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BC Court of Appeal to Consider Discretionary Costs Awards and Formal Settlement Offers

Written by admin on . Posted in BC Supreme Court Costs Cases, Uncategorized. 61 Comments on BC Court of Appeal to Consider Discretionary Costs Awards and Formal Settlement Offers

After dozens of trial judgements which have applied Rule 37B (the current rule dealing with formal settlement offers which will be replaced with the almost identical Rule 9 on July 1, 2010), the BC Court of Appeal has agreed to hear what I believe will be their first case dealing with the application of this rule.
Reasons for judgement were published today on the BC Court’s Website where the BC High Court agreed to hear such an appeal.  In today’s case (Gehlen v. Rana) the Plaintiff was injured in a BC motor vehicle collision.  The Plaintiff sued.  Prior to trial ICBC made a formal settlement offer of $22,000.  The Plaintiff rejected this and proceeded to trial.  At trial a jury awarded just over $13,000 in damages.
In these circumstances the trial judge had the discretion to order that the Plaintiff pay the Defendant’s trial costs.    Mr. Justice Leask refused to do so and instead ordered that the Defendant pay the Plaintiff’s costs.   (You can click here to read my article discussing the trial decision).
The Defendant (through ICBC) asked for permission for the BC Court of Appeal to hear the case and they agreed to do so.  In deciding that this case merits an appeal the BC High Court reasoned as follows:

[3]             I am satisfied that the defendant has met the test for leave to appeal on both grounds, as that test is set out in Power Consolidated (China) Pulp Inc. v. British Columbia Resources Investment Corp. (1988), 19 C.P.C. 3d 396 (B.C.C.A.) (Chambers). With respect to the merits of the appeal, I appreciate that an order for costs is a discretionary order to which an appellate court will give considerable deference. I am nevertheless satisfied that the first ground of appeal may be characterized as a question of law, and the second as an error in principle. In fact, counsel advises that leave has been granted in another appeal on the question of whether it is appropriate to adjust costs on the basis that one party chose a jury trial.

[4]             The issue is of significance to the parties as the order under appeal entitles the plaintiff to costs in the range of $47,000, while if the defendant is successful he will recover costs in the range of $8,000.

[5]             It is more difficult to see significance to the practice in this appeal, but I do not find that militates against granting leave. The defendant does say that this court has not had the opportunity to hear many cases that provide guidance on R. 37B and its interaction with R. 57(10).

[6]             Finally, being an order for costs at the end of the action there is no need to consider possible delay due to the appeal.

As I recently wrote, ICBC has asked the Court of Appeal to also consider the issue of ‘costs’ awards when Plaintiff’s receive a judgement below $25,000 at a BC Supreme Court trial and these appeals may be heard together.

Clarity from the BC High Court will be welcome on numerous issues regarding the effects of formal settlement offers and costs awards after trial and I will be sure to report the highlights of the decisions when they are pronounced.

BC Court of Appeal Clarifies Discretionary Costs Awards in Fast Track Trials

Written by admin on . Posted in BC Supreme Court Costs Cases, Civil Procedure, Uncategorized. 50 Comments on BC Court of Appeal Clarifies Discretionary Costs Awards in Fast Track Trials

As I’ve previously written, when a person wins in a lawsuit in the BC Supreme Court they are usually entitled to ‘costs‘.
The normal amount of costs a successful litigant is entitled to are set out in a tariff as an appendix to the Rules of Court (appendix B).  However, in fast track trials, the amount of costs a person is entitled to is capped under Rule 66.  A judge has discretion to waive this cap and award a litigant more.  Today, the BC Court of Appeal released reasons for judgement dealing with the extent of that discretion.
In today’s case (Majewska v. Partyka) the Plaintiff was injured in a 2007 BC car crash.  ICBC admitted that the driver was at fault.  The lawsuit focused on the value of the Plaintiff’s claim.  The Plaintiff made a formal offer to settle her case for $50,000.  ICBC made a formal offer for $25,000.  The trial judge ultimately awarded just over $62,000 in damages.
The Court went on to award the Plaintiff double costs under the ‘usual tariff‘.  ICBC argued that while the Court did have discretion to award costs above the capped amount set our in Rule 66(29) the Judge was wrong in awarding them under the ‘usual tarriff’ and should have used the limited amounts set out in Rule 66 as guidance for the increased costs award.  The BC Court of Appeal agreed and set out the following principles:
[29] Thus, Anderson established two principles. First, it confirmed that there is discretion to award costs beyond the limits in R. 66(29) if there are special circumstances. Second, where such an award is justified, it affirmed that costs should be calculated using those limits as reference points, rather than under the usual tariff…

[31] I appreciate that Anderson dealt only with a settlement offer, whereas there were additional special circumstances in this case. The trial had run for three and a half days, and there was an issue of some complexity. However, the approach in Anderson can easily be adapted to calculate costs for extra days of trial by adding a further $1,600 for each day, based on the present figures of $5,000 and $6,600 in R. 66(29). This was the approach used by Gerow J. in Park, where the R. 66 trial had taken three days.

[32] Using the amounts in R. 66(29) as a basis for awarding increased costs because the issues were complex is not as straightforward. I am persuaded, however, that theAnderson approach could be adapted effectively to accomplish this, again by using those amounts as the basis for calculations.

[33] This approach brings desirable consistency and predictability to costs awards following fast track litigation. The varied approaches that have developed under R. 66 have led to uncertainty with respect to both exposure to and recovery of costs under the rule. Having opted into the R. 66 process, fast track litigants should be able to reliably assess their potential costs liability or recovery in making decisions about the conduct of the case….

[37] I would conclude that the discretionary nature of R. 66(29) is circumscribed by the objectives of R. 66: to provide a speedier and less expensive process for relatively short trials. Those objectives are best served by awarding lump sum costs, calculated by reference to the amounts in R. 66(29).

[38] I acknowledge there may be situations that justify a departure from such costs. I anticipate these would be “exceptional” circumstances rather than “special” circumstances, and might include situations deserving of special costs or solicitor client costs, however, such matters must be left for another day.

[39] I would therefore allow the appeal, and calculate costs under R. 66(29) as follows. Under the present limits of $5,000 and $6,600 I take the pre-trial portion of costs to be $3,400, and $1,600 as representative of each day of trial. The plaintiff’s offer to settle was delivered only six days before trial. Thus, she is not entitled to double costs for trial preparation. She is, however, entitled to double costs for three and a half days of trial, calculated at $3,200 per day. Total costs are thus $14,600 ($3,400 plus $11,200) before disbursements and taxes.

Despite winning the appeal, the BCCA ordered that ICBC pay the Plaintiff’s costs of the appeal because this was a ‘test case‘ and but for that reason ICBC would not have proceeded with the appeal.  The Court stated as follows:

[42] In my view, an order that each party bear its own costs would not be appropriate. The amount in issue is not so significant that the parties would have undertaken the appeal of their own accord. Because the defendant’s insurer chose to use it as a test case, the plaintiff was put to the expense of responding to the appeal. The defendant’s late and unsuccessful attempt to raise a second ground of appeal increased that expense, as the plaintiff had to reply to the new ground as well. In Patterson v. Rankel (1998), 166 D.L.R. (4th) 574 (B.C.C.A.), Southin J.A. described the same insurer’s agreement to pay the plaintiff’s costs in a “test case” as “a very proper thing to do”, and ordered costs in those terms. I agree that is the appropriate result in such a case.

I should point out that Rule 66 is being taken off the books as of July 1, 2010 and being replaced with Rule 15.  However, today’s case ought to retain value as a precedent under the new rule because Rule 15-1(15) has language almost identical to Rule 66(29).