People sometimes have disputes about money or other property. Methods of settling disputes can range from private negotiation between the parties, to a settlement in which a neutral, third party mediator is involved, to an action within the court system where a judge decides the issue.
Even if the dispute is to be resolved by court action it should be understood that the legal system actually encourages settlement between parties. This is because the judicial system, from a policy standpoint, would prefer that parties settle between them rather than to pursue a one sided, judge-ordered remedy.
Some examples of systemic pressure in the court system designed to avoid trial and encourage settlement are: 1) different court processes depending on the amount of money involved; 2) formal settlement rules under Rule 49; and, 3) cost awards against the unsuccessful party.
The civil courts, or processes within the court, are divided according to the amount of money involved in the lawsuit. There can be cost consequences to a party who brings a claim for a value greater than its real worth, thereby bringing the action into the wrong court or by way of the wrong process. If a claim is an exaggerated as to value and should have been heard in a court of lesser monetary jurisdiction then that court can find against the party exaggerating the claim and award costs against them. There is, therefore, real incentive built into the system to encourage only reasonable claims and reasonable claims are much easier to settle.
There are formal rules designed to encourage settlement. If, for example, a reasonable, formal settlement offer is made by a party early on in the litigation that is rejected by the other, and then the party who rejected the settlement offer is granted a poorer outcome by a judge at trial, then the party who rejected the reasonable offer can be required to pay the other side's legal costs from the date that the reasonable offer to settle was made. This rule is designed to make people really take settlement offers seriously, to accept them if reasonable, and to avoid trial.
As well, the basic rule of trial is that the loser pays all of the costs of the other party. This can be enormous, as the loser must not only pay his or her own lawyer but also the other side's lawyer. The risk of pushing an issue to trial, therefore, is very high, and knowing this encourages litigants to settle matters rather than risk an all-or-nothing outcome at trial.
So settlement between parties is always encouraged, even within the litigation system itself. Lawyers are familiar with the cost issues involved in litigation vs. settlement. Indeed, the Rules of Professional Conduct require lawyers to advocate for settlement rather than to go to trial on issues to help avoid costly litigation where unnecessary.
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