Formal Settlement Offers and Costs Consequences: A "Broad Discretion"

Reasons for judgement were released last month by the BC Supreme Court, Vancouver Registry, discussing the broad discretion that Judges have respecting costs consequences following trial where formal settlement offers have been made.
In last month’s case (Ward v. Klaus) the Plaintiff was involved in a motor vehicle collision.  Prior to trial ICBC tabled a $493,000 settlement offer.  As trial neared the offer was increased to $595,000.  The Plaintiff rejected these offers and went to trial.  At trial the presiding judge awarded just over $434,000.
ICBC brought an application to be awarded post offer costs.  This would have created a ‘costs swing‘ of $149,000.  Mr. Justice Goepel ultimately stripped the Plaintiff of her post offer costs but did not make her pay the Defendants costs reducing the sting of her failure to best the formal settlement offer.  In demonstrating the ‘broad discretion‘ of Rule 9-1 Mr. Justice Goepel provided the following reasons:

[32] Since its inception in 2008, much ink has been spilled explaining the Rule. LexisNexis Quicklaw presently references some 231 decisions in which the Rule has been discussed. From the decisions, some broad principles of general application have emerged concerning how the Rule should be applied.

[33] It is now generally recognized that the Rule provides for the exercise of a broad discretion by trial judges and provides principles to guide in the exercise of that discretion: Roach v. Dutra, 2010 BCCA 264, 5 B.C.L.R. (5th) 95…

[53] For the reasons I have stated, it cannot be said that the plaintiff should have accepted either offer. That is, however, the beginning, not the end of the analysis. Unlike Rule 37 which mandated the outcome regardless of the circumstances, Rule 9-1 gives the court a broad discretion to determine the consequence of a successful offer to settle. While the Rule is intended to reward the party who makes a reasonable settlement offer and penalizing the party who fails to accept it, the several options set out in Rule 9-1(5) allows the court to determine with greater precision the penalty or reward appropriate in the circumstances.

[54] In this case, regardless of the merits of the plaintiff’s case, the defendant’s offers to settle cannot be ignored. To do so would undermine the purpose of the Rule. Having decided to proceed in the face of two not insignificant and ultimately successful offers to settle, the plaintiff cannot avoid some consequences. That said, in the circumstances of this case, to deprive the plaintiff of her costs and have her in addition pay the costs of the defendant would be too great a penalty. It would not be fair or just to require the plaintiff to pay the defendant’s costs after the date of the First Offer. Similarly, however, I find that the defendant should not pay the costs of the plaintiff after the delivery of the First Offer, which costs were only incurred because the plaintiff decided to proceed.

[55] Accordingly, I find that the plaintiff is entitled to her costs up to May 3, 2010. The parties will bear their own costs thereafter.