Law Times

www.lawtimesnews.com Law Times / march 17/24, 2008 Page 11 Y ikes! It turns out there's no such thing as an irrevo- cable offer to settle under Ontario's Rules of Civil Procedure. So don't make one. Because according to the Ontario Court of Appeal's November decision in 363066 Ontario Ltd. v. Gullo, it's a waste of time. "Gullo means that lawyers can't use the irrevocability of their offer as a tactical tool anymore," says Alexandra Mayeski of Hamilton's Evans Sweeny Bordin LLP. The issue arose in the context of lengthy litigation between fam- ily members over a York Region property development venture. The defendants in the action, Anna Gullo, Tony Gullo, Peter May, and two companies, made a number of settlement offers, which the plaintiffs rejected. In September 2004, the defen- dants made a further offer to settle the action by offering the plaintiff, 363066 Ontario Ltd., a 20-per- cent interest in the property in return for a consent to dismissal. The offer stated that it would "remain irrevocable until one min- ute after the commencement of the trial of this action." In January 2006, the plaintiff made inquiries about the offer. Soon afterward, the defendants made a less favourable offer which expressly revoked the 2004 offer. After taking the position the 2004 offer could not be revoked, the plaintiff accepted it. Plaintiff 's counsel followed with a motion under rule 40.09 to enforce the 2004 offer. At first instance, Superior Court Justice James Spence ruled the set- tlement should be enforced. Spence considered rule 49.04(1). It provides that "an offer to settle may be withdrawn at any time before it is accepted by serv- ing written notice of withdrawal of the offer." A restrictive reading of the rule would have permitted withdrawal of the 2004 offer at any time before acceptance. Spence, however, invoked rule 1.04. It states the Rules of Civil Procedure should be "liberally con- strued to secure the just, most expe- ditious, and least expensive deter- mination of every civil proceeding on its merits." In Spence's view, rule 1.04, coupled with the court's policy of encouraging settlements, mandated that rule 49.04(1) be interpreted as being subject to an irrevocability provision in an offer. But Justice Eileen Gillese, writ- ing for a unanimous Court of Appeal bench composed also of justices Eleanore Cronk and Robert Armstrong, disagreed. As Gillese saw it, rule 49 consti- tuted a self-contained scheme deal- ing with the making, acceptance, and withdrawal of offers. Its clear language precluded resort to rule 1.04 when interpreting it. "Rule 49.04(1) expressly pro- vides that an offer to settle may be withdrawn at any time before it is accepted by serving written notice of withdrawal of the offer on the party to whom the offer was made," Gillese noted. "The 2004 offer was an offer to settle. As the 2004 offer had not been accepted at the time that the 2006 offer was made and the 2006 offer complied with the requirements of rule 49.04(1), the [defendants] were entitled to withdraw the 2004 offer despite the fact that it was stated to be irrevocable." Failing to afford rule 49.04(1) its plain meaning, Gillese added, had significant practical implica- tions. For example, had the 2004 offer not been irrevocable, the defendants would have been entitled to with- draw it until one minute after the commencement of trial. "There is little difference between an offer that is to remain open until one minute after trial commences versus one that is to be irrevocable until one minute after trial commences," she wrote. "In both cases, the intention is that the offer is to remain open until one minute after the trial commences. "I do not favour an interpreta- tion of rule 49.04(1) which per- mits the withdrawal of the offer in the former situation but precludes withdrawal of the offer in the lat- ter. Giving rule 49.04(1) its plain meaning, namely, that an offer to settle may be withdrawn at any time before acceptance provided that written notice of the with- drawal is served, precludes such inconsistency." Mayeski says the decision is instructive beyond the immediate issue at stake. "What the Court of Appeal is telling counsel is that they can't opt out of the rules, and that one rule can't be used to override the clear intent of another rule," she tells Law Times. Michael Kestenberg of Toronto's Kestenberg Siegal Lipkus LLP, who represented the defendants on appeal, says there are other — per- haps more significant — traps for unwary counsel in the rules govern- ing offers to settle. He points to rule 49.07(5). It says where an accepted offer to settle does not provide for the dis- position of costs, the plaintiff is entitled to costs to the date of the notice of acceptance. So Kestenberg posits this sce- nario: a plaintiff 's lawyer makes an offer to settle for $50,000. The offer says nothing about costs, which apparently is not uncom- mon. The defendant accepts the offer, believing quite naturally that the offer is for $50,000 all in. However, under rule 49.07(5) — with which not all counsel are too familiar, to say the least — the plaintiff can then assess costs. Kestenberg says this result is "unbelievable" and taking advan- tage of the rule is "sneaky." But not everyone shares his view. Other lawyers have told Kestenberg there's nothing wrong with taking advantage of the clear wording of a rule — not to mention the igno- rance of opposing counsel. LawPro, are you listening? No such thing as an irrevocable offer to settle FOCUS Irrevocability of offers to settle can no longer be used as a tactical tool, says Alexandra Mayeski. GILBERTSON DAVIS EMERSON LLP BARRISTERS AND SOLICITORS practice restricted to CIVIL LITIGATION, INSURANCE LAW Counsel: James E. Adamson 20 Queen Street West, Suite 2020 Toronto, Ontario M5H 3R3 Tel: (416) 979-2020 Fax: (416) 979-1285 email: office@gilbertsondavis.com Angela Emerson John L. Davis John L. Davis Professional Corporation Richard Hayles R. Lee Akazaki James W. Wilson Nazanin Aleyaseen Jody W. Iczkovitz BY JULIUS MELNITZER For Law Times If nothing else, everyone agrees that the court is taking a newly proactive approach. In the past, the court might have let parties determine the pace of the litigation, bearing in mind only the 24-month time limit. But now it appears that judges will be making every effort to reduce the time a hearing takes by demand- ing realistic time estimates and putting limits on what parties can do. Among the most suc- cessful of these restraints is limiting the number of experts by strictly applying the provisions of the Canada Evidence Act that hold parties to five experts without leave of the court. Virtually everyone favours this approach. For his part, Radomski lauds any measure that will shorten and simplify the proceedings. "The Federal Court of Appeal has emphasized that PMNOC litigation produces a preliminary determination rather than a final determina- tion of rights," he says. "So we should need only enough to give the court a sense of what the real story is, much like what happens on a summary judgment motion in civil pro- ceedings generally." But not everyone believes the changes are necessary. Some critics argue that, absent a com- plete overhaul, the present sys- tem should remain in place. Others believe the current sys- tem works well enough, achiev- ing its goal of allowing generics to enter the market only after a preliminary review of validity and infringement. However that may be, salva- tion may come from an unex- pected source. Increasing num- bers of innovators and generics could be turning to full impeach- ment or infringement proceed- ings as their primary approach. The reason is the Federal Court has been streamlining its trial procedures even as it is work- ing on PMNOC challenges. The court has implemented a fast- track process that promises a hearing within two years, poten- tially making final determina- tions as expeditious as PMNOC proceedings. Continued from page 9 Court taking a proactive approach LT E. V. Litigation & Financial Services Inc. Elaine G. Vegotsky, CMA, CFE, CFI Assisting you in Litigation & Forensic Accounting, Financial Investigations x a F r o e n o h p e l e T 0 0 9 e t i u S 0 7 3 1 - 0 3 9 ) 6 1 4 ( , t s a E e u n e v A d r a p p e h S 5 4 Willowdale, Ontario M2N 5W9 (905) 731-5812 evlitigation@rogers.com Vlit_LT_Mar17_08.indd 1 3/13/08 11:55:47 AM So we should need only enough to give the court a sense of what the real story is, much like what happens on a summary judgment motion in civil proceedings generally. LT

• Cover