Formal Settlement Offers and Strict Compliance with Rule 37B
Reasons for judgement were released today considering whether strict compliance with Rule 37B is required for a Court to award a successful party Double Costs after beating a formal settlement offer at trial.
In today’s case (Eigeard v. Muench) the Plaintiff sued for personal injuries. Prior to trial the Plaintiff made a written settlement offer to resolve the claim for $107,500. The claim went to trial and the Plaintiff enjoyed success with a Jury awarding more than settlement offer.
The Plaintiff then asked the Court to award Double Costs under Rule 37B. The Defendant objected arguing that the formal offer did not strictly comply with Rue 37B(1)(c)(iii) which requires formal offers to contain the following sentence:
“The ….[name of party making the offer]…. reserves the right to bring this offer to the attention of the court for consideration in relation to costs after the court has rendered judgment on all other issues in this proceeding.”
The Plaintiff argued that the Court still had the discretion to award double costs because “the defendant’s insurers are sophisticated and understood the content of the offer and there is no confusion.” and that “this was a legitimate attempt by the plaintiff to resolve the action.”
Madam Justice Hyslop disagreed and concluded that the Court did not have the discretion to award double costs in these circumstances. The Court went onto summarize the applicable law as follows:
[16] In Roach, the exact words of Rule 37B(1)(c)(iii) were not contained in the offer to settle pursuant to Rule 37B. Despite this, the trial judge ordered double costs. This was one of the grounds of appeal.
[17] The offer to settle was in the form of a letter directed to counsel. The letter set out an offer of settlement and then stated:
We reserve the right to bring this letter to the attention of the judge as a matter of costs in accordance with Rules 37 and 37A. [para. 32]
[18] Madam Justice Prowse, writing for the Court, stated:
[35] It is not disputed that the terms of Ms. Roach’s offer substantially complied with the requirements of an offer under Rule 37B(1)(c): it was made in writing; it was delivered to Mr. Dutra (through his counsel); and it contained a sentence in terms similar to those set forth in subrule (1)(c)(iii). Nor is there any suggestion that Mr. Dutra was misled by the offer in any way, or that he believed that he could disregard the offer with impunity with respect to costs because it did not track subrule (1)(c)(iii) word-for-word. Rather, Mr. Dutra takes what appears to be the highly technical point that if an offer does not contain the exact wording set out in subrule (1)(c)(iii), it does not come within the definition of an “offer to settle” within the meaning of Rule 37B(1) and, therefore, cannot attract an award of double costs.
[19] Madam Justice Prowse considered both a strict and relaxed interpretation of Rule 37B(1). In doing so, she reviewed the history of Rule 37 and the enactment of Rule 37B.
[20] She concluded that the enactment of Rule 37B was a move away from strict compliance as was the situation of Rule 37. In considering the offer, Madam Justice Prowse stated at para. 52:
That said, I am also of the view that the wording of the offer must be substantially compliant with the wording of subrule 1(c)(iii) such that no reasonable person could be misled as to the intent of the offer or the fact that it was an offer within the meaning of Rule 37B. In other words, the offer must be in writing, the wording must make it clear what party is making the offer and to whom it is made, and it must include the fact that the party making the offer is reserving the right to bring the offer to the attention of the court in relation to costs after judgment on all other issues in the proceeding.
[21] The court in Roach upheld the trial judge’s finding that the offer meant the requirements of Rule 37B. At para. 54, Madam Justice Prowse endorsed the trial judge’s admonition that:
…counsel would be well advised to ensure that the language of their offers complies precisely with subrule 1(c)(iii) (and, in future, Rule 9-1) to avoid any possibility of their offers being found deficient. In this case, the offer was made just days after the new rule came into effect. It may be that the same measure of flexibility will not be accorded to offers in the future which are non-compliant. That is especially so if it proves that flexibility in the application of the Rule undermines its purpose of encouraging settlement of disputes in a fair, timely and cost-efficient manner, in accordance with the object and spirit of the Rules as a whole.
Madam Justice Hyslop then dismissed the application for double costs with the following reasons:
[25] The offer does not meet the criteria set out in Roach. Rules 37(22) and (37) address the consequence of accepting an offer. There is nothing in the offer of the plaintiff to suggest that the plaintiff intends to bring the offer to the trial judge’s attention as it relates to costs.
[26] The court’s discretion under Rule 37B comes into play after the court determines whether the offer complies with Rule 37B(1)(c) and as interpreted by Roach.
[27] I dismiss the plaintiff’s application for double costs. The defendant shall have costs of this application pursuant to scale B to be set off against the costs otherwise awarded to the plaintiff.
In my continued efforts to get us all prepared for the New BC Supreme Court Civil Rules I will again point out that Rule 37B will be replaced with Rule 9 under the New Rules. The new rule uses language that is almost identical to Rule 37B so this case will likely retain its value as a precedent moving forward.