Winners and Losers: More on Costs Consequences and Formal Settlement Offers

How can a Plaintiff who is awarded damages following a personal injury trial end up owing ICBC money?  The answer relates to the costs consequences that can be triggered by formal settlement offers.  I’ve discussed this topic previously and two sets of reasons for judgement were released this week by the BC Supreme Court further demonstrating this reality.
In the first case (Dempsey v. Oh) the Plaintiff was injured in a bicycle accident when he was struck by the Defendant’s vehicle.  In the course of the lawsuit ICBC made a formal settlement offer of $40,000.  As trial neared ICBC increased their formal offer to $165,000.  The Plaintiff rejected this and proceeded to trial.  At trial the Court made some critical findings relating to the Plaintiff’s credibility and awarded damages of just over $20,000.
Following trial ICBC asked for an order pursuant to Rule 9-1(5) that the Plaintiff pay all of the Defendant’s costs following their first formal offer.  The Plaintiff objected to such a result arguing that “if he is ordered to pay the defendant’s costs he will end up owing it money“.  Mr. Justice Myers rejected this argument and ordered that the Plaintiff pay the Defendant’s post offer costs.  In rejecting the Plaintiff’s submission the Court made the following comment “It is not the court’s function to ensure that a plaintiff makes a net recovery from an action when it has ignored a reasonable offer.  That would defeat the purpose of the Rule and does not accord with common sense”.
On another note, this case is worth reviewing in full for the Court’s discussion of Rule 14-1(10).  The Defendant argued that the Plaintiff should be deprived of his pre-offer costs as there was no sufficient reason to sue in Supreme Court.   Mr. Justice Myers rejected this argument finding that when the lawsuit was started the Supreme Court was an appropriate venue.  In making this finding the Court provided the following useful reasons:
[11]    In part due to the loss of income, this was a more complicated case than Ghelen.  This action was commenced approximately six months after the accident.  At that point I find it was reasonable for the plaintiff to have commenced the action in this Court because he was reasonably entitled to see the impact of the accident on his prior condition.  There is nothing in the rules which imposes a cost penalty on a party who files its suit quickly after its cause of action arises.  And, in Reimann v. Aziz, 2007 BCCA 448, the Court of Appeal held that there is no ongoing obligation on a party to assess his action as it progresses in the Supreme Court in order to consider whether it should be moved to Provincial Court.
In the second case released this week (Miller v. Boughton) the Plaintiff was injured in a 2006 collision.  She sued for damages and her case went before a jury.  The trial lasted 7 days.  Prior to trial ICBC made a series of escalating formal settlement offers starting at $22,000 with the final offer made shortly before trial topping out at $62,500.
The Plaintiff rejected these offers and proceeded to trial.  The Jury found the Plaintiff 45% at fault for the crash and the Defendant 55% at fault.   After taking this split into account the Jury’s award was a modest $3,880.  ICBC’s motion for post offer costs and disbursements was granted.  After factoring these in the Plaintiff likely ended up owing ICBC a significant amount of money.   (UPDATE September 12, 2011 – click here for follow up reasons confirming the Defendant’s costs were assessed at over $42,000)
Cases such as these illustrate the important lesson that formal offers create a “loser pays” system which could result in significant costs swings following trial.  When considering ICBC formal settlement offers it is important to keep this in mind when deciding whether to accept the offer or proceed to trial.