Defendant Awarded Double Costs for Successfully Defeating Claim Where "Walk Away" Offer was Made

Rule 37B, the BC Supreme Court Rule dealing with formal settlement offers, continues to be shaped by the Courts.  One factor that is not yet firmly established is what effect a “walk away” offer made by a Defendant has after a Plaintiff’s claim is dismissed at trial.
When a party sues for damages in the BC Supreme Court and later decides that their lawsuit is likely going to lose at trial they can discontinue.  If this is done the Defendant is able to seek their costs at the time of discontinuance unless they waive this right.  A common strategy of Defendants when they are confident they will win at trial is to make a formal “walk away” offer where they waive their right to costs if the Plaintiff discontinues.  If the Plaintiff does not take the offer and goes on to lose at trial the Defendant may be entitled to ‘double costs’ which could easily add up to tens of thousands of dollars.  Reasons for judgement were released this week by the BC Supreme Court dealing with a walk away offer.
In this week’s case (Riley v. Riley) the parties were involved in a lawsuit involving the transfer of real-estate between family members.  (although this was not a personal injury case there is no reason why the Court’s reasoning cannot be used in the injury claims context).  Prior to trial the Defendant made a formal offer under Rule 37B for the Plaintiff to walk away from the lawsuit on a ‘no costs‘ basis.  The Plaintiff refused the offer, went to trial where her case was dismissed.  The Defendant then asked the Court to award ‘double costs‘ and Mr. Justice Greyell agreed to do so.  In concluding that this was a fair result the Court provided the following reasons:

[20] In MacKinlay v. MacKinlay Estate, 2008 BCSC 1570, Savage J. also considered the effect of Rule 37B when a nominal offer was made.  The issue was whether double costs should be awarded where the successful defendant had made a nominal offer to settle.  He held, at paras. 34-35:

[34]      While a nominal offer might be described as strategic, it was a strategy aimed at persuading the Plaintiffs to discontinue the proceeding, an outcome that is favourable as compared to the outcome the Plaintiffs obtained at trial.  Such an offer is one of the few tools in the arsenal of a defendant of relatively modest means which might exert pressure on a plaintiff pursuing an unmeritorious claim.

[35]      In this regard, albeit in the context of the former Rule, the Court of Appeal in Kurylo v. Rai 2006 BCCA 176, 53 B.C.L.R. (4th) 214, at ¶ 7 said:

…. When a defendant assesses his position in litigation of any kind he may consider that the plaintiff has no case and if the case goes to trial, will fail.  But the defendant may also be willing to make some minor offer which would carry with it the costs in the hope that the action will go away and that he will not, thereafter, incur large legal bills to establish his legal position that the plaintiff has no case.

[21] I see no logical distinction between a nominal offer and an offer such as that made by the defendant in this case.  The principle is the same.  One party is provided with an offer to settle and if not successful at trial in advancing its position relative to the offer it may be held accountable for costs of pursuing the matter to trial.

[22] The second factor referred to in Rule 37B(6) clearly favours the defendant.  The judgment upheld the position she outlined in the offer to settle.  Had the plaintiff accepted it he would have saved not only his legal costs but also the legal costs he must pay to the defendant as the successful party.

[23] There are no other relevant circumstances which bear on my determination of double costs.  The caution expressed by Hall J.A. in Catalyst Paper Corporation v. Companhia de Navegaçäo Norsul, 2009 BCCA 16, 86 B.C.L.R. (4th) 17, is applicable in this case.  Based on the considerations in the above paragraphs, I conclude the plaintiff shall pay double costs to the defendant.  Those double costs shall commence seven days from the date the offer was made.

As mentioned at the start of this article, the formal offer Rule is still being shaped and the result of a ‘walk away’ offer is still not certain.  To read a case where the Court refused to award double costs where a walk away offer was made you can click here.
In my continued efforts to get us all prepared for the New BC Supreme Court Civil Rules I will again point out that Rule 37B will be replaced with Rule 9 under the New Rules. The new rule uses language that is almost identical to Rule 37B so the issue of the effect of ‘walk away’ offers will continue to be judicially shaped moving forward.