The decision of Justice Nancy Spies in Tuffhide Products v. Rhino Systems of Canada Inc. is a cautionary tale on the subject of offers to settle in multi-defendant cases.
The plaintiffs had sued two defendants. Prior to trial, the plaintiffs had offered to settle for $150,000 plus interest and partial indemnity costs. At trial, the plaintiffs were awarded damages of $187,664, plus interest. They sought substantial indemnity costs from the date of the offer, arguing that the judgment had been more favourable than their offer. They relied on Rule 49.10 of the Rules of Civil Procedure.
However, Justice Spies rejected this argument and limited the costs to a partial indemnity basis. Her reason for doing so was that the claims against the two defendants were quite independent of each other. The offer could not be accepted by either defendant without paying the entire amount:
The claims asserted by the plaintiffs against the two defendants were two separate, independent and distinct causes of action. It was never suggested that there should be joint liability on the claims and so because the offer was for a global amount it was not possible for either defendant to settle the claim asserted against that defendant by paying a particular amount. In this regard I adopt the reasons of Polowin J. in Sommerard. Accordingly, I find that the plaintiffs’ Offer to Settle was not a valid Rule 49 offer and that the plaintiffs are not entitled to any of their costs on a substantial indemnity basis.
Because of the discrete nature of the claims, Justice Spies concluded that she was required to assess separately the partial indemnity costs payable by each defendant. In the result, one defendant had to pay only $14,421.12, while the other was ordered to pay $69,965.62.
This case underlines the importance of analyzing the theoretical basis of an action (or defence) before making an offer to settle.