Facts: 11 months before trial, a defendant makes an offer to settle. On the eve of trial, the plaintiff accepts the offer. The offer includes as a term, “costs to be agreed upon or assessed.” After acceptance of the offer, the parties cannot agree on costs.

Issue: under the terms of the accepted offer, is the plaintiff entitled to the costs of the action up to the date of the offer or up to the date of the acceptance?

This was the scenario in Milanovic v. Le (CV-04-1027) [Milanovic], in which Justice Kent, of the Superior Court of Justice in Kitchener, found that the law in Ontario is the former: costs are payable to the date of the offer, not the date of acceptance.

When the parties could not agree on costs, the Defendant  brought a motion pursuant to Rule 131(1) to determine the extent to which costs  were payable. There were two Ontario cases that conflicted, one in the Defendant’s favour and the other in Plaintiff's favour.

 In support of the Plaintiff's position was the case of Lamprakos v. Pickering, in which the defendants made an offer to settle, including the payment of the plaintiffs' party-and-party costs as assessed or agreed. Just before the trial, the plaintiffs accepted the offer. Justice Sutherland held that the matter should be settled, “by analogy to contract principles. The offer is an offer that is outstanding as long as it is left outstanding.” Justice Sutherland held that the defendants offer would therefore include the payment to the plaintiff of his party-and-party costs to the date of acceptance.

Justice Sutherland noted, however, that the defendant could have protected himself by limiting his offer: “[o]n the plain meaning of the language, "payment to the plaintiff of its party and party costs as assessed or agreed", could have had added thereto, "to date", "to the date of this offer", or "to a date two weeks following the date of this offer", but no such language was added.”

In Rosero v. Huang, Justice Nordheimer reached the opposite conclusion. The defendants had proposed a settlement of the plaintiff's action for $5,000 and "costs to be assessed or agreed upon". The offer was expressly stated to be made in accordance with the Rules of Civil Procedure. One month later, on the eve of trial, the plaintiff accepted the offer. Justice Nordenheimer held that the plaintiff was entitled to costs only up to the date of the offer.

In Milanovic, Justice Kent held that the law in Ontario should follow Rosero. To follow Lamprakos would be to interpret an offer to settle as giving a “costs holiday” to the plaintiff, by which the plaintiff can “mull over the offer…while at the same time continuing to expend costs.” The reasoning in Rosero is more consistent with the thrust and purpose of Rule 49: to bring litigation to an early conclusion, with the least expense to the parties.