.
Can an offer to settle be withdrawn?
Yes. Until the other side accepts, the offering party can withdraw it by serving written notice (Rule 49.04(1)). An offer with its own time limit is deemed withdrawn when that time passes without acceptance (Rule 49.04(3)).
Can I still accept an offer after I rejected it?
The Rules say a party who turns an offer down, or whose counter-offer goes unaccepted, may still accept the original offer later, unless it was withdrawn or the court has decided the claim (Rule 49.07(2)). Whether a particular offer is still open should be confirmed with a lawyer right away.
What happens if I do better at trial than my own offer?
Where a plaintiff's offer was properly served and not accepted, and the plaintiff's judgment ends up equal to or better than the offer, the Rules presume partial indemnity costs to the date the offer was served and substantial indemnity costs afterward, subject to the court ordering otherwise (Rule 49.10(1)).
What happens if the plaintiff does no better than the defendant's offer?
Under Rule 49.10(2), the plaintiff is presumed to receive partial indemnity costs to the offer date and the defendant partial indemnity costs after it, subject to the court ordering otherwise.
Who pays legal costs in an Ontario civil lawsuit?
Costs are left to the court's discretion, subject to any Act or rules of court, so a judge decides who pays and how much (Courts of Justice Act, s. 131(1)). Rule 57.01(1) lists matters a judge may weigh, including any written offer to settle. The outcome in a particular case should be confirmed with a lawyer.
Questions a lawyer would typically look at
- Whether the offer is still open, and when it was served relative to the hearing date
- How the offer's terms compare with the realistic range of outcomes at trial
- Whether more than one defendant or an insurer is involved, or a party is under a disability
Good to know: Read the offer and any covering letter carefully, note every date on it, and gather the documents listed below.
Sources named in this article
- Courts of Justice Act
- Rules of Civil Procedure
Statutes, regulations and decisions change. Read the current official text before relying on anything here. This is not a complete list of every source behind the article.
Read the primary sources: Ontario e-Laws · CanLII
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