What is a Rule 49 offer to settle and how can it affect costs in Ontario?

A Rule 49 offer (named after Rule 49 of Ontario's Rules of Civil Procedure) is a formal written offer to settle a lawsuit that triggers cost consequences if the other party refuses it and later does no better at trial. Either the plaintiff or defendant can make a Rule 49 offer at any stage of the litigation.

If a plaintiff makes a Rule 49 offer and the defendant refuses it, and the plaintiff then obtains a judgment as good as or better than the offer, the defendant must pay the plaintiff's legal costs on a "partial indemnity" basis up to the offer date and on a "substantial indemnity" basis afterward. This can significantly increase the costs the rejecting party owes.

The same logic applies in reverse for defendants. Making a reasonable offer — and doing so early — is a recognized litigation strategy. Courts expect parties to seriously consider settlement, and the cost consequences of ignoring a fair offer can be substantial. A litigation lawyer can help you time an offer strategically and structure it properly so it qualifies for Rule 49 cost protection.