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Can Interest on Disbursements be Recovered in BC Injury Litigation?

Written by admin on . Posted in BC Supreme Court Costs Cases, Civil Procedure, Uncategorized. 120 Comments on Can Interest on Disbursements be Recovered in BC Injury Litigation?


As I’ve written before, personal injury litigation can be an expensive business.
It usually costs thousands of dollars if not tens of thousands of dollars to bring an injury claim to trial in the BC Supreme Court.  I’m not talking about lawyers fees here either.  What I’m referring to is the cost of gathering evidence for presentation in court.  To succeed in Court usually expert opinion evidence is required to address many areas that frequently come up in injury litigation such as diagnosis of injury, prognosis, disability etc.   Expert medical reports usually cost anywhere from hundreds to tens of thousands of dollars.
These significant disbursements are often funded by personal injury lawyers or on a line of credit.  When a Plaintiff is successful in their personal injury claim they can recover their reasonable disbursements from the opposing party.  But can the interest on these disbursements be recovered?  Reasons for judgement were released today by the BC Supreme Court, Vancouver Registry addressing this topic.
In today’s case (Milne v. Clarke) the Plaintiff was injured in a 2005 BC Car crash.  In advancing his claim private MRI’s were arranged between 2005-2006.  These cost $975 a piece.
The claim settled in 2009 for $170,000 plus costs.  By the time of settlement the costs of the MRI’s with interest came to almost $4,000.  The Plaintiff sought this amount from the Defence and the Defence refused to pay.
Ultimately the matter went before a Master of the BC Supreme Court who held that the interest was not recoverable.  The Plaintiff appealed.  Mr. Justice Burnyeat reversed the Master’s ruling finding that interest on disbursements can be recoverable.  Specifically the Court reasoned as follows:

[4] In support of the submission that the Learned Registrar erred in principle, Mr. Milne submits that the law which was binding on the Learned Registrar is set out in McCreight v. Currie, [2008] B.C.J. No. 2494, where ….  In allowing the interest, Registrar Young concluded:

… The plaintiff really had no choice but to pay the interest given that she did not have the funds to be retaining experts and paying for their reports up front.  I suppose the defendant’s choice was that the defendant could have offered to pay for the report up front once it was disclosed to him, but no offer was forthcoming.  Given this was the only way to finance the obtaining of a report, I find this to be a reasonable expense and I will allow it.

…

[6] Rule 57(4) of the Supreme Court Rules provides that, in addition to determining fees, the Registrar must:

(a)   determine which expenses and disbursements have been necessarily or properly incurred in the conduct of the proceeding, and

(b)   allow a reasonable amount for those expenses and disbursements.

[7] In support of the application, it is said that Mr. Milne had no means of paying for the required M.R.I. scans other than to borrow money from the provider and that, since the cost of the M.R.I. had already been agreed upon, so too should the interest on the unpaid accounts rendered by the provider of the M.R.I. images.  Here, it is the provider of the M.R.I. and not counsel for Mr. Milne who is charging the interest on the invoices.

[8] I find that the Learned Registrar erred in principle.  The December 29, 2009 decision was clearly wrong.  First, even if the Learned Registrar was not bound by the decision inMcCreight, I am not bound by the decision reached by the Learned Registrar herein.  I am satisfied that the statement set out in McCreight accurately represents the law in British Columbia.  Second, the decision in Hudniuk relates to the question of whether disbursement interest is a head of damage and not to the question of whether it is recoverable as costs on an assessment.

[9] The law in British Columbia is that interest charged by a provider of services where the disbursement has been paid by counsel for a party is recoverable as is the disbursement.  The interest charge flows from the necessity of the litigation.  If the disbursement itself can be assessed as an appropriate disbursement, so also can the interest owing as a result of the failure or inability of a party to pay for the service provided.  In order to obtain the M.R.I., it was necessary to pay not only the $975.00 cost but also the interest on any unpaid balances that were not paid immediately.  The cost plus interest was the cost of obtaining the M.R.I.  The claim for interest should have been allowed.

This judgement is a welcome development for people advancing personal injury claims in BC as the Court’s reasoning provides greater certainty that successful Plaintiffs can recover interest charged on reasonable disbursements incurred in the course of litigation.

Rule 37B – Formal Settlement Offers and Liability Trials

Written by admin on . Posted in BC Supreme Court Costs Cases, ICBC Liability (fault) Cases, Settlement Law, Uncategorized. 85 Comments on Rule 37B – Formal Settlement Offers and Liability Trials


It is not uncommon for personal injury lawsuits to sever the issues of quantum and liability.  What this means is that with a Court order a lawsuit can proceed on the issue of fault first and leave the issue of the value of the claim for a later date.  This often makes sense in serious injury litigation with contested liability where the cost of proving damages will be expensive and the parties wish to save the money associated with this until its clear who is at fault for an accident.
As readers of this post know Rule 37B permits the Court to reward a successful party in a lawsuit with a double costs award if that party beats a formal settlement offer.  In cases addressing quantum its easy to determine if a formal offer was beat at trial.  You simply look at the numbers.  But can Rule 37B be used in a liability only trial?  Reasons for judgement were released today dealing with this issue for what I believe is the first time.
In today’s case (McLaren v. Rice) the Plaintiff made a personal injury claim against the various defendants.   Liability and quantum were severed.  Before the liability trial proceeded the Plaintiff made the following formal settlement to the Defendants:

The plaintiff, Matthew R.J. McLaren, offers to settle the liability trial in this proceeding on the following terms: that the defendant is 99 percent responsible for the motor vehicle accident of February 26, 2005, in which the plaintiff was a passenger in the vehicle owned and operated by the defendants and costs in accordance with Rule 37B.

The plaintiff reserves the right to bring this offer to the attention of the court or consideration in relation to costs after the court has rendered judgment on all other issues in this proceeding relating to liability for the accident.

This offer was rejected.  The Plaintiff proceeded to trial and was successful with the Court finding that the defendants were jointly and severally liable for the accident.

The Plaintiff brought a motion seeking double costs under Rule 37B.  The Defendants opposed this arguing that when the plaintiff added the words “relating to liability in this proceeding” to the offer it was rendered null because it did not comply with Rule 37B(1)(c)(3) which requires a formal offer to contain the 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 judgement on all other issues in this proceeding“.

Mr. Justice Brooke rejected this argument and held that Rule 37B can be used in liability only trials.  The Court provided this short but helpful analysis:

[7] Despite the prescribed formulation in Rule 37B, 1(c)(3) being added to with the words “relating to liability in this proceeding”, I am satisfied that the plaintiff has complied with the definition of offer to settle contained in Rule 37B(1) and the issue is properly before me. On the trial of the quantum issue, it seems to me that Rule 37B may again be invoked. The two aspects of the trial are separate and discrete.

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.

ICBC Injury Claims, Settlement Offers, Rule 37B, Sanderson Orders…

Written by admin on . Posted in BC Supreme Court Costs Cases, Civil Procedure, ICBC Liability (fault) Cases, Jury Trials, Uncategorized.

Where to begin…
Important reasons for judgement (Burdett v. Mohamed) were released on Friday by the BC Supreme Court, Vancouver Registry addressing a host of topics in the context of BC personal injury litigation.
By way of background the Plaintiff was a passenger in a 2002 motor vehicle accident.  She was riding in a vehicle operated by Mr. Mohamed and this vehicle collided with a vehicle operated by a Mr. Samuel.
The Plaintiff suffered various injuries including a traumatic brain injury.
The Defendant Mohamed was charged with Dangerous Driving and was deemed to be in breach of his insurance policy.  Accordingly, ICBC, Mr. Mohamed’s insurer defended the claim as a ‘statutory third party.’
There was reason to believe that Mohamed was solely responsible for the collision however the Plaintiff’s lawyer sued both Mohamed and Samuel.  The reason being was concern about limited insurance coverage.  Mohamed only had $1 million in insurance coverage.  The Plaintiff was not the only injured party and when sharing this money with the other claimants the Plaintiff was concerned she would be significantly undercompensated if this was the extent of her recovery.
ICBC made an offer to the various claimants to “get together to divide among themselves the $1,000,000 third party liability (coverage).”   This offer was not accepted and the Plaintiff proceeded to trial.
Prior to trial the Plaintiff made a formal offer to settle her claim against Mohamed for $1.5 million.  The Defendant Samuel made a formal offer to the Plaintiff to ‘walk away’ on a costs free basis.  After a lengthy trial the case against Samuel was dismissed, the Jury found Mohamed responsible for the Plaintiff’s injuries and the Plaintiff 20% contributorily negligent for her own injuries.   After this reduction in liability the Plaintiff was awarded over $1.8 million in damages.
The Court was asked to decide, amongst other things, whether the Plaintiff should be awarded double costs against Mohamed, whether Samuel should be awarded double costs against the Plaintiff and whether the Mohamed should pay to Samuel any costs the Plaintiff is exposed to.
Rule 37B – Is it reasonable to go to trial for a claim exceeding the Defendants insurance coverage?
The Plaintiff was awarded double costs for beating her formal offer of settlement against Mohamed.  In coming to this decision the Court had to grapple with an area of law that is still open to debate, specifically, when considering whether to award double costs can a court consider the insurance coverage available to the parties?
There are cases that go both ways on this topic and the law is not yet set in stone.  Usually Plaintiff’s argue that this is a relevant consideration and Defendants argue it is not.  Interestingly, here it was ICBC that was arguing the presence of insurance could be “the central factor driving the Court’s analysis under Rule 37B.”.  The Defendant submitted that the Plaintiff was unreasonable in going to trial “knowing of the third party liability policy limits“.
Madam Justice Boyd “entirely reject(ed) this submission.”   Specifically the Court held as follows:
[36] In my view, having never received an actual offer of settlement from the Third Party, it was reasonable for the plaintiff to choose to proceed to trial in this case.  She could expect that she would recover judgment against at least Mohammed and Dubois.  The judgment would also likely be in excess of the policy limits.  While the quantum of the judgment actually recovered would not exceed her pro rata share of the insurance funds (the calculation of which depended on settlements reached or judgments obtained by Maxwell and Sahota), she would still be left with the ability for the next ten years to pursue execution on the judgment against Mohammed and Dubois.  While the Third Party apparently insists that any such judgment will be dry, there is simply no evidence one way or another to confirm that likelihood.  It should also be noted that had the insurance monies been paid into court, and had the three claimants reached some agreement as to an appropriate division of the funds, the Third Party could not have enforced any requirement for a release of her claim against either Mohammed or Dubois.
Can a “Walk Away” offer trigger Double Costs under Rule 37B?
A ‘walk away’ offer is one where a Defendant, confident of winning at trial, offers that if the Plaintiff discontinues the lawsuit pre-trial that the Defendant will waive their entitlement to costs.  The Defendant Samuel made exactly such an offer to the Plaintiff.  The Plaintiff rejected this offer and went to trial.  The Plaintiff indeed was unsuccessful against Samuel.  Samuel asked for an order of Double Costs for beating their formal offer.
Madam Justice Boyd sided with the Defendants and granted the order for double costs.  The Court held that while not automatic, a walk away order is capable of triggering double costs and here it was appropriate to do so.  Specifically the court held as follows:
[56] My own impression is that faced with the grim realities of the other defendants’ limited insurance coverage, the plaintiff made a calculated decision to pursue a claim of very doubtful merit against Samuel, realizing that she would realize a substantial benefit even if Samuel’s liability was limited to a small percentage.  But for the insurance situation, I am confident that the Samuel offer would have been accepted early on by the plaintiff.  ..

[60] As Hinkson J. noted in Bailey v. Jang, 2008 BCSC 1372, the underlying purpose of the offer to settle provisions survived the repeal of Rule 37 and the implementation of Rule 37B.  That purpose is to encourage conduct which reduces both the duration and the cost of litigation, while also discouraging the conduct which has the opposite effect.

[61] I conclude that all of these factors weigh in favour of the defendant Samuel recovering double costs.

The Sanderson Issue:

When a Plaintiff sues 2 parties and succeeds only against one (which was the case here) the Court has a discretion under Rule 57(18) to order that the unsuccessful defendant pay the successful defendants costs.  This is called a “Sanderson Order”.

Here the Plaintiff, not wanting to have the ‘double costs’ order eat into into the limited $1,000,000 of insurance coverage applied for a Sanderson Order.  Madam Justice Boyd granted the order and required Mohamed to pay  Samuel’s court costs.  Vital in this decision was the fact that ICBC, in their Third Party Statement of Defence, alleged that Samuel was negligent in causing the collision.

In reaching this decision the Court held as follows:

[66] This raises the issue, was it reasonable for the plaintiff to have sued and continued her action against the defendant Samuel?  I accept that at the outset, given the evidence of the eyewitness to the effect the Dubois vehicle (driven by Mohammed) had fishtailed back and forth across the road before its collision with the oncoming Samuel vehicle, it was reasonable for the plaintiff to have joined Samuel as a defendant to the action.  However, after the receipt of the many engineering reports which overwhelmingly laid the blame on Mohammed and absolved Samuel of any negligence, was it reasonable for the plaintiff to have continued her action against Samuel?  …

[70] In my view, faced with ICBC’s plea that Samuel caused or contributed to this accident, the plaintiff had no choice but to continue her claim against Samuel.

[71] In all of these circumstances, I exercise my discretion under Rule 57(18) and find that a Sanderson order is appropriate in the case at bar, thus requiring the defendants Mohammed and Dubois to pay the costs which the plaintiff would otherwise pay to the successful defendant Samuel.

The lesson to be learned here is that if a Defendant is going to allege that another party is responsible for a car crash they should do so with caution.  The Plaintiff is free to bring them into the lawsuit and if the claims are not successful ultimately it is the Defendant who may be on the hook for the extra court costs.

Not Done Yet…

One last point.  A companion set of reasons was also released in this case on Friday addressing tax gross ups and management fees.   You can find that decision here.

More on Rule 37B – The Conduct of the Parties as a Factor

Written by admin on . Posted in BC Supreme Court Costs Cases, Civil Procedure, Uncategorized.

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.

More on Rule 37B – Lack of a "Reasonable Counter Proposal" Considered

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Reasons for judgement were released today by the BC Supreme Court, New Westminster Registry, considering a factor that I don’t believe has been previously considered under Rule 37B, the effect (or lack of) a reasonable counter offer.
In today’s case (Foster v. Juhasz) the Plaintiff was injured in a BC car crash.  She sued for damages.  Before trial she made a formal offer under Rule 37B for some $285,000 and at the same time indicated she would be willing to settle for $214,000.  The Defendants rejected the offers, apparently did not make a counter offer and went to trial.
At trial the Jury awarded the Plaintiff over $450,000 in total damages.  The Plaintiff then brought a motion for ‘double costs’ under Rule 37B.
The Defendants argued that they could not have accepted the offer because their insurance policy was only for $200,000.   Mr. Justice Crawford rejected this argument and ordered that the Defendants pay double costs.  He reasoned that the offer should have been accepted.  In coming to this decision he took into consideration the fact that the Defendants did not make a “rational counter-proposal“.  Mr. Justice Crawford provided the following reasons:

[14] While I accept the policy limits may have been a factor in not accepting the offer, it does not answer the question why a rational counter-proposal was not made by the defendants. There was no comment made by the defendants as to the reasonableness or otherwise of the plaintiff’s offer. Rather, the position was taken that the defendants had a meritorious case to present on the issues which could result in an award under policy limits. If that was so, then a sensible and rational defendant could have sat down and appraised the plaintiff’s case. For instance an assessment of general damages at $60,000, past wage loss at $2,000, future lost earning capacity at $35,000, and $25,000 for future care could be made. That would not have been unreasonable and at least if not accepted, might have created a pathway to settlement. Such an offer pales in comparison to the jury award, especially the future income capacity and future care components. More so in that I recall directing the jury to be moderate. I am obliged to say the jury’s award was far beyond the evidence on these aspects.

[15] However, I do not accept the argument that the defendants were in an impossible situation in terms of accepting the offer. They chose their own level of insurance, and their choice was, with respect, a very low one given current potential liabilities for motor vehicle owners. I accept counsel’s belief that there were reasonable arguments to advance as to the amounts of the plaintiff’s claims. It was not unreasonable to think a jury, in light of the small past income loss, might not give a large future lost income award. As to the reasoning of the jury on the future care aspect, that cannot be fathomed. But no direction is given to a jury on the quantum of general damages, save in catastrophic cases.

[16] The motion for judgment was not contested by the defendants at trial. Counsel does say the case is under appeal, so the quantum may not be settled. I agree with Humphries J. that while consideration should be given to the result, the court’s discretion is not to be driven by “hindsight analysis”: see Lumanlan v. Sadler, 2009 BCSC 142.

[17] Another aspect is deterrence. The difference in the offer and the final award is a factor, as is the failure of the defendants to make a sensible counter-offer. It was not a case where the plaintiff would not obtain a reasonable award. It was a case to be carefully assessed and the usual avenues for settlement explored. A reasonable counter-offer would show a sensible stance being taken by the defendants before trial. That course was not chosen.

[18] Under the previous rule, double costs would have been automatic. Now there is consideration of whether or not the offer could be reasonably accepted.

[19] While there may have been some grounds for not accepting the offer, no response was made, the defendants choosing to “keep their powder dry” for trial. In the circumstances, the plaintiff is entitled to her double costs, which I allow for preparation for trial, examination for discovery, and the trial. I do not allow costs for the notices to admit which I now address.

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.

More on Rule 37B and the Timing of Formal Settlement Offers, "All Inclusive" Offers Discussed

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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.

BC Supreme Court Confrims Strict Adherence Necessary to Trigger Rule 37B

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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.

Purpose of Rule 37B in Injury Litigation Discussed

Written by admin on . Posted in BC Supreme Court Costs Cases, Civil Procedure, Uncategorized.

(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.

Another Rule 37B Case – Plaintiff Awarded Trial Costs Despite not Beating Defence Offer

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(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.

Double Costs Awarded After Jury Dismisses ICBC Injury Claim

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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.