Setting Aside an Unfair Settlement in an ICBC Injury Claim


As I’ve previously written, typically when an ICBC claim is settled and a “full and final release” is signed the agreement is binding and can’t be undone.
BC Courts can, however, set aside ‘grossly unfair‘ agreements.  Reasons for judgement were released today by the BC Supreme Court, Victoria Registry, dealing with this area of the law.
In today’s case (McIsaac v. McIsaac) the Plaintiff was injured in a single vehicle car crash.  Her husband was driving and was the at fault party.   The Plaintiff’s injuries were serious enough to require hospitalization.
In the months that followed the collision ICBC approached the Plaintiff on a number of occasions and eventually a settlement was reached to resolve her claims for $22,000.  The agreement was ‘somewhat low‘ given the severity of her injuries.  She regretted finalizing her claim and retained a lawyer.   She commenced a lawsuit and asked the settlement to be set aside.  ICBC argued that it was a binding contract and should not be undone.  Mr. Justice Wong agreed with ICBC but before dismissing the lawsuit the Court set out the following useful summary of the law:

[17] I agree with defendant’s counsel’s submission that there are two alternative tests to assess the validity of the settlement.  Also, to have a settlement set aside or voided, the insured must have been unfairly induced to accept the settlement or release, and that the settlement or release must also be grossly unfair or grossly inadequate.  Settlement and release of a claim may not be set aside where the parties are not on equal footing if the insurer can demonstrate that the settlement is fair and reasonable.

[18] There are two alternative tests to determine the validity of a settlement.  Whether, when the settlement is looked at in the light of the knowledge of the adjuster at the time the settlement was entered into, the bargain was fair, just and reasonable, and whether the transaction seen as a whole is not sufficiently divergent from community standards of commercial morality that it should be rescinded.  See McCullogh v. Hilton (1998) 63 B.C.L.R. (3d) 272 (B.C.C.A.) and see also Gindis v. Brisbourne (2000) 72 B.C.L.R. (3d) 19 (B.C.C.A.), particularly at paragraphs 42 to 44.

[19] A settlement with an unrepresented claimant will not necessarily be invalid simply because all of the symptoms stemming from any injuries have not been fully resolved.  Again, see McCullogh.

[20] There is no evidence that the injuries sustained by the plaintiff were, at the time of settlement, any worse than what was understood by the plaintiff and the adjuster, nor is there any evidence that the plaintiff’s injuries have become any worse since the settlement was entered into.

[21] Quite apart from any alleged inequality of bargaining power, the plaintiff and the adjuster had a complete picture of the plaintiff’s medical condition at the time of the settlement directly from the plaintiff’s medical caregivers.

[22] Clearly on the evidence, the plaintiff relied on and trusted the ICBC adjuster and their bargaining power were unequal, but the ultimate question is whether viewed objectively, the agreement was unconscionable and offended applicable standards of commercial morality.

[23] I am satisfied on the evidence that it cannot be said that the plaintiff was taken advantage of by ICBC.  The plaintiff, upon receiving the offer to settle at $22,000, could have consulted with a lawyer before accepting the offer, but for reasons of her own chose not to.

[24] Counsel for the plaintiff now submits the adjuster relied on outdated 12 to 18 year case law authorities as guidance on damage quantum range, and did not make any adjustment for interim inflation.  Be that as it may, the amount offered likely also factored in some discount for contributory negligence by the plaintiff in not being seat belted at the time of the accident.

[25] I might consider the amount settled by the parties in this case to be somewhat low, but taking into account all of the outlined factors related earlier, I cannot say the bargain struck was grossly unfair and unconscionable.  In order to maintain consistency and predictability in commercial transactions, public policy requires court enforcement of contracts not found to be unconscionable.

No Double Costs for "Walk Away Offer" In Defeated Lawsuit

Reasons for judgement were released today by the BC Supreme Court considering whether a Defendant should be awarded double costs for successfully defeating a lawsuit where they made a formal settlement offer before trial.
In today’s case (McVeigh v. McWilliams) the Plaintiff sued the Defendant alleging defamation.  Before trial the Defence lawyer made a ‘walk away’ offer under Rule 37B (click here to access my previous posts and recent video discussing formal settlement offers and costs consequences) which was phrased as follows:
Our client will waive costs in exchange for your consent to a dismissal of your claim on a “without costs” basis. Our client 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, in accordance with Rule 37(b) of the Rules of Court.
The Defendant, who was awarded Costs for succeeding in the lawsuit, asked the Court to exercise its discretion under Rule 37B and award double costs.  Mr. Justice Shabbits refused to do so finding that the Plaintiff was entitled to his day in Court and should not be penalized with an order of double costs for failing to beat a walk away offer.  The Court reasoned as follows:

[23] A defendant in every case in which a non-monetary issue is at stake could offer to “settle” on the basis that the plaintiff concede the cause of action, and they could do so as soon as they file the statement of defence. The issue is whether such an “offer” should attract double costs.

[24] I acknowledge that in this case the defendant did offer to waive costs to the date of the offer. But, costs here were never the issue. In my view, the defendant’s offer did not really involve any meaningful element of compromise. In respect of the cause of action, the defendant’s position after delivery of the offer to settle was the same as before delivery. It was as set out in the pleadings.

[25] In my opinion, it was not unreasonable of the plaintiff to refuse the defendant’s offer. He, too, was entitled to have the issue tried.

[26] In my opinion, no order for double costs is warranted. The defendant is entitled to his costs on Scale B except for the costs of this application. The plaintiff has enjoyed substantial success on this application, and he is entitled to his costs of it on Scale B.

I should point out that it is possible for a Defendant to be awarded double costs for beating a settlement offer if the lawsuit is dismissed, however, in cases where the settlement offer was no more than a ‘nuisance’ offer or a ‘walk away’ offer the BC Supreme Court may be reluctant to make such an award.

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 and Formal Settlement Offers; What You Need to Know

When taking an ICBC or other BC personal injury claim to trial in the Supreme Court it is vital to understand the financial consequences that can be triggered when formal settlement offers are made. I have written dozens of articles on this topic and you can access these here.
Below is a brief video discussing some of the key factors you need to consider when reviewing ICBC’s formal settlement offer under the BC Supreme Court Rules and further the issues you should consider when making your own formal settlement offer. I hope this information is of assistance.

More on ICBC Injury Claims, Lawyers and Binding Settlements


Further to my previous post on this topic, reasons for judgement were released today by the BC Court of Appeal discussing the principles behind binding settlement agreements in ICBC injury claims when lawyers accept an offer on their client’s behalf.
As I wrote earlier:
Lawyers act as agents for their clients.  Lawyers can, therefore, bind their clients to a settlement.   Typically a client will give a lawyer authority to settle their claim for X dollars and the lawyer will attempt to get that amount or more.  If a lawyer accepts an ICBC settlement offer on behalf of their client the client is typically bound to the settlement, even if the client later wishes to get out of the settlement by not signing ICBC’s full and final release.
Today’s case (Lacroix v. Loewen) demonstrated this principle.  In Lacroix, the Plaintiff gave her lawyer instructions to accept a settlement offer.  The lawyer then did accept ICBC’s settlement offer.  The client, after speaking with some friends, decided not to proceed with the settlement and did not sign ICBC’s settlement contract.  The client proceeded with her Injury Claim and ICBC brought an application to dismiss the lawsuit on the basis that it was already settled.  The Chamber’s judge ruled that the case was not settled because ICBC insisted on a term beyond the scope of the initial settlement agreement thus ‘repudiating‘ the contract.  ICBC appealed and succeeded.  In setting aside the lower court’s judgement the BC Court of Appeal found there was no repudiation and set out the following principles:
25] The chambers judge held that there was a settlement and that ICBC then repudiated the agreement by insisting upon terms that were not agreed upon….

[38] Applying the principles of contractual interpretation, the communications between Mr. Mickelson and the adjuster, Mr. Per, objectively indicate that there was an enforceable settlement including both tort and Part 7 claims. Looking at all the material facts, the reasonable objective bystander would conclude that the parties intended to make a final settlement of both tort and Part 7 claims.

[39] At the time of the discussions between Mr. Mickelson and Mr. Per, there was no outstanding action for either tort damages or Part 7 benefits. There was simply a “file” which included both tort and Part 7 claims. When Mr. Mickelson and Mr. Per spoke, the evidence indicates that their discussions concerned the “file” as a whole, and the “merits” of her claims. No differentiation was made between tort and Part 7. Their discussions about “settlement” were directed to settling the “file”/“matter”. This is clear from Mr. Per’s affidavit, which states:

3.   On March 11, 2004, I received a telephone call from John Mickelson with respect to special expenses which he wanted covered. After a discussion of the merits of the file I offered to settle the matter for $5,500.00. John Mickelson stated that he would speak to his client and get back to me…

9.   On March 16, 2004, I spoke to John Mickelson by telephone with respect to the returned cheque and release. I specifically asked Mr. Mickelson if he had instructions from Ms. Lacroix to settle the matter at the time that the counter offer was made and accepted by myself. He told me that he did have such instructions.

[40] The judge correctly noted at para. 30 of his reasons that, “There was no mention of the fate of any subsequent Part 7 claims until the release was forwarded to counsel for the plaintiff”. However, the trial judge failed to acknowledge that there was little or no specific mention of individual aspects of any claims, tort or Part 7. The objective observer would conclude that was so because Mr. Mickelson and Mr. Per’s discussions were directed to a settlement of the “file” or “matter” as a whole. Both sides understood the benefits and advantages of settling early, and concluding the matter in its entirety. To an objective observer, they did so.

[41] While the above conclusion makes it unnecessary to consider the repudiation issue, a word or two is warranted. While the chambers judge cited proper authority in Fieguth in relation to repudiation, he incorrectly applied that authority. The judge concluded that the mere tendering of documents with terms that have not been agreed upon can constitute repudiation. That is an error. As set out above, in Fieguth Chief Justice McEachern said at p. 70:

…One can tender whatever documents he thinks appropriate without rescinding the settlement agreement. If such documents are accepted and executed and returned then the contract, which has been executory, becomes executed. If the documents are not accepted then there must be further discussion but neither party is released or discharged unless the other party has demonstrated an unwillingness to be bound by the agreement by insisting upon terms or conditions which have not been agreed upon or are not reasonably implied in the circumstances.

[42] This passage continues to be a correct statement of the law and to accord with sound practice.

I repeat my advice that the lesson in this case is to make sure that when you give your lawyer settlement instructions understand that he/she can make a binding commitment on your behalf based on these instructions.  Better yet, if you don’t know your lawyers negotiation tactics consider asking him or her to negotiate on a non-binding basis giving you, the client, the final say when the claim settlement paperwork is presented to you.

More on Formal Settlement Offers – Relevance of Insurance and a Novel Use of Rule 37B


In my continued efforts to write about the development of Rule 37B (the rule that deals with costs consequences after a party beats a formal settlement offer at trial) two cases were released this week further interpreting this rule.
The first case (Ostiguy v. Hui) the Plaintiff was injured in a 2003 BC car crash.  She ultimately represented herself.  In the course of the lawsuit ICBC made a formal settlement offer under the old Rule 37 for $30,000.  The Plaintiff did not accept this offer and went to trial.  The Jury awarded the Plaintiff $10,000.   The Defendants brought a motion for costs.
After addressing a technical issue about the offer’s general compliance with the old Rule 37 Mr. Justice Williams decided that the offer was capable of triggering costs consequences under the new Rule 37B.  The Court went on to award the Defendant 60% of their costs from the time that liability was admitted onward.  In reaching this decision the Court held that whether the Defendant was insured with ICBC was not to be considered (an issue the BC Supreme Court cannot agree on and needs to be addressed by the Court of Appeal).
The Court made the following notable comments:
[68] I have no knowledge as to the circumstances of the defendants; I will proceed on the basis that they are ordinary people of ordinary means. I should note parenthetically that, although they were represented by an insurer, it is their circumstances and not those of the insurer which are to be considered…

[71] In this case, the costs which the plaintiff is liable to pay are substantial. That is attributable in significant part to the fact that this litigation dragged on considerably. The plaintiff hired and subsequently discharged two different lawyers before proceeding to act for herself. There were a number of delays. Costs have mounted.

[72] The law is clear that sympathy is not a basis to determine the outcome of matters such as this. Nevertheless, it is quite disconcerting to see the plaintiff’s award of damages for her injury completely obliterated and overshadowed by a costs obligation, and for the consequences in fact to go further, to leave the plaintiff with a huge bill to pay as well.

[73] At the same time, the Court must be cautious that the sound and basic principles that underlie the costs regime are not simply disregarded because the plaintiff chose to represent herself and chose to proceed as she did.

[74] In the final result, the matter requires a balancing of a number of considerations and a significant application of judgment to try and fashion an outcome that is fair in the circumstances. Approaching the task in that fashion, I have decided as follows:

(a)      The effective date of the Offer will be July 14, 2008, when the defendants advised the plaintiff that liability was being admitted.

(b)      Up to July 14, 2008, the plaintiff is entitled to recover from the defendants her costs and disbursements.

(c)      For the time period following July 14, 2008, the defendants are entitled to recover from the plaintiff their disbursements and 60% of their costs.

For my readers not familiar with the potential extent of cost consequences I should point out that on these findings there is a good chance that the Plaintiff, despite being awarded $10,000 by the Jury, would end up owing ICBC money.  When preparing for trial it is imperative that parties consider the potential consequences of formal settlement offers.

________________________________________________________________________________________________

The second case released this week was interesting because the Defendant made what appears to be a novel use of Rule 37B.  Usually parties restrict formal settlement offers to the issues to be addressed at trial.  In this week’s case (Moro v. El Mantari) the Defendant used Rule 37B in a Chambers application.

The parties could not agree on a lot of issues in the lawsuit.  Prior to trial the Parties brought cross motions to be decided in Chambers.  Prior to this pre-trial hearing the Defendant made a formal settlement offer under Rule 37B asking that the Plaintiff consent to various aspects of their motion.

The Defendant was largely successful in Chambers.  The Court was asked to award the Defendant double costs for Chambers because of the formal offer.  In the first case that I’m aware of using Rule 37B in this fashion Mr. Justice Chamberlist agreed that it was a permitted use of the Rule.  Specifically the Court held as follows:

[18] The defendant submits that it should be entitled to double costs on the basis of its offer to settle to the plaintiff made on June 26, 2009.  At that time the defendant asked the plaintiff to consent to items 1, 4, 6, 7, 8, and 10 of her notice of motion.

[19] The fact is that R. 37 has since 2008 been amended by deleting the subrules that an offer to settle did not apply to interlocutory proceedings.  The overriding fact is that there must be substantial success.  ..

22] Thus R. 37B(4) permits the court to consider an offer to settle when exercising the court’s discretion in relation to costs.

[23] As a result, the fact that the defendant has failed to meet the terms of the offer to settle will no longer necessarily mean that she would be deprived of her double costs.  In various decisions of this court it would appear that an issue which has been discussed in many cases is whether the offer to settle is one that ought reasonably to have been accepted (R. 37B(6)(a))….

[26] The enactment of R. 37B so that it now applies to interlocutory applications as well as trial, demonstrates the purpose of the new rule is to allow an offer to settle to be made, and if I were to follow the plaintiff’s position it would completely ignore the important deterrent function of the rule…

[32] In this case the offer to settle was made on June 26, 2009, and I find that the defendant was substantially successful.  The defendant shall have her costs of her attendance before me on August 27 and 28, 2009, as calculated in accordance with R. 37B, namely double costs.

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 these retain their value as precedents.

More on ICBC Claims and the Timing of Formal Settlement Offers


One principle that is becoming well defined with respect to Rule 37B is that settlement offers made on the eve of trial may not trigger any costs consequences.  Reasons for judgement were released today demonstrating this.
In today’s case (Parwani v. Sekhon) the Plaintiff was injured in a 2004 BC car crash.  The Plaintiff sued for damages.  As trial approached the Plaintiff offered to settle his case for $37,000 plus costs and disbursements.  On the last business day before trial the Defendants responded with a formal settlement offer under Rule 37B for $10,000 plus 50% of disbursements.
The claim went to trial and the Plaintiff claimed damages of $270,000.  The claim was largely unsuccessful with the Plaintiff being found 75% at fault.  Damages were assessed at $25,000 leaving an award of $6,250 for the Plaintiff (25% of $25,000).
The Parties could not agree on costs consequences.  The Defendants argued that since they beat their formal offer they should be awarded the costs of trial.  Madam Justice Ross disagreed with this submission finding that while the Defendants offer should have been accepted it was simply made too late.  In declining to award the Defendants any costs the Court reasoned as follows:

[18] The defendants submit that the offer to settle was one that ought reasonably to have been accepted given the evidence with respect to the liability issue. In addition, the position taken by the plaintiff at trial with respect to his losses was unreasonable given the medical evidence and the paucity of evidence to support the claims. The offer exceeded the plaintiff’s recovery at trial. The position of the plaintiff was that he did not have adequate time to consider the offer, coming as it did on the eve of trial. Moreover, had the plaintiff accepted the offer, considering the disbursements already incurred, the plaintiff would have recovered only $765.34. Accordingly, it was not reasonable to accept the offer. The plaintiff had made an early offer to settle that reflected a considerable discount to reflect the uncertainties in the case.

[19] In my view, while the defendants’ offer was reasonable, it was not early. It came on the eve of trial, after substantial costs and disbursements had been incurred. Such an offer is not the embodiment of the conduct the rule intends to promote. In the circumstances, and considering the factors identified in the rule, I am not prepared to consider the offer in relation to the award of costs.

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.

You can click here to read access my archived posts discussing Rule 37B in injury lawsuits.

More on Rule 37B; Settlement Offers, Acceptance and the Discretion of the Court


Reasons for judgement were released today by the BC Supreme Court, New Westminster Registry, addressing whether the BC Supreme Court has discretion to make costs awards after a formal settlement offer is accepted that specifically addresses costs consequences.
In today’s case (Hambrook v. Sandhu) the Plaintiff was injured in a 2004 BC collision.  He sued for damages.  The defence lawyer (instructed by ICBC) made a formal offer to settle the case for $75,000 plus costs up to the time that the offer was made with the Defendant being entitled to costs thereafter.  (this offer was made under the old Rule 37 which has now been repealed).
The Plaintiff initially dismissed the offer and continued in the lawsuit.   Three days before trial the Plaintiff accepted the offer.  The parties could not agree on the costs consequences.  The Plaintiff argued that Rule 37B (the rule that governed at the time of acceptance) gave the Court discretion to award her costs up to the date the offer was accepted.   Mr. Justice Verhoeven disagreed and held that when a settlement offer is accepted that specifically spells out the costs consequences there is no discretion for the Court to exercise under Rule 37B.  The Court provided the following reasons:
[28] But it has also been held that a settlement agreement containing terms as to payment of costs leaves the court with no room for the exercise of discretion pursuant to Rule 37B:  Buttar v. Di Spirito, 2009 BCSC 72 at para. 17..

[30] Madam Justice Gerow held that the court had no discretion to award costs in the matter before her. She stated at para. 11:

[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.

[31] On this basis, where a party has specified the costs consequences of acceptance of its offer to settle, within an offer to settle to which Rule 37B applies, and a settlement agreement results in accordance with the offer, the court does not retain a discretion to depart from the terms of the agreement.

[32] Put another way, it remains open to litigating parties to make an offer to settle within the meaning of Rule 37B and to specify the costs consequences of acceptance of the offer. In my view this is a positive result. It allows the parties to create their own bargain. It provides for certainty, and avoids the need for applications to court where a settlement agreement is reached, while preserving the court’s discretion in cases where no settlement occurs…

[37] In my view the agreement that the parties made was unambiguous. The defendants’ offer was clear in relation to the costs consequence of acceptance; the defendants would pay the costs until the date of the offer, and if the plaintiff were to accept the offer after that date, then the defendants would be entitled to costs after that date.

[38] After July 1, 2008, when the new rule came into effect, the defendants’ offer remained open for acceptance in accordance with its terms. The defendants had not withdrawn it or amended it. The new rule affected the costs consequences in the event that the offer was not accepted, and the court went on to render a judgment. That did not occur…

[61] The plaintiff will receive costs in accordance with Appendix B, Scale B, for the time leading to delivery of the defendants’ offer to settle. The defendants will receive costs following that date. No argument was presented to me that there should be any distinction between the tariff items and disbursements. The applicable costs will include both tariff items and disbursements.

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.

Another Case Holds ICBC Insurance is Relevant Factor Under Rule 37B

Further to my recent post on this topic, another case was just released by the  BC Supreme Court considering whether the Court can consider the fact that the Defendant is insured when determining what costs consequences a formal offer of settlement should have in an ICBC Claim.
In today’s case (Cridge v. Ivancic) the Plaintiff was involved in a 2005 car crash in Surrey, BC.  The Plaintiff sued for damages.  Fault was admitted by the Defendant and the Court was asked to value the claim.
Prior to trial the Defendants (through their ICBC appointed defence lawyer) made a formal offer to settle the case for $50,000.  The Plaintiff did not accept this offer and went to trial.  At trial the Plaintiff sought damages of over $100,000.  The claim was largely unsuccessful with the Court awarding just over $12,000 in total damages.
The Defendants brought a motion seeking that the Plaintiff pay their costs from the point of trial onward.   The Court held that it was not unreasonable for the Plaintiff to reject the formal offer until the week before trial.  As a result the Court awarded the Plaintiff her costs until that stage and the Defendants their costs from that time on.  The result was the costs cancelled each other out.  While there is nothing noteworthy about this result, the decision is worth reviewing because it is yet another precedent discussing whether insurance is a relevant consideration under Rule 37B.  Madam Justice Fenlon held that the existence of insurance is a fair consideration stating as follows:

[14] Under R. 37B(6)(c), another consideration is “the relative financial circumstances of the parties”. The defendants were represented by ICBC. The plaintiff was unrepresented; she is a retired accountant in her 70s, and appears to be of limited means, working only part-time each spring during tax season.

[15] There is conflicting case law on the issue of whether a defendant’s insurance coverage is relevant to the consideration of the financial circumstances of the parties. In Bailey v. Jang, 2008 BCSC 1372 at paras. 32-34, 90 B.C.L.R. (4th) 125 [Bailey], Hinkson J. held that the defendant’s insurance coverage should not be considered because the wording of Rule 37B(6)(c) of the Rules of Court does not invite such consideration and because an insurer is not generally a party to the litigation. Bailey has been followed on this point in various cases, including Abma v. Paul, 2009 BCSC 60 at para. 32, 66 C.P.C. (6th) 100, and A.E. v. D.W.J., 2009 BCSC 505 at para. 58, 91 B.C.L.R. (4th) 372.

[16] However, in Radke at para. 42, Boyd J. held that the fact that the defendants were represented by ICBC and “had substantially greater resources to finance a trial than the individual plaintiff” is a relevant consideration under R. 37B(6)(c). Radke was followed in Smith v. Tedford, 2009 BCSC 905, 77 C.P.C. (6th) 308, where Mr. Justice Grist stated at para. 16 that “[t]he ability to have a case advanced by experienced and well funded counsel is, to my mind, a resource that should be taken into account in exercising the judicial discretion stipulated under the new Rule.”

[17] I find Mrs. Cridge’s modest financial means and the defendants’ representation by ICBC to be a relevant consideration, although not a significant or determinative factor in my decision.

As pointed out in my last article on the topic, Rule 37B has been on the books now for almost two years.  The Court is clearly conflicted about whether the availability of insurance is a relevant factor under the rule.  When the New BC Supreme Court Rules come into force on July 1, 2010 Rule 37B will be replaced with Rule 9.  Rule 9 uses language that is almost identical to Rule 37B so the lack of clarity will likely continue.  In light of the on-going conflicting authorities it will be useful if the BC Court of Appeal addresses this issue.

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.

Can a Lawyer Bind a Client to a Settlement Agreement Without Client Consent?


As strange as it may sound the answer is yes.  Lawyers are client’s agents and as such their actions can bind their clients.  If a lawyer agrees to a settlement even if the lawyer does not have or is mistaken about their client’s instructions the settlement agreement can be binding.  Reasons for judgement were released today demonstrating this.
In today’s case (Park v. Palmer) the Plaintiffs took their claim to trial.  The Plaintiffs were represented by their niece who was a lawyer from Toronto.
At the close of the Plaintiffs case the Defendants brought a no-evidence motion. (a motion to dismiss a plaintiff’s claim for failure to call any evidence on an essential element of the case).
The Plaintiffs were apparently concerned about the costs consequences they’d be exposed to if the motion was successful.  Before the Court ruled on the motion the Plaintiff and Defence lawyers had settlement discussions.  When the parties returned to court the Defence lawyer advised the court as follows:
My Lady, I can advise the court of a settlement that was just reached between my friend and I.  The plaintiffs agree to withdraw and discontinue their action, and the defendants, in turn, agree to waive their costs.  We wanted to alert Your Ladyship and with apologies for not being able to advise you of this earlier, but that is the arrangement.  That is the settlement that has been agreed to between myself and my friend.
The Plaintiffs lawyer was present in Court when this statement was made.
The settlement the Plaintiff lawyer allegedly accepted was a Defence offer to “settle the matter by waiving costs and disbursements in return for the plaintiffs agreeing to discontinue and withdraw thier action against the defendants“.
Upon hearing that a settlement was reached the Court did not rule on the No Evidence Motion.  Some time passed and the parties could not agree on whether or not there was a binding settlement.  The Plaintiffs said that “they did not give instructions to settle (to their lawyer)”.  The parties ultimately brought this matter before the Court and asked the presiding Judge to decide “whether or not a settlement was reached in this matter“.
Madam Justice Dillon held that the matter was indeed settled.  Specifically the Court held:
Certainly (the Plaintiffs lawyer) was in the courtroom at that time (the court was informed there was a settlement).  There is some controversy in the affidavits before me as to whether or not (the Plaintiffs) were in the courtroom.  Notwithstanding that uncertainty, clearly (the Plaintiffs lawyer) had authority, as lawyer, agent, and representative of the plaintiffs, to speak on their behalf before the court.  As a lawyer and officer of the court, this court can rely on what (the Plaintiffs lawyer) tells the court. ..

[11] While I realize that this creates an unfortunate situation for the plaintiffs, there is no doubt that (their lawyer) settled this matter before the court by the plaintiff agreeing to withdraw and discontinue their action and the defendants waiving their costs.  The plaintiffs’ recourse now is against (their lawyer) for failure to follow instructions, if that indeed is the case.

[12] This court has to rely on the statements of legal counsel and, in the circumstances before me, I have no alternative but to enforce the settlement that was stated before me on July 4, 2008.

[13] Therefore, I order that this matter is discontinued.  The plaintiffs’ writ and statement of claim is ordered to be withdrawn, and there will be no costs to the defendant.

It is worth noting that the Court did not decide whether the Plaintiffs’ lawyer actually had instructions to accept the settlement matter.  Ultimately it does not matter.  If the Plaintiffs did give those instructions then the case was settled.  If the lawyer acted without instructions the case would still be settled but as Madam Justice Dillon pointed out “the Plaintiffs’ recourse is now against (their lawyer) for failure to follow instructions, if that indeed is the case“.

There is a good lesson to learn here for both clients and lawyers.  If you are giving your lawyer instructions to settle it is vital to know that your lawyer can create an agreement that is binding on you even if you later change your mind.   For this reason you should be committed to the result when giving a lawyer settlement instructions.  For lawyers, it is a good idea to take important instructions in writing so that there is clarity and certainty before settlement offers are made and accepted.

Contact

If you would like further information or require assistance, please get in touch.

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.

“Work hard, be kind and enjoy the ride!”
Erik’s Philosophy

Disclaimer