The Old, The New and The Ugly – Costs Consequences Involving Rule 37 and Rule 37B

I’ve blogged about most if not all of the recent reported BC Supreme Court judgements applying the new Rule 37B and don’t intend to summarize a history of the rule here (for a history of the rule and to read my previous articles on Rule 37B cases simply use the search feature on this site and type Rule 37B).
Reasons for judgement were released today considering an interesting issue.  Rule 37B, once it came into force, repealed Rule 37.  In recognizing that a transition period was necessary the rule permitted costs consequences to flow from formal offers delivered under the old Rule 37 if those offers were made before July 2, 2008.  Today;s case decided what costs consequences should flow when an old Rule 37 offer is accepted after Rule 37B comes into effect.
In this case the Defendants made a formal offer in April, 2008 under the old Rule 37.  The Plaintiff accepted the offer in November of 2008, after Rule 37B took effect.  The parties could not agree on the costs consequences of the acceptance and application was brought to the BC Supreme Court.  The point of contention was who should be responsible for the costs incurred after delivery of the offer to the time of acceptance.  The court dealt with this issue delivering the following reasons:

[11]            Both parties advanced arguments that the court has discretion under Rule 37B to make an order regarding costs.  However, it is my opinion that the court has no discretion to make an order regarding costs in this matter.  Mr. Buttar accepted the offer put forth by the defendants, including the offer regarding costs, without reservation.  It is my view that Rule 37B does not confer a discretion on the court to set aside an agreement that has been entered into between the parties regarding costs.

[12]            The offer made by the defendants reads as follows:

TAKE NOTICE that the Defendants offer to settle this proceeding on the following terms:

1.         the sum of ONE HUNDRED THOUSAND DOLLARS ($100,000.00), less deductible benefits paid or payable pursuant to Part 7 of the Insurance (Vehicle) Regulation, and Section 83 of the Insurance (Vehicle) Act, R.S.B.C. 1996, c. 231, and less any advances paid to date; and,

2.         Costs to be taxed in accordance with Rule 37(22) and (37).

[13]            Although Rule 37 was repealed and replaced by Rule 37B, by incorporating the wording of Rule 37(22), the offer provided that the defendants would pay costs to the plaintiff to the date the offer was delivered and that, if the matter were to continue, the defendants would be entitled to their costs from the date of delivery.  Former Rule 37(22) provided that if an offer made by a defendant was accepted by a plaintiff, the plaintiff is entitled to costs to the day of the offer, and the defendant is entitled to costs from the date of the offer.

[14]            In this case, there has been no determination of any issues in this lawsuit.  Rather, Mr. Buttar accepted the offer to settle as presented by the defendants.

[15]            The letter of acceptance is unequivocal and states the following:

We confirm that there have been no advances under Tort or under Part 7 to our client.

We accept the Defendants’ Offer to Settle dated April 28, 2008.

I note that the Defendants’ Offer to Settle was made under the old Rule 37, but our acceptance of that offer is clearly under the new Rule 37B which does not provide a form for acceptance.  As such, out of an abundance of caution, I also enclose an Acceptance of Offer in Form 65A.

[16]            On this application, the parties argued the effects of Rule 37B(4),which provides that the award of costs is discretionary, and Rule 37B(5)(a), which provides that the court may do one or both of the following:  deprive a party, in whole or in part, to costs that would otherwise be entitled to and award double costs of all, or some, of the steps taken in litigation after the date of the delivery of the offer to settle.

[17]            I agree that subrules 37B(4) and (5) are permissive.  However, it is my view that the court has no discretion to consider costs in this matter because Mr. Buttar accepted an offer which contained a term as to when costs would be payable and to whom.

[18]            Accordingly, Mr. Buttar’s application is dismissed.  The defendants are entitled to the costs of this application.