More on Costs and the Flexibility of the New Rules of Court
(Update June 5, 2013- the underlying trial verdict was upheld in reasons for judgement released today by the BC Court of Appeal)
As previously discussed, one of the best changes in the New Rules of Court is the ability for trial judges to have discretion in assessing costs consequences where one party bests their formal settlement offer at trial.
Generally where a Plaintiff fails to beat a Defence formal settlement offer they can be punished with a significant costs award. Fortunately Rule 9-1 does not force a Court to this result and instead leaves some discretion in the process. This discretion was demonstrated in reasons for judgement released last week by the BC Supreme Court, New Westminster Registry.
In last week’s case (Gatzke v, Sidhu) ICBC, on the Defendant’s behalf, made a formal settlement offer of $50,000. The Plaintiff proceeded to trial and after a split finding of liability was assessed damages at “an amount to someting less than $10,000“.
ICBC brought a motion to be awarded post offer costs. Mr. Justice Saunders refused to make this order instead simply ordering that the Plaintiff be deprived of her post offer costs and that the Plaintiff pay the disbursements associated with bringing the Defendant’s IME doctor to trial. In reaching this result the Court provided the following reasons:
 …. Ordinarily, where a plaintiff obtains judgment for less than the amount offered in settlement, the legislative purpose of the Rule would be fulfilled by awarding the defendant its costs from the date the offer was made. However, where there is a very significant gap between the judgment amount and the offer, it may be the case that a defendant is in a better position for having gone to trial, even taking its counsel’s fees into account. This appears to have quite possibly been the case in the present circumstances. The damages assessed, net of the plaintiff’s contributory negligence, are a small fraction of the offer.
Defendants should not be discouraged from making generous settlement offers. But where the end result is dramatically different than the offer resulting in a net savings to the defendant, a defendant found to be partially at fault can reasonably expect to bear some of the cost of obtaining that result.
The plaintiff apparently has very limited financial means. This factor, however, will be given the most weight where it is the subject accident, or other issue between the parties, which is responsible for the plaintiff’s circumstances. That is not the case here.
The defendants, on the other hand, were presumably being defended by the Insurance Corporation of British Columbia. An insured defendant’s greater financial ability to defend is a factor which was described by the B.C. Court of Appeal in Smith v. Tedford, 2010 BCCA 302, as being a matter “of no small importance to considering whether and to what extend the financial circumstances of the parties, relative to each other, bear on an award of costs”.
This appears to have been a case where both parties undertook a course of action based on an overestimation of the risk to the defendants. There is no compelling case, in the circumstances, for awarding the defendants the entirety of their post-offer costs. Given the plaintiff’s financial circumstances and the very modest damages, the purpose of the Rule will be met by awarding the plaintiff 30% of her costs to the date of the offer, and awarding the defendants only the disbursements incurred in association with the attendance at trial of their expert witness, Dr. Sovio. Dr. Sovio’s attendance at trial was only required for cross-examination at the plaintiff’s request, and it is appropriate that this cost be borne by the plaintiff. That amount is to be set off against the plaintiff’s award of damages.