Formal Settlement Offers, Costs, and the Flexibility of the New Rules of Court
Interesting reasons for judgement were released this week by the BC Supreme Court, New Westminster Registry, discussing the ‘flexibility‘ that the New Rules of Court give Judges in making costs awards following trials where formal settlement offers were made.
In today’s case (Cairns v. Gill) the Plaintiff brought an ‘exaggerated’ personal injury claim to trial following a 2005 motor vehicle collision. ¬†ICBC made an early formal settlement offer in 2006. ¬† ICBC’s offer was modest at just over $1,200 plus costs. ¬† The Plaintiff rejected the offer and proceeded to trial. ¬† The trial did not go well and the Jury largely rejected the Plaintiff’s claim awarding just over $850 in total damages.
Having beaten their formal offer ICBC applied for an order that the Plaintiff pay their post offer Bill of Costs which was expected to exceed $16,000. ¬†Despited the ‘exaggerated’ nature of the claim Madam Justice Arnold-Bailey found that such a result was unjust. ¬†The Court stripped the Plaintiff of her post offer costs and disbursements however did not award ICBC their costs. ¬†In reaching this result the Court provided the following reasons demonstrating the¬†flexible¬†(but perhaps somewhat unpredictable) nature of the current Civil Rules:
 The defendants seek costs and disbursements following the date of the offer to settle, despite the plaintiff obtaining judgment. ¬†This is available pursuant to Rule¬†9-1(5)(d)…
 To make such an order would have a very negative effect on the plaintiff, and have the broader effect of further discouraging those with legitimate claims from bringing their actions in this Court when the defendant, funded by an insurer, has deeper pockets with which to bear the risk of a plaintiff achieving only a minor or, indeed, a pyrrhic victory.
 It is clear from the rules and the jurisprudence that costs consequences are to guide counsel in litigation decisions. ¬†The object of the Rules is, ‚Äúto secure the just, speedy and inexpensive determination of every proceeding on its merits.‚ÄĚ ¬†This object is to be conducted, as far as is practicable, with regard to proportionality. ¬†While this object is frustrated to some extent by a claim worth $851 proceeding to its conclusion at a Supreme Court jury trial where it was more appropriate for determination in Provincial Court, the object and proportionality principle do not appear to accord with the potential cost of litigation in this case.¬† The bill of costs of the defendants is expected to exceed $16,000.
 I note that the Court of Appeal in¬†Giles¬†recognized when dealing with the issue of double costs that ‚Äúall litigation comes with a degree of risk,‚ÄĚ and that, ‚Äúwhen faced with settlement offers, plaintiffs must carefully consider their positions.‚ÄĚ ¬†However, the court also indicated that plaintiffs, ‚Äúshould not to be cowed into accepting an unreasonable offer out of fear of being penalized with double costs if they are unable to ‚Äėbeat‚Äô that offer.‚ÄĚ ¬†These considerations also appear relevant in these circumstances.
 In this case, pursuing a valid, although exaggerated, personal injury claim to trial, where the offer to settle did not provide a genuine incentive to settle in the circumstances, may, in the face of a defence funded by ICBC, cost the plaintiff almost twenty times what was awarded at trial. ¬†It seems consistent with the object of the Rules generally, and of Rules 9-1 and 14-1(10), to have regard to the need to emphasize litigation decisions that direct cases to the appropriate forum without disproportionately penalizing a party that had some success, however limited.
 To this end, as considered in relation to the first issue, Rule 14-1(10) permits the Court to limit a plaintiff to the recovery of disbursements when the amount of the judgment is within the jurisdiction of the Provincial Court, which I declined to do in this case. ¬†Then, as considered in relation to the second issue, Rule 9-1(5)(a) permits the Court to deprive the plaintiff of any or all of their disbursements after the date of the offer, which I found to be appropriate. ¬†Then, taking the matter even further, Rule 9-1(5)(d) permits the Court to consider requiring the plaintiff to pay the defendants‚Äô costs in respect of some or all of the steps taken after the date of the offer to settle.
 This progression demonstrates the flexibility within the overall framework of the rules to craft an order for costs that is appropriate to the circumstances of each case.
 In the present case, the plaintiff, although the ‚Äúsuccessful‚ÄĚ party at trial, agreed to forego her costs after the date of service of the offer to settle and is, by virtue of my decision on the second issue, without disbursements from the date of service of the offer to settle, which occurred very early in the proceedings.¬† To require her to pay all or some of the defendants‚Äô costs after the date of service of the offer to settle, which at the time was an unreasonably low offer, would be excessive and unjust. ¬†It would not be in keeping with the nature of the offer, the relative financial circumstances of the parties, the principle of proportionality, and the need to avoid decisions that inappropriately discourage plaintiffs from pursuing valid claims.
This case is worth reviewing in full for the Court’s length¬†analysis¬†of many authorities to date addressing costs discretion under the new Rules of Court and further addressing important issues such as sufficient reason to sue in Supreme Court, and the relevance of suing an insured defendant.