New Rules of Court Update: Discontinued Lawsuits and Third Party Costs


Reasons for judgement were released today by the BC Supreme Court, Chilliwack Registry, interpreting and applying Rule 9-8(5) for what I believe is the first time.  (It’s worth pointing out, however, that this rule reads almost identically to the former Rule 36(5)).  This rule deals with the entitlement of a Third Party to costs when a Plaintiff discontinues a lawsuit.
In today’s case (Patterson v. Williams) the Plaintiff sued two Defendants for personal injuries sustained when a dog knocked her over.  The Defendants denied fault and issued Third Party Proceedings against another dog walker seeking contribution and indemnity.
Ultimately the Plaintiff settled the claim, signed a release in favour of the Defendants and discontinued the lawsuit.  The Third Party then brought a motion asking that the Defendants pay the Third Party’s costs.  The Third Party relied on Rule 9-8(5) which reads as follows:
(5)  If a plaintiff discontinues the whole or any part of an action in which a person has been joined as a third party, the third party, if the discontinuance disposes of the claim against the third party, is entitled to costs and may apply to the court for a direction as to who should pay them.
Mr. Justice Sigurdson dismissed the motion finding that a discontinued lawsuit does not automatically dispose of Defendant claims against a Third Party.  The Court provided the following reasons:

[11]         The third party says that the notice of discontinuance disposes of the third party claim, as it was for contribution and indemnity only and did not include an independent claim. This was so, in the third party’s submission, because the specific wording of the third party notice made the third party claim conditional both on the plaintiff not being contributorily negligent and on the defendant being found liable. According to the third party, these conditions cannot now be satisfied because of the discontinuance.  Mr. Nossal also argues that there is no ongoing claim against the third party because the terms of the Release are on so-called “B.C. Ferry Agreement terms” (British Columbia Ferry Corp. et. al. v. T&N plc. et .al. (1993), 86 B.C.L.R. (2d) 353 (S.C.); (1995), 16 B.C.L.R. (3d) 115 (C.A.)) that prevent recovery from a third party.

[12]         I think that this application for costs must fail.  While the Release may limit the liability of the defendants and prevent successful third party proceedings against them, the notice of discontinuance itself does not prevent the defendants from continuing third party proceedings against Ms. Parker.

[13]         I do not think it can be said that the filing of the notice of discontinuance by the plaintiff disposes of the claim against the third party by the defendants.

[14]         The claim for contribution is a substantive right that continues to exist notwithstanding a settlement: see A.R. (Al) Smith Ltd. v. Turner, [1984] B.C.J. No. 3107, [1985] 2 W.W.R. 424 (B.C. Co. Ct.), and Canada v. Foundation Co. of Canada, [1980] 1 S.C.R. 695.

[15]         Moreover, I do not think that the precise terms of the third party notice can be determinative of this application, as the defendants are at liberty to apply to amend the terms of the third party notice.

[16]         Even if the terms of the Release do prevent the defendant from continuing third party proceedings against the third party, which I question, that is a matter of the interpretation of the Release, not something that flows from the filing by the plaintiff of the notice of discontinuance itself.

[17]         Accordingly, the application by the third party for costs is dismissed, with costs.

New Formal Settlement Offer Rule Treated the Same as the Old


A further decision dealing with the consequences of formal settlement offers under the New BC Supreme Court Civil Rules was released today by the BC Supreme Court, New Westminster Registry.
In today’s case (Gregory v. ICBC) the Plaintiff was injured in a BC motor vehicle collision.  Prior to trial ICBC made a formal settlement offer of $164,000.  The Plaintiff rejected this offer and at trial was awarded just over $131,000.
ICBC brought an application seeking costs or double costs from the date of the offer onward.  Madam Justice Kloegman agreed that the Plaintiff ought to have accepted the formal settlement offer and accordingly deprived her of her costs and disbursements for the trial and awarded ICBC their costs and disbursements for steps taken shortly after delivery of the formal settlement offer.
In reaching this result the Court noted that Rule 9 (the New Formal Settlement offer rule) should be treated similarly to the old Rule 37B.  Specifically Madam Justice Kloegman noted that “The parties agree that it is likely that the new Supreme Court Rules apply to this application and, in any event, very little turns on whether or not the old or new Rules apply.
While ICBC was awarded post offer costs, they were not awarded double costs.  In reaching this decision the Court noted that ICBC’s financial ability to defend a lawsuit was “much greater than the (plaintiff’s) ability to prosecute” and that this factor must be taken into account in exercising judicial discretion under Rule 9.   In considering this factor Madam Justice Kloegman stated as follows “I will not order double costs to the defendant, which would be about $50,000, because the impact on the financial circumstances of the plaintiff and on the amount of her award at trial would be grievous.

Defendant Refused Costs at Trial For Failing to Consent to Small Claims Court Transfer


Reasons for judgement were released today addressing whether a Defendant who beat a formal settlement offer should be awarded costs.
In today’s case (Cue v. Breitkruez) the Plaintiff was involved in a rear-end collision.  He sued the rear motorist for damages.  Prior to trial the Defendant made a formal settlement offer for $1.  With liability being hotly contested the Plaintiff proposed that the case be transferred to Small Claims Court.  The Defendant refused to consent stating that “such a transfer would result in greater delay“.
At trial the Plaintiff’s case was dismissed with a finding that the Plaintiff was responsible for the collision.  (You can click here to read my summary of the trial judgement).  The Defendant then applied to be awarded double costs pursuant to Rule 9-1(5) because they beat their formal offer at trial.
Mr. Justice Smith dismissed the application noting that since Rule 14-1(10) generally restricts Plaintiff’s awarded an amount within the small claims court jurisdiction from being awarded trial costs that the Defendant should be refused costs for not agreeing to have the case heard in Provincial Court.  Specifically Mr. Justice Smith noted as follows:

7]             The matter remained in this court subject to an agreement to still limit the claim to what could be awarded in Provincial Court. Had my liability decision been different and the matter proceeded to an assessment of damages, Rule 14-1(10) would have been a bar to an award of any costs, other than disbursements, in favour of the plaintiff.  In my view, fairness requires that the same limitation apply to the successful defendant, particularly as the defendant did not agree to the proposed transfer to Provincial Court.

[8]             I therefore decline to award any costs to the defendant, other than disbursements.  There is therefore no need to consider the offer to settle because there are no costs to double.

New Formal Settlement Offer Rule Gets First Judicial Interpretation


The first judgement that I’m aware of dealing with the new formal settlement offer rule (Rule 9) was released today by the BC Supreme Court.
In today’s case (Demarzo v. Michaud) the Plaintiff was injured in a BC motor vehicle collision.  He went to trial and was awarded $356,000 in total damages.  (you can click here to read my post summarizing the trial judgement).  Prior to trial the Plaintiff made a formal settlement offer to resolve the claim for $150,000.
Having comfortably beat his pre-trial settlement offer the Plaintiff asked the Court to exercise its discretion and award double costs under Rule 9-1 (Rule 9 reads almost identically to the old Rule 37B.  You can access my archived posts dealing with Rule 37B by clicking here).
Prior to trial the Plaintiff obtained various independent medical reports.  The Plaintiff served these on the Defendant in compliance with the rules of Court but not as quickly as possible.  In an interesting application of the new rule Mr. Justice Brown held that double costs should not be ordered if a party failed to make “timely disclosure of documents“.  Specifically the Court held as follows in refusing to award the Plaintiff double costs:

[18]         The main purpose of Rule 9-1 is to encourage parties to settle, early if possible. But the purposes of the Rule, and modern practice, assumes timely disclosure of documents and reports that would significantly affect a party’s ability to make a rational assessment of the litigation risks they face. While it is true the Rules of Court provide parties means to discover facts and the parties can conduct their own investigations to assess litigation risks, in my view it is also incumbent on a party expecting an order for double costs to show timely disclosure of documents and reports that would have significantly affected the other party’s assessment of whether the offer ought reasonably to be accepted.

[19]         Further, while evidence at trial produced a judgment that was more than double what the plaintiff offered to settle for, I note that the plaintiff’s credibility, tested on cross-examination, and the specialist reports served in October 2009 were important factors in the damages awarded.

[20]         Considering these factors, I find an award of double costs is not in keeping with the purposes of the Rule and I decline an award.

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ERIK
MAGRAKEN

Personal Injury Lawyer

When not writing the BC Injury Law Blog, Erik is the managing partner at MacIsaac & Company, based in Victoria, B.C. He is also involved with combative sports regulatory issues and authors the Combat Sports Law Blog.

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