A Costs Argument That "Ought Not To Have Been Made"

Reasons for judgement were released today by the BC Supreme Court, Victoria Registry, criticizing a costs argument advanced by defense counsel after failing to best the Plaintiff’s formal settlement offer at trial.
In today’s case (Tenhunen v. Tenhunen) the plaintiff was injured when she tripped and fell on a deficient ramp constructed by the Defendant.  At trial both were found equally to blame for the incident.  Prior to trial the Plaintiff made a formal settlement offer of $80,000.  The Defendant did not accept this and the trial damages awarded amounted close to $125,000.
The Plaintiff sought post offer double costs but the Defendant opposed arguing, in part, that the Defendant was of modest means.  The court, suspicious of this argument asked about whether the claim was insured to which Defence counsel refused to answer citing the Code of Professional Conduct.  Plaintiff’s counsel then “provided a copy of the policy of insurance that the defendant was obliged to produce” which led to the following judicial criticism of the defence argument and an award of partial post offer double costs –

[27]        The defendant’s principal argument is based on Rule 9-1(6)(c), as she points to her own unfortunate circumstances, subsisting barely on a disability pension, and contrasts this to the far better financial position enjoyed by the plaintiff, who had been employed on an income between $77,000 and $101,511 in the five years between 2009 and 2013. The defendant argues that this financial disparity militates against an order for double costs. This submission, bearing in mind the evidence at trial, raises a logical question of insurance coverage.

[28]        The plaintiff and defendant are mother and daughter, respectively. They were and are close. The defendant ordinarily lives in the rented house where the plaintiff fell and suffered her injury, and from the photographs submitted into evidence, that residence would not suggest an ability to pay substantial damages. It is unlikely in the extreme that the plaintiff would sue her daughter, and proceed to trial, if the only prospects of recovery were limited to the defendant’s disability pension.

[29]        While the defendant’s straightened finances would argue against her being able to afford insurance premiums, those same financial constraints would argue more strongly against the defendant being able to afford to retain senior counsel for the entire action, or to offer to settle her mother’s claims for $80,000 all-inclusive on October 30, 2014. I recognize that an offer to settle is not a guarantee of payment, as it would simply have entitled the plaintiff to enter judgment for the amount of the offer, had she accepted it. In these circumstances, however, the plaintiff would have every reason to know that her daughter had no ability to pay the amount offered from her own funds.

[30]        The defendant’s argument under Rule 9-1(6)(c) made the question of insurance relevant to the costs issue, and by memorandum to counsel I invoked Rule 7-1(4) and asked if there were a policy of insurance to which the defendant could turn for indemnity. The Rule provides:

Despite subrule (3), information concerning the insurance policy must not be disclosed to the court at trial unless it is relevant to an issue in the action.

[31]        Counsel for the defendant replied to this question in this way:

Finally, and more on the basis of a footnote, the Court has inquired as to whether there is a policy of insurance that the Defendant may look to for indemnification of damages and Costs. It would be entirely inappropriate for defence counsel to make any submission as to whether Ms. Kim Tenhunen may or may not look to a policy of insurance for indemnification. Defence counsel has a dual retainer in the circumstances and owes an obligation to both the Defendant and to an insurer not to compromise their respective interests: Professional Conduct Handbook, Chapter 6.4(a-d).

[32]        The Code of Professional Conduct for British Columbia (BC Code) replaced the Professional Conduct Handbook on January 1, 2013. I have examined the previous rule cited by counsel, and see nothing there to prevent the disclosure requested. I have examined the BC Code, with the same results.

[33]        The most charitable interpretation of counsel’s argument is that it is hypothetical. Even on that assumption, it still does not respond to the question posed under Rule 7-1(4), and that is whether the existence of a policy of insurance is relevant to the costs issue, and, if it is, whether there is a policy of insurance available to the defendant in this case.

[34]        How a lawyer’s duties are supervised by the Law Society – to both an insurer who retains the lawyer and the insured on whose behalf the lawyer acts under the retainer – have little to do with the question raised in this application. Nothing in the question put to counsel could raise a risk of dividing counsel’s loyalties to an insurer and insured, assuming that is the relationship that has existed.

[35]        Counsel for the plaintiff has provided a copy of the policy of insurance that the defendant was obliged to produce as part of pre-trial document discovery. The argument against double costs based on the parties’ relative financial circumstances ought not to have been made.

bc injury law, Double Costs, financial circumstances of the parties, Mr. Justice Johnston, Rule 9, Rule 9-1, Rule 9-1(6), Rule 9-1(6)(c), Tenhunen v. Tenhunen

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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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