ICBC Law

Reasons for judgement were released yesterday by the BC Supreme Court, New Westminster Registry, dealing with a very interesting set of facts.  Can a Defendant accept a Formal Settlement Offer from a Plaintiff when the Plaintiff forgot the offer was made in the first place?

In yesterday’s case (Burton v. Bakker) the Plaintiff was injured in a 2005 BC motor vehicle accident.  He hired a lawyer to help him advance his ICBC claim.  In the course of the lawsuit the Plaintiff’s lawyer made a formal settlement offer to resolve the claim for $40,000.  Some time after this the Plaintiff switched lawyers.  When the new lawyer took over the file “there was no copy of the settlement offer made (by the last lawyer) in the file and the correspondence accompanying the file made no reference to (the) offer“.

Almost one year passed.  During this time the potential value of the Plaintiff’s claim appreciated significantly.  The Plaintiff’s new lawyer continued to be unaware of the outstanding offer made by the first lawyer.  Then the Defendants lawyer, without any prior notice to the Plaintiff’s new lawyer, accepted the formal settlement offer.  The parties could not agree if there was a binding settlement which resulted in the Defendants applying to Court for “a declaration that there is a binding settlement agreement“.

Madam Justice Bruce of the BC Supreme Court presided over the application.   The Plaintiff’s lawyer argued that “the offer to settle was made under a misapprehension of the facts underlying the claim such that it would result in an injustice to enforce the settlement“.  Ultimately the Court held that this is an issue that would better be dealt with by the trial judge as opposed to in a pre-trial chambers application.  Before reaching this conclusion, however, Madam Justice Bruce provided a useful discussion of the powers of BC Courts to offer remedies in the enforcement of settlement agreements.  Here are the highlights of the Courts discussion:

[20] The enforcement of settlement agreements is not a separate field of law exempt from the ordinary principles of contract law and the rules of procedure. The various means of enforcing a settlement agreement may involve equitable principles, discretionary remedies, and rules regarding the entry of consent orders; however, this does not oust the general principles of contract law. This proposition of law is amply supported by the reasoning of the Court of Appeal in Robertson where Lambert J.A. says at 386:

The law in relation to the enforcement of settlement agreements by stays of proceedings brings together principles of contract law, principles of the law of agency as they apply to barristers and solicitors, rules of equity as they apply to discretionary remedies, and rules of procedure as they apply to the pronouncement and entry of consent orders. In each case, the issues between the parties must be dealt with in accordance with those principles. The effectiveness and the enforcement of settlement agreements does not constitute a separate field of law to which the ordinary principles of contract law, agency, and equity, and the ordinary rules of procedure, do not apply.

[21] It is because the enforcement of settlement agreements involves such a collage of legal and equitable principles that the remedies available to the court have become somewhat muddied. On the one hand, it is apparent that the Rules of Court and in particular, Rules 37A and 37B addressing settlement offers, are not a complete code that have ousted the principles of contract law in respect of the enforcement and interpretation of settlement agreements. As Madam Justice Ross says in Thom at paras. 33 to 34:

[33] In my view, the decision in Acadia Hotels did not have the effect contended by counsel for the respondent of completely ousting the principles of mistake from a consideration of Offers to Settle.

[34] I find support for this conclusion in Craig Estates and in Vickaryous v. Vickaryous (2001), 19 R.F.L. (5th) 195, [2001] B.C.J. No. 1343, 2001 BCSC 930 (S.C.) per Garson J. In both decisions, the principles applicable to unilateral mistake were applied in relation to the acceptance of an Offer to Settle. Moreover, in 256593 B.C. Ltd., Mr. Justice Donald approved of the statement of law made by Baker J. in the Craig Estate decision.

[22] Thus, on an application for a declaration that a settlement agreement is binding on the parties, the court may apply the ordinary principles of contract law to determine the matter and grant or dismiss the application based on these principles.

[23] On the other hand, in an application to enforce a settlement agreement, the court has a broader range of remedies available to it that in an ordinary contract case, particularly because of s. 8 of the Law and Equity Act. This provision authorizes the court to grant a stay of proceeding in any cause or matter before it if it is just and fit in all of the circumstances. Alternatively, the court may exercise its discretion to leave the issue of the settlement agreement to the trial judge. As Garson J. (as she then was) says in Vickaryous v. Vickaryous, 2001 BCSC 930, 19 R.F.L. (5th) 195 at paras. 28 to 29:

[28] This application is brought pursuant to Rules 1, 2, 18A, 27 and 57 of the Rules of Court and s. 8 of the Law and Equity Act.

[29] In an application such as this, the court may grant or dismiss the application to enforce a settlement, pursuant to Rule 18A. Alternatively, pursuant to s. 8 of the Law and Equity Act the court may exercise its discretion in favour of granting a stay of the proceedings pending completion of the settlement agreement. The court also has a discretion to leave the settlement issue to be resolved at trial. (English v. Storey, [1999] B.C.J. No. 1647 (B.C.S.C.) and Hawitt v. Campbell (1983), 148 D.L.R. (3d) 341, 46 B.C.L.R. 260 (C.A.).)

[24] In Hawitt v. Campell, (1983) 148 D.L.R. (3d) 341, 46 B.C.L.R. 260 (C.A.) [Hawitt CA], , the Court of Appeal articulated the circumstances in which the court may refuse a stay of proceedings and held that the same factors should apply whether the application is for a stay of proceedings or for summary trial on the issue. These factors are described by MacFarlane J.A. in Hawitt CA at paras. 20 to 23:

[20] The judge may refuse the stay if:

1. there was a limitation on the instructions of the solicitor known to the opposite party;

2. there was a misapprehension by the solicitor making the settlement of the instructions of the client or of the facts of a type that would result in injustice or make it unreasonable or unfair to enforce the settlement;

3. there was fraud or collusion;

4. there was an issue to be tried as to whether there was such a limitation, misapprehension, fraud or collusion in relation to the settlement.

[21] Refusal of a stay would leave the parties to their remedy in the action or in an action on the settlement.

[22] My fourth point arises from an analogy between a summary application to stay, and an application for summary judgment. In either case, if there is a triable issue then the parties ought to be left to their remedy at trial.

[23] In exercising his discretion to refuse to grant a stay, a judge will consider not only whether there was the required misapprehension by the solicitor but whether the result of that would be unreasonable or unfair to the client. It is in that sense that I understand the reference to reasonableness and fairness in the authorities cited.

[25] Finally, in Robertson the Court of Appeal clarified that the judgment in Hawitt CA deals with an application for a stay of proceedings or summary relief and does not address the legal and equitable principles that ultimately govern whether the settlement is binding on the parties. The latter question is to be determined by the ordinary principles of contract law. As Lambert J.A. says in Robertson at 388:

…But the remarks made in the course of the reasons in Hawitt v. Campbell that a stay might be refused if a settlement obtained as a result of a misapprehension was unreasonable or unfair should not be regarded as introducing a rule that settlements are not binding if they are unreasonable or unfair. In my opinion, those remarks were intended to apply to the exercise of the judge’s discretion upon a summary application for a stay. A judge hearing such an application might refuse a stay, if there had been a misapprehension of instructions, on the ground that to allow it might be unjust. The result of a refusal would be to leave the parties to seek their remedies in the action, in which the settlement might be pleaded, or to seek them separately in an action on the settlement. In short, Hawitt v. Campbell deals with the considerations which apply to the judicial discretion under s. 8 of the Law and Equity Act to grant or refuse a stay. But those same considerations do not determine whether a settlement is binding or not.

[26] Applying these principles to the case at hand, I find it would be inappropriate to grant a stay of proceedings or to grant the summary relief claimed by the defendants. In my view, Mr. Burton has raised a triable issue that there was a unilateral mistake and unfair reliance upon it by the defendants. Further, he has raised a triable issue that the offer to settle was made under a misapprehension of the facts underlying the claim such that it would result in an injustice to enforce the settlement. The parties should be left to pursue their remedies in respect of the settlement agreement at the trial of the action set to commence on April 19, 2010.

Ultimately this case serves as an important reminder that great care should be taken before making a settlement offer in an ICBC Claim otherwise the consequences could cause regret.  If the parties to this lawsuit are unable to come to a resolution before the case goes to trial the presiding Judge will certainly be asked to grapple with this interesting issue.  If that occurs I will be sure to write about the reasons for judgement once they are released

Further to my numerous posts revieiwng BC Supreme Court cases interpreting and applying Rule 37B following an injury claims trial, reasons for judgement were released today dealing with a unique issue; in exercising discretion under the Rule can the Court consider the conduct of the successful litigant?

In today’s case (Lakhani v. Elliott) the Plaintiff was injured in a 2005 car crash.  Before trial the Plaintiff made a formal offer to settle her case under Rule 37B for $95,000 plus costs and disbursements.

While the Plaintiff did not obtain all the compensation she sought at trial she fared well enough to beat her formal offer.  Specifically, after an 11 day trial Mr. Justice Voith awarded the Plaintiff just over $105,000 in total damages (You can click here to read my post summarizing the trial findings).

Despite the Plaintiff’s relative success at trial all did not go smoothly.  Mr. Justice Voith made some damaging findings with respect to her credibility.  Some of the highlights of these findings were as follows:

[33]      The defendants asserted that Mrs. Lakhani’s credibility was suspect. I agree in significant measure. I believe there are a number of distinct factors that have caused me to question, in some cases reject, and in other cases to significantly discount her evidence. In the main, I find that Mrs. Lakhani has overstated her symptoms resulting from the Accident; downplayed the significance of her 2001 workplace injury; and has been untruthful regarding the Accident’s effect on her graduation from nursing school. I will discuss these concerns in turn…

[40]      I believe that Mrs. Lakhani has tended to considerably overstate the severity of the symptoms that she suffers from as a result of the Accident….

[46]      For the plaintiff to assert that she has routinely and consistently suffered from pain, from the date of the Accident to the trial, which approaches the worst pain possible is not tenable. For her to describe her pain in terms which would be comparable to that of patients who are heavily medicated to assist with their pain management or who are inextremis goes beyond mere subjectivity or imprecision. It is instead either so inaccurate a description as to be of no value or it is a description intended to overstate. In either case it is not a description that can be relied upon….

[51]      The second significant concern with the plaintiff’s evidence was a tendency to downplay the significance of her 2001 workplace injury or to suggest some improvement in her symptoms in relation to that injury prior to the Accident…

[54]      Indeed Mrs. Lakhani sought broadly to suggest that in late 2004 she reclaimed or reassumed control of her life. She said this was so with respect to spending time with her sister, with respect to gardening and even with respect to her household activities. This too is all inconsistent with the objective record of what she told others she could do, with the medical assessment that her condition had plateaued or with her admission that things had become “as good as they were going to get”…

[59]      Quite simply the overall picture which the plaintiff sought to paint with her evidence was one where the very significant “life altering changes” brought on by her low back injury occupied little or no space. This absence of balance in her evidence had the affect of considerably detracting from its weight.

[60]      A third concern with Mrs. Lakhani’s evidence arises from having testified that the Accident caused her to graduate two terms later than she otherwise would have. Specifically, Mrs. Lakhani said that the pain and difficulty associated with the Accident caused her to skip the May to August 2005, as well as the January to April 2007 academic terms. This is not credible on an objective basis…

[66]      Plaintiff’s counsel sought to persuade me that an eight month delay in Mrs. Lakhani’s graduation was a very modest component of the plaintiff’s claim and not one that would cause the plaintiff to be less than forthright. In my view, however, the focus of the plaintiff’s evidence was not designed to obtain the modest financial benefit that receiving her degree earlier would have generated, but rather to impress upon the court the ongoing severity of her injuries. Quite apart from her motivation, the documents I’ve referred to as well as the admissions she made in cross examination, simply do not accord with the evidence she first gave.

With this background at hand the Plaintiff brought an application for double costs under Rule 37B.  The Defendants opposed and argued that given the Plaintiff’s “failure to be forthright at trial” the Court should not exercise its discretion to award the Plaintiff double costs.  Mr. Justice Voith agreed and provided the following analysis:

0] While the dominant objective of Rule 37B, found under the heading “Offers of Settlement”, is likely to promote early or reasonable settlement, additional factors, and in particular the conduct or honesty of one of the parties, can be relevant in considering whether to make an order of double costs under 37B(5)(b). This is apparent from numerous sources…

[13] Second, both the permissive nature of Rule 37B(5), which establishes that the new rule does not purport to create any automatic double cost consequences, and the non-exhaustive list of factors in Rule 37B(6) acknowledge the flexibility inherent in Rule 37B and the prospect that the Rule is amenable to furthering legitimate policy objectives apart from settlement…

[15] It is important to emphasize that in this case there is no issue of depriving the plaintiff of the ordinary costs to which she is entitled or of any award of special costs being made against her. Instead, the only issue is whether she should be entitled to double costs in light of various findings that I made in my Reasons for Judgment.

[16] Having regard to the foregoing authorities, and the underlying rationale that drives them, I can see no principled reason why a lack of candour or probity on the part of a party who gives evidence at trial should not constitute an “other factor the court considers appropriate” under Rule 37B(6)(d) in any potential award of double costs. An award of double costs, or a refusal to award such costs, is one of the means available to a court of signalling to litigants the types of conduct or behaviour it considers as either worthy of promotion or, conversely, as worthy of rebuke…

[20]        The same considerations apply to a party whose evidence is found by a court to be dishonest or designed to exaggerate or inflate a claim. Such a party should understand the seriousness with which that conduct will be regarded. It should similarly understand the potential consequences of that conduct, including its relevance to an award of double costs that the party might otherwise be entitled to.

[21]        In making these comments I am mindful that there are a great many cases where a party’s evidence is not accepted by the court for a variety of reasons. In many cases a party’s best recollection may simply not accord with other objective evidence. A party’s candid evidence may not, in light of the expert evidence, be accepted. Indeed it is not remarkable or unusual for a party to place a somewhat positive slant on given events. The mere fact that a party’s evidence is not accepted by the court, without more, does not engage the considerations I have identified. There is nothing in the conduct of such a party that warrants any reproach or criticism. It is, instead, the natural result of all cases where competing memories or competing versions of given events require resolution…

[24] In this case, the specific findings I referred to go beyond the “normal trial process” and do extend to a finding that the plaintiff sought to mislead the court and to significantly exaggerate the claim being advanced. Such conduct is worthy of censure and, in the circumstances of this case, disentitles the plaintiff to the award of double costs that she seeks.

This case serves as an important reminder of the crucial role that Plaintiff credibility plays in injury litigation.

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 which should help cases such as this one retain their value as precedents.

One pattern that is becoming well developed under Rule 37B (the Rule dealing with Formal Settlement Offers in BC Supreme Court Lawsuits) is that of timing.  Caselaw seems to require that formal offers need to be available for acceptance for a reasonable period of time before triggering cost consequences under Rule 37B.  Reasons for judgement were released this week demonstrating this.

In this week’s case (Dodge v. Shaw Cablesystems [SBC) Ltd.) the Plaintiff sued for damages as a result of a slip and fall.  As a result of the fall the Plaintiff injured her knee.  Before trial the Defendant made a formal offer for $50,000 on an “all-in” basis (meaning inclusive of all damages, costs and disbursements).  This offer was made two working days before the start of trial.

After trial, the Jury decided that the Plaintiff and the Defendant were equally at fault for the fall an awarded a net sum of $20,000 for her injuries.  The Defendant then brought a motion for costs under Rule 37B.  Mr. Justice Masuhara refused to award the Defendant any costs because the offer was not left open for consideration for a reasonable period of time.  In coming to this conclusion Mr. Justice Masuhara stated as follows with respect to timing of formal offers under Rule 37B:

I conclude that the defendant’s offer was in effect from Wednesday, January 7, 2009 to Friday, January 9, 2009.

[14] A party requires a reasonable time within which to consider an offer and decide in the circumstances existing at the time of the offer whether it should be accepted or rejected:Coquitlam (City) v. Crawford, 2008 BCSC 1507. There is case law on Rule 37B that suggests that a reasonable amount of time to consider an offer is seven days. In Arnold, Butler J. cited Bailey when he stated at para. 22 that “[a] reasonable period of time to consider an offer to settle is seven days”. In Towson v. Bergman, 2009 BCSC 978 at para. 70, Gray J. stated that the seven day period “has been applied in the case law.” I do not, however, read these cases as laying down a rule of general application. In Wright v. Hohenacker, 2009 BCSC 996, for example, Fisher J. did not consider a “seven day rule” when determining whether an offer should have been reasonably accepted, stating that, in the circumstances of that case, the fact that the offer was made only four days before trial was not particularly significant. Suffice it to say that every case must be judged on its own facts. Imposition of an inflexible rule as to what is considered a reasonable amount of time risks returning to the rigid consequences of the old Rule 37 and fettering the wide discretion intended under Rule 37B.

[15] In this case, the plaintiff was only given two days to consider accepting the offer before it expired. Apart from pointing out that the offer was made after mediation and after delivery of the defendant’s expert reports, neither party has led any evidence surrounding the circumstances at the time the offer was made. It is known, however, that the plaintiff was a resident of Ontario at the time, whereas her counsel was resident in Abbotsford. While this alone is not determinative (the plaintiff has not led any evidence of her whereabouts at the time of the offer), when an offer to settle is received, counsel and client are required to make a careful appraisal of the merits, taking into account complex and subjective factors in appraising the eventual outcome of a trial, in this case, a jury trial. Complexity is increased where the plaintiff is asked to evaluate an “all-in” offer where, by the very nature of the offer, the actual amount offered in discharge of the action is not immediately apparent.

[16] Taking into account that analysing the “all-in offer” would have required breaking out the appropriate cost consequences, and that plaintiff and counsel undoubtedly had many other things that required their attention, two days was an unreasonable amount of time in which to properly analyze the offer. Even if the offer did beat the result, counsel for the plaintiff did not have enough time to reach this conclusion within the deadline set by the defendant…

[18] Since I have decided that it was unreasonable for the defendant to expect that the plaintiff would accept the offer within two days, the policy underlying Rule 37B, which is to encourage the settlement of disputes by rewarding the party who makes a reasonable offer and penalizing the party who declines to accept such an offer, is not engaged. Accordingly, as permitted by Rule 37B(4), I decline to consider the defendant’s offer to settle in exercising my discretion relating to costs.

Another interesting point in this decision was the Court’s discussion of “all-inclusive” offers under Rule 37B.  Under the now repealed Rule 37 such offers were not allowed and could not trigger costs consequences.  Mr. Justice Masuhara ruled that such a strict prohibition is not warranted under Rule 37B but parties should make such “all-in” offers at their own peril, Specifically the Court stated as follows:

24] Since the introduction of Rule 37B, there is no longer a complete code to dictate the cost consequences of an offer to settle. Rule 37B contemplates a summary procedure to determine costs. It offers broad discretion to the trial judge to determine cost consequences of a failure to settle. While the defendant is no longer automatically entitled to costs from the date of the offer if the offer is more favourable than the judgment, Rule 37B(5)(d) still states that the court may in such a case “award to the defendant the defendant’s costs in respect of all or some of the steps taken in the proceeding after the date of delivery of the offer to settle.” While I accept that the consequences of an uncertainty in the calculation of costs up to the date of the offer to settle are no longer as stringent, as under the old Rules, the court is still faced with difficulty in summarily determining the relationship between the offer and the costs in an “all-in” offer. Consequently, the potential for injustice still exists. Thus, under Rule 37B, it does not appear to me that the rationale for the rule in Helm is no longer of assistance. In my view the language of Rule 37B is broad and assumes that the trial judge in every case is in the best position to determine whether an “all-in” offer can be considered. Provided that the proper form of an offer to settle is adhered to, the court has under Rule 37B the discretion to take into account that offer to settle. Nonetheless, defendants who make an “all-in” offer do so at their own peril.

In my continued efforts to get prepared for the New BC Supreme Court Civil Rules I am cross referencing Civil Procedure cases that I discuss on this blog with the New Rules.  To this end  it is worth pointing 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 which should help cases such as this one retain their value as precedents.

Reasons for judgement were released this week by the BC Supreme Court confirming that strict adherence to the requirements of Rule 37B are necessary for a pre-trial settlement offer to trigger costs consequences. In this week’s case (Wormell v. Hagen) the Third Party to the lawsuit made a pre trial offer stating “the Third Party offers to settle the Defendant’s claim(s) for any contribution or relief from the Third Party in this proceeding on the following terms: Dismissal of the Third Party Notice; and costs in accordance with Rule 37(22) and (37)”

After trial the Defendant’s claims against the third party were dismissed.  The Third Party brought an application for double costs under Rule 37B as they beat their pre-trial settlement offer.  Mr. Justice Goepel refused to order double costs holding that the pre-trial settlement offer did not comply with the strict requirements of Rule 37B thereby giving the Court no authority under the Rule.

Mr. Justice Goepel reasoned as follows:

[5] Rule 37 was repealed by B.C. Reg. 130/2008, effective July 1, 2008.  At that time Rule 37 was replaced by Rule 37(b) which provides that:

37B(1) In this rule, “offer to settle” means

(a)      an offer to settle made and delivered before July 2, 2008 under Rule 37, as that rule read on the date of the offer to settle, and in relation to which no order was made under that rule,

(b)      an offer of settlement made and delivered before July 2, 2008 under Rule 37A, as that rule read on the date of the offer of settlement, and in relation to which no order was made under that rule, or

(c)      an offer to settle, made after July 1, 2008, that

(i)         is made in writing by a party to a proceeding,

(ii)        has been delivered to all parties of record, and

(iii)       contains that following sentence: “The … [name of the party making the offer]… reserves the right to bring this offer to the attention of the court for consideration in relation to costs after the court has rendered judgment on all other issues in this proceeding.” [B.C. Reg. 130/2008, s. 1]

[6] The offer served by Mr. Moses on the defendant does not contain the wording required in Rule 37B(1)(c)(iii)…

[7] In Lau v. Rai, 2009 BCSC 696, Powers J. considered the effect of a non-compliant offer and held that a non-compliant offer did not constitute an “offer to settle” as defined under Rule 37B.

[8] I agree with Powers J.’s conclusion.  “Offer to settle” is a defined term.  A proposal concerning costs made subsequent to July 1, 2008 that does not comply with the provisions of Rule 37B(1)(c) is not an “offer to settle” as defined in the Rules and does not trigger the cost options set out in Rule 37B(5).

[9] In the result, therefore, the third party’s application for double costs is dismissed.  I confirm the cost order set out in para. 144 of my initial reasons.  The defendant is entitled to the cost of this application to be set off against the costs otherwise awarded to the third parties.  As the third parties were both represented by the same counsel at trial and took the same positions with respect to defending the third party claim the third parties are collectively only entitled to one set of costs:  Malik v. State Petroleum Corp., 2009 BCSC 115.

(Update: December 14, 2011 - the below decision was modified somewhat by the BC Court of Appeal in reasons for judgement released today)

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Precedents with respect to costs consequences under Rule 37B are still developing as this rule is slowly being molded into place.  The one clear pattern under Rule 37B is that of varying results which is a welcome relief from the strict and sometimes harsh costs results that flowed to litigants who could not beat a formal offer under the old Rule 37.

Today, reasons for judgement were released by the BC Supreme Court, Vancouver Registry, discussing the purpose of Rule 37B in Personal Injury Litigation.

In today’s case (Fan v. Chana) the Plaintiff sued as a result of alleged disability flowing from a motor vehicle collision which occurred in 2000.  The Plaintiff’s claims were largely rejected at trial with Mr. Justice McEwan finding that the crash caused nothing more than an “unexceptional soft-tissue injury” and that the litigaiton was “driven largely by parents…and a series of medical interventions premised on their representations, which were significantly at odds with certain basic information“.  In the end Mr. Justice McEwan awarded the Plaintiff just over $31,000 in damages.  (click here to read my blog post on the trial judgement)

Before trial the Defendant made a formal offer of $75,000 plus costs.  Since the Defendant beat their formal offer they brought an application for costs under Rule 37B.  Illustrating just how expensive personal injury litigation can be the Plaintiff’s costs and disbursements totaled over $85,000 and the Defendants totaled over $43,000.

In making a rather conventional award giving the Plaintiff most of her costs and disbursements up to the time of the formal offer and awarding the Defendant their costs and the disbursements from the time of the offer forward Mr. Justice McEwan made the following useful observations about Rule 37B:

[14] I agree that it is very difficult to see how the plaintiff’s guardian ad litem could have accepted the offer given the medical evidence at hand.  I doubt that the public trustee would have considered it prudent.  Nor do I see how a pre-trial judge could have made a sensible suggestion without hearing the evidence.

[15] The circumstances of this case illuminate a difficulty that arises with some kinds of personal injury cases.  Those with evident injuries and predictable consequences can usually be located within a range that allows for informed discussion.  Some soft tissue injuries, however, sometimes take a course that includes poorly founded medical opinions that seem to verify claimants’ beliefs that they have been seriously harmed.

[16] I have observed in other cases that it is not part of doctors’ function to cross-examine their patients.  On the other hand, I do not think it asks too much of medical professionals who know their reports are going to be used in forensic contexts, that matters that can be verified by objective evidence be verified.  The cogency of medical reports erodes pretty quickly when, for example, someone who plays on the school basketball team is otherwise described as seriously limited in his or her physical capacities.  There were several examples of such difficulties in this case.

[17] It is disturbing to find that a matter has come to trial on a costly series of opinions, founded on premises that a rudimentary effort at fact checking would reveal to be dubious.  It is not asking experts to trespass the fact-finding responsibilities of the court to ask that they take some responsibility for the soundness of the premises on which they proceed.  It may be that disbursements for such reports ought to be more carefully scrutinized for value, when bills of costs are taxed.

[18] Rule 37B is relatively recent.  I do not say new, because it amounts to a restoration of a broad discretion which had been curtailed by a series of rules amendments, the last of which occurred in 1999.  Even then, the court retained its inherent jurisdiction until that was essentially eliminated with respect to costs by appellate rulings (see: Cridge v. Harper Grey Easton, 2005 BCCA 33, 37 B.C.L.R. (4th) 62; Bedwell v. McGill, 2008 BCCA 526. The results were sometimes hard on parties who had guessed wrongly about their claims. The recent history of the costs rule is briefly, and helpfully, set out by Goepel J., in A.E. v. D.W.J., 2009 BCSC 505.

[19] The reintroduction of judicial discretion in costs certainly serves the ends of justice. Costs should be a penalty for unreasonable conduct in the litigation, not a penalty for failing to guess the outcome. In this regard, Courts must, I think, extend some leeway to litigants holding honest but, ultimately, mistaken views of their claims. It is generally better that such expectations be disposed of at law, rather than discouraged.  The public should not be given the impression that there is no reasonable access to a legal resolution.  It must be recognized that some people will only be comfortable if they “hear it from the judge.” This should be a valid option for those who seek it, not a form of deemed unreasonableness.  As such, inducements to settle, and to avail oneself of alternate dispute resolution, ought to complement rather than obstruct judicial determinations…

[21] The obstacle to the acceptance of a reasonable settlement offer in this case was clearly a belief that, by the alchemy of endorsement by experts, a set of facts that was or should have been assessed as dubious would be accepted by the trier of fact.

[22] These factual weaknesses should have been evident by the time the offer was made, but by then, a great deal had been invested in medical and other reports.  It seems likely that that investment contributed to an unreal expectation on the part of the plaintiff’s guardian.

[23] I am of the view that the fairest disposition of costs in the circumstances is to allow the plaintiff’s costs and disbursements to the date of the offer, and the defendant, its costs and disbursements thereafter, with the exception that I would disallow from the plaintiff’s disbursements the reports of Dr. Hahn, and the disallowed report of Dr. Kuttner.  Dr. Kuttner’s report was not proper opinion evidence.  Dr. Hahn’s reports should not be disbursements that the defendants should pay either before or after the tender of the offer to settle.

(Please note the case discussed in this post was overturned on Appeal, you can click here for an updated post and click hear to read the BC Court of Appeal decision)

Reasons for judgement were released today dealing with costs consequences under Rule 37B.

Although Rule 37B has some flexibility to its outcomes, normally when a Plaintiff fails to beat a defence formal settlement offer after trial the Plaintiff is deprived of his/her costs and the Defendant is awarded theirs.  Today’s case had a result which departs from this norm.

In today’s case (Gehlen v. Rana) the Plaintiff was injured when she was a passenger involved in a rear-end car crash.  The Defendant admitted fault for the crash but denied liability to the Plaintiff claiming that the Plaintiff “was not present in the vehicle at the time of the accident“.  The Defendant made a formal offer to settle the Plaintiff’s claim for $22,000 plus disbursements.  The Plaintiff rejected this offer and went to trial.  After trial the Jury awarded the Plaintiff total damages of just over $13,000.

The Plaintiff brought a motion for her costs and the Defendant brought a counter motion for their costs from the time of the offer onward.  Mr. Justice Leask held that the Plaintiff should be awarded her full costs, even for steps taken after the formal settlement offer despite not beating the offer.  His reasoning was as follows:

[18]         As to s-s. (d), I consider two other factors to be relevant.  First, the defendant’s choice of trial by jury, which considerably increases the costs.  Second, the manner in which the defence was conducted – to accuse the plaintiff and her family of fraud – that accusation having been rejected by the jury.

[19]         Turning last to s-s. (a) – the most important question – whether the offer was one that ought reasonably to have been accepted.  On this issue, I agree with Goepel J.’s judgment in A.E. v. D.W.J., 2009 BCSC 505, at paragraph 55:

[55]      … this analysis is not one to be done based on hindsight once the final result is known.  The reasonableness of the plaintiff’s decision not to accept the offer to settle must be assessed without reference to the court’s decision.

[20]         I am satisfied that the defendant’s denial of liability, and the allegations of fraud that underlay that denial, dominated the plaintiff’s thinking at the time the offer to settle was made and, indeed, throughout the entire pre-trial period.  Knowing that her claim was not fraudulent and knowing the persuasive evidence she had to rebut the allegation of fraud, the plaintiff thought she had a good answer to the defendant’s “low ball” offer to settle.  With hindsight, it is obvious that her counsel did not anticipate the defendant’s vigorous attack on her credibility including the detailed attack on her employment resumé and the emphasis on her second accident.  Her counsel’s trial preparation did not include preparing her or her witnesses for these issues.  However, analyzing the plaintiff’s decision not to accept the defendant’s offer to settle without the benefit of hindsight, I am satisfied that it was not an offer that ought reasonably to have been accepted.

[21]         Analyzing all the Rule 37B(6) factors, I am satisfied that the plaintiff is entitled to a judgment under Rule 37B(5)(c) and is entitled “in respect of all … of the steps taken in the proceeding after the date of delivery … of the offer to settle, costs to which the party would have been entitled had the offer not been made” (emphasis added).

I turn now to the plaintiff’s submission for 1.5 times Scale B costs because of the allegation of fraud made by the defendant and the manner in which those allegations were pursued at trial.  Having taken that factor into account in my analysis of Rule 37B(6), I believe it would represent a form of “double counting” to award increased costs for this factor.  My conclusion is that the plaintiff is entitled to her costs and reasonable disbursements of the entire proceeding on Scale B.

Reasons for judgement were released today by the BC Supreme Court, New Westminster Registry, awarding a Defendant double costs following a Jury dismissing a Plaintiff’s ICBC Injury Claim.

This is one of the first cases that I am aware of under Rule 37B where a defendant was awarded double costs.

In today’s case (Luzuka v. Chuang) the Plaintiff was involved in an intersection collision.  Both fault and value of the claim were at issue.  ICBC, through the defendant’s counsel, made a formal settlement offer in 2007 for $40,000.  This offer was rejected by the Plaintiff.  The claim proceeded to trial which lasted 9 days before a Judge and Jury.  The Jury dismissed the Plaintiff’s claim finding that she did not prove the Defendant was responsible for the collision.

The Defendant sought an award of costs up to the date of delivery of the offer and double costs from that point on.  The application was largely successful and Mr. Justice Harvey noted that the “deterrent functions” of punishing a party who refused to accept reasonable settlement offer should not be ignored in such applicaitons.  Specifically Mr. Justice Harvey found as follows:

[24] The offer to settle was one which ought to reasonably have been accepted by the plaintiff within seven days of the disclosure to counsel of the identity of the witness, Ms. Kapil, which occurred during examinations for discovery on November 27, 2007.

[25] By that date, the plaintiff’s medical condition was well defined and it ought to have been clear to the plaintiff that liability for the accident was seriously in dispute.

[26] As was noted by Hinkson J. in Bailey, at para. 39, a refusal to award double costs following the date determined that the offer of the defendants ought reasonably to have been accepted, “would completely ignore the important deterrent function of the Rules”.

[27] Therefore, the defendants are entitled to costs and disbursements of the action until December 4, 2007, pursuant to Rule 57(9). Thereafter, the defendants are entitled to double costs together with actual disbursements, pursuant to Rule 37B(5)(b).

While no mention of the amount is made, the costs and disbursements stemming from this order would likely be in the tens of thousands of dollars.  This ‘deterrent‘ effect is a real one and unfortunately needs to be accounted for when preparing for trial where a formal settlement offer is made under Rule 37B.

As readers of this blog are likely aware, Rule 37B will be replaced with Rule 9 on July 1, 2010 when the new BC Civil Rules come into force. The new rule uses language that is almost identical to Rule 37B which should help cases such as this one retain their value as precedents.

Reasons for judgement were released last week by the BC Supreme Court, Vancouver Registry, dealing with several issues under Rule 37B.

In this case (Towson v. Bergman) the Plaintiff was involved in 2 BC motor vehicle collisions, the first in 2002, the second in 2004.    At trial liability was found as against a Defendant in the first trial.  The second case was dismissed.  Leading up to trial the Plaintiff made a formal offer to all of the Defendants for $500,000.  Following trial over $1.1 million dollars in damages were awarded (click here for my previous posting on the trial judgment).

The court was asked to consider whether the Plaintiff can have double costs when her formal settlement offer under Rule 37B was made to multiple defendants.  The liable defendant argued that “the offer under 37B was invalid…because it was made to multiple defendants…and could only have been accepted by all the defendants, including the defendant’s against whom (the Plaintiff’s) claim was eventually dismissed by the court”.

Madam Justice Gray disagreed with this submission and held that there is no reason why costs consequences can’t follow a formal offer made to multiple defendants under Rule 37B.  Her reasoning was as follows:

[59] Aspen Enterprises Ltd. v. Quiding, 2009 BCSC 50, is the only case I located which considered the effect of a global offer to settle made under Rule 37B.  The plaintiffs inAspen argued that Rule 37B is “intended to be broader in application than the former rules, and therefore should apply to global offers”.  They argued that the fact that a global offer has been made should not preclude a court from considering the factors set out in subrule 37B(6) and exercising its discretion to award double costs.

[60] Fenlon J. appeared to accept this argument, although she found, on consideration of 37B(6)(a), that the offer to settle was not one that ought reasonably to have been accepted by the defendants.  The offer as framed could not have been accepted by Aspen or Kingsway without the consent of the other, and without the further consent of Landmark, which was not even a party at trial.

[61] Rule 37B places no restrictions on the court’s discretion in relation to global settlement offers.  The purpose of the rule is to facilitate and encourage reasonable offers to settle.  It requires a settlement offer to be delivered to all parties of record.  The law developed under Rule 37 regarding global offers is of little assistance.  Pursuant to Rule 37B, the consideration for the court pertaining to global settlement offers is whether the offer was one that ought reasonably to have been accepted.

[62] In considering the effect of an offer to settle on an award for costs under Rule 37B, the court may consider the following factors:

(a)      whether the offer to settle was one that ought reasonably to have been accepted, either on the date that the offer to settle was delivered or on any later date;

(b)      the relationship between the terms of settlement offered and the final judgment of the court;

(c)      the relative financial circumstances of the parties;

(d)      any other factor the court considers appropriate.

[63] The Offer Under 37B was one that ought reasonably to have been accepted by MPS.  Despite the fact that the Offer Under 37 was addressed to all defendants, it was evident at the time that MPS was the party facing the greatest risk of liability to Ms. Towson.  When the Offer Under 37B was made, it was apparent that the liability, if there were any, of Ms. Chan, Mr. Ko, and Mr. Bergman was likely to be very significantly less than the liability of MPS.

[64] Although MPS could not accept the Offer Under 37B on behalf of Ms. Chan, Mr. Ko, or Mr. Bergman, MPS could have agreed to pay the $500,000 in full settlement of the claim against it.  The eventual judgment was for roughly $1.2 million, being more than double the amount Ms. Towson offered to accept.

[65] In this case, Ms. Towson’s award against the single unsuccessful defendant, MPS, is far greater than the amount she offered to accept. Global offers made in circumstances where there is more than one unsuccessful defendant may give rise to different considerations.

[66] Ms. Towson, at the time of trial, was in difficult financial circumstances.  She was unemployed, living with her parents, and receiving social assistance and disability payments.  MPS is a government ministry.  Ms. Towson’s financial circumstances were significantly worse than those of MPS.

[67] In all these circumstances, Ms. Towson is entitled to double costs, although when the double costs should begin is discussed below.

Madam Justice Gray went on to hold that double costs should begin one week following the delivery of the offer as that was a reasonable period for the Defendants to consider their response.

The other Rule 37B issue that was addressed was whether the existence of insurance should be considered when weighing costs consequences.  Our courts are currently split on this issue.  Madam Justice Gray held that Insurance should not be considered and set out the following reasons:

[113] The British Columbia Supreme Court has divided on the issue of whether insurance should be considered in assessing the relative financial circumstances of the parties.  InBailey, Hinkson J. considered that insurance should not be taken into account:

33.       While I accept that it is likely that most drivers in British Columbia are insured by ICBC, the wording of subrule 37B does not invite consideration of a defendant’s insurance coverage. There may be good policy reasons for this. Insurance coverage limits with ICBC are not universal, and will vary from insured to insured. Certain activities may result in a breach of an individual’s insurance coverage, or the defence of an action under a reservation of rights by ICBC. A plaintiff will not and likely should not be privy to such matters of insurance coverage between a defendant and ICBC.

34.       The contest in this case was between the plaintiff and the defendants, and the insurance benefits available to the defendants do not, in my view, fall within the rubric of their financial circumstances, any more than any collateral benefit entitlement that a plaintiff may have would affect that person’s financial circumstances for the purpose of determining their loss.

[114] Conversely, Madam Justice Boyd in Radke v. Perry, 2008 BCSC 1397, 90 B.C.L.R. (4th) 132, did consider the fact that the defendants were insured by ICBC, stating, at para. 42:

It is also clear that there is a substantial disparity in financial circumstances between the parties. The defendants, represented by ICBC, had substantially greater resources to finance a trial than the individual plaintiff. Had the defendants accepted the plaintiff’s initial reasonable offer, the plaintiff would not have had to incur the significant costs associated with nearly two weeks of trial.

[115] Bailey was released on October 16, 2008, six days before the October 22, 2008 release of Radke.  Radke does not refer to Bailey, and Bailey was likely not brought to the court’s attention.

[116] In my view, the reasoning in Bailey should be preferred, and the court should consider the “relative financial circumstances of the parties” without considering the insurance benefits available to the defendant.  Here, however, there was no evidence concerning the insurance benefits available to Ms. Chan and Mr. Ko.

I will continue to post about Rule 37B cases as they come to my intention despite the fact that the current BC Civil Rules are being repealed on July 1, 2010.  The reason for this is after July 1, 2010 formal settlement offers in the BC Supreme Court will be dealt with under Rule 9-1 which has language that is almost identical to the current Rule 37B making these precedents useful.

Reasons for Judgement delivered by Madam Justice Dorgan on July 30, 2009 were recently transcribed and have come to my attention applying Rule 37B in a favourable way to a Plaintiff who failed to beat an ICBC formal offer of settlement.

In this case (Robbeson v. Gibson) the Plaintiff was injured in a BC Motor Vehicle Collision.  The Defendant (insured by ICBC) made a formal offer of $82,100 under Rule 37B.  At trial the Jury awarded the Plaintiff $52,700 for damages.  In other words, ICBC beat their formal settlement offer.

The defendant (through ICBC) brought a motion seeking to deprive the Plaintiff of her costs from the date of the formal offer forward and further seeking to have the Plaintiff pay the Defendant’s costs and disbursements from the date of the formal offer forward.  Such an order is not unusual when ICBC beats a formal offer at trial.  If this motion was granted the punishing effect would in essence leave the Plaintiff with $0 as the costs consequences would eat up almost the entire $52,700 awarded by the Jury.

Madam Justice Dorgan refused to grant the Defendant’s application and instead ordered that the Plaintiff ‘be deprived of all tariff items to which she would otherwise be entitled‘ from a few weeks following the delivery of the formal offer through trial and further awarding the Plaintiff to ‘all disbursements incurred from the comencement of the action to the conclusion of trial‘.

In reaching this conclusion Madam Justice Dorgan made some important comments when applying Rule 37B which I highlight below:

On the topic of the purpose of Rule 37B the Court stated  ”the cost consequence (of Rule 37B) is meant to encourage litigants to reach settlements; reasonable settlements, and to impose penalties on those litigants who decline to accept offers which are reasonable in all of the circumstances...”

In considering “the relationship between the offer and the final judgement” the Court held that the gap between $80,000 and $52,000 was not ‘dramatically divergent’.  Specifically Madam Justice Dorgan noted that “the swing is not wild…the relationship between the offer and the award is, in my view, a neutral factor on the question of costs‘.  In coming to this conclusion it was noted that ”the overall award clearly reflects the jury’s conclusion that the plaintiff was injured as a result of the defendant’s negligence and that she suffered losses, both non-pecuniary and pecuniary“.

When considering the relative financial circumstances of the parties the Court seems to have considered the fact that the Defendant was insured by ICBC.  Judgements to date are still inconsistent in determining whether a policy of insurance is a relevant consideration under Rule 37B.  Madam Justice Dorgan did not ignore the reality that this case was defended by ICBC through a policy of insurance as opposed to directly financed by the Defendant.  Addressing this issue the court noted as follows “the defendant’s financial position is unknown.  While he testified, he did not actively involve himself in this litigation.  ICBC defended the case.  I have no need to, nor should I, go into a comparison of the financial circumstances of a corporate citizen versus a private citizen, but each of the two citizens is entitled to competent counsel, entitled to pursue their claim on the basis of advice received by each of those counsel, and that is what happened here.  On the issue of financial circumstances, I am advised that the jury award, as I have earlier said, will be effectively cancelled if the defendant obtains a costs order from the date of the offer to the conclusion of trial…It is reasonable for me to conclude that (the plaintiff) has significant disbursements from prosecuting her claim.  Certainly, the trial disbursements would be significant.  In all those circumstances, this factor, I am satisfied, favours the Plaintiff“

Reasons for judgement were transcribed today by the BC Supreme Court giving a new and interesting interpretation to Rule 37B.

In today’s case (Oliver v. Moen) the the Plaintiff sued for personal injuries as a result of a BC Car Crash.  The matter proceeded to trial by Jury.

Leading up to the trial the Plaintiff made a formal offer to settle under the now repealed Rule 37 for $400,000.  The Defendant countered with a formal offer of $100,000.  The Plaintiff then delivered a formal offer under Rule 37B for $185,000.  After 12 days of trial the Jury awarded approximately $14,000 in total damages for the Plaintiffs injuries and losses.

More often than not, when a defendant beats a formal settlement offer at trial they are entitled to costs under Rule 37B and in today’s case the defendant brought an application for such an order.  In an interesting twist, however, Mr. Justice Joyce of the BC Supreme Court declined to award the Defendant costs finding that when the Plaintiff made the formal counter offer of $185,000 this constituted a rejection of the Defendant’s offer.  A rejection of an offer, at common law, takes the offer off the table.  Mr. Justice Joyce held that since this occurred the Defendant did not have a valid offer to settle in existence from the time of the Plaintiff’s offer to settle onward thus the offer ‘cannot be considred under Rule 37B when deciding the issue of costs’

Specifically the Court reasoned as follows:

[12] Satanove J. noted that Rule 37(10) had been repealed when the counteroffer was made and Rule 37B did not contain an analogous provision. Accordingly, the common law rule relating to contract applied. At paras. 8 and 9 Madam Justice Satanove said:

8          Turning then to the common law of contracts, it is trite to say that a counteroffer constitutes non-acceptance of a previous offer. The previous offer must be revived in order to be accepted after a counteroffer has ensued. (United Pacific Capital v. Piché, 2004 BCSC 1524; Cowan v. Boyd (1921), 49 O.L.R. 335 (C.A.)).

9          Applying these principles to the chronology of facts in this case, when the plaintiffs issued the counteroffer of January 6, 2009, they were communicating non-acceptance of the Rule 37B offer of November 28, 2008 from the defendants, and this latter offer was no longer extant. [emphasis added]

[13] On the authority of More Marine, I am driven to conclude that when the plaintiff made its offer of January 30, 2009 that counteroffer constituted non-acceptance of the defendant’s offer of February 25, 2008 and rendered the earlier offer no longer extant because the saving provision of Rule 37(10) was no longer in effect.

[14] As the defendant’s offer was no longer in existence and therefore no longer capable of acceptance it cannot be considered under Rule 37B when deciding the issue of costs. This may seem a harsh result but it is one that, in my opinion, follows from the failure to preserve the saving effect of the former Rule 37(10) in Rule 37B.

[15] The defendant submits that More Marine is distinguishable because in that case the offer in question was made under Rule 37B whereas the defendant’s offer in this case was made under Rule 37 and at a time when the saving provision of Rule 37(10) was in effect. It is my view, however, that one must consider the law as it was when the counteroffer was made on January 30, 2009. At that time there was no enactment in place to alter the common law principle that the defendant had to revive his offer in order to give it effect once again.

[16] The defendant argues, in the alternative, that where no formal offer exists, s. 3 of the Supreme Court Act gives the Court a broad discretion over costs and that in the exercise of that discretion I should award the plaintiff costs up to the date of the defendant’s offer and award costs to the defendant from the date of that offer. The defendant relies on British Columbia v. Worthington (Canada) Inc., [1988] B.C.J. No. 1214 (C.A.). That case was concerned with the discretion of a trial judge to order a party who was successful in the action as a whole to pay the costs of an issue in the action to the party who was successful in that issue but who lost the entire action. That issue does not arise in this case. This case does not concern success on separate issues. Mr. Oliver was successful in his action but the jury saw fit to award him only modest damages.

[17] The usual rule as set out in Rule 57(9) is that the “costs of and incidental to a proceeding shall follow the event unless the court otherwise orders”. Having concluded that there is no offer by the defendant that can be considered under Rule 37B, the defendant has not persuaded me that there is any other circumstance that should cause me to depart from the usual rule.

[18] I therefore award the plaintiff the costs of the entire proceeding at scale B.

As far as I am aware this is a novel interpretation of Rule 37B.

Interesting as this case may be, and whether or not it is a correct interpretation of Rule 37B, the case’s value as a precedent will be short lived.  This case, although transcribed today, was pronounced in June, 2009.   As of July 1, 2009 Rule 37B has been amended adding a subrule which specifically states that “An offer to settle does not expire by reason that a counter offer is made.”   which in effect addresses the courts concerns about the short comings of this rule.