Francosteel Canada Inc. v. The “African Cape” et al.

This matter concerned an action for damages to cargo in the alleged amount of $500,000. Early in the proceedings the Defendants offered to settle the Plaintiff’s claim for $125,000. The offer was not accepted and the case proceeded to arbitration. The Defendants’ offer of settlement was withdrawn on the fourth day of the arbitration. The arbitrator subsequently rendered an award in the total amount of $108,000, inclusive of interest. A hearing was subsequently held to decide the issue of costs. The Plaintiff argued that it was the successful party and was entitled to its costs. The Defendants argued that their settlement offer should be taken into account and they should be entitled to costs. At first instance, the Prothonotary agreed with the Plaintiff and held that as the Defendants’ settlement offer had been revoked it could only be taken into account in determining the amount of costs not the entitlement to costs. The Prothonotary awarded the Plaintiff costs of $40,000. On appeal, the Prothonotary’s Order was upheld. On further appeal, the Federal Court of Appeal held that the Prothonotary and the Judge on appeal misapplied Rule 400 in that they had failed to take into account the offer of settlement in determining entitlement to costs. The appeal was allowed and the Defendants were awarded their costs. (Note: In separate Reasons Letourneau J.A. was very critical of the present Rule 420 and suggested that it is in dire need of revision. This is something that is currently being undertaken.)