Rule 37 Dies a Natural Death
As most frequent visitors to this blog know, Rule 37 of the BC Supreme Court Rules (the rule that dealt with formal settlement offers and costs consequences in BC Supreme Court trials including ICBC personal injury claims) was replaced this summer with Rule 37B. Rule 37B builds in a lot of judicial discretion in the process of awarding ‘costs’ to litigants where a formal offer was made compared to the old Rule 37 which had strict consequences resulting when a formal offer was made and beat at trial.
In what will likely be one of the last BC court cases dealing with the old Rule 37, unanimous reasons for judgment were released today by a 5 member panel of the BC Court of Appeal ruling that the old Rule 37 is not incompatible with the Negligence Act and both can work in harmony.
In this case the Plaintiff sued for injuries sustained as a result of a motor vehicle collision. Pre-Trial the Defendant made a settlement offer under the old Rule 37 for $150,000. The Plaintiff rejected this offer and proceeded to trial. The trial judge found that the Plaintiff was 50% at fault and awarded damages of just over $56,000.
Having found that the Plaintiff was 50% at fault he awarded her 50% of her costs to the date the formal offer was made by the Defendant. Since the Defendants ‘beat’ their formal offer the Court ordered that the Plaintiff pay all of the Defendants Tariff costs from the date of the formal offer through to trial. This award of costs was apparently so significant that the Plaintiff ended up owing the Defendant money.
The Plaintiff appealed arguing that Rule 37 was in conflict with the Negligence Act, the relevant portions of which read as follows:
2. The awarding of damage or loss in every action to which section 1 applies is governed by the following provisions:
(a) the damage or loss, if any, sustained by each person shall be ascertained and expressed in dollars;
(b) the degree to which each person was at fault shall be ascertained and expressed as a percentage of the total fault;
(c) as between each person who has sustained damage or loss and each other person who is liable to make good the damage or loss, the person sustaining the damage or loss shall be entitled to recover from that other person the percentage of the damage or loss sustained as corresponds to the degree of fault of that other person;
(d) as between 2 persons each of whom has sustained damage or loss and is entitled to recover a percentage of it from the other, the amounts to which they are respectively entitled shall be set off one against the other, and if either person is entitled to a greater amount than the other, he shall have judgment against that other for the excess.
3. Unless the court otherwise directs, the liability for costs of the parties to every action shall be in the same proportion as their respective liability to make good the damage or loss. The provisions of section 2 governing the awarding of damage or loss apply, with the necessary changes and so far as applicable, to the awarding of costs, with the further provision that where, as between 2 persons, one is entitled to a judgment for an excess of damage or loss and the other to a judgment for an excess of costs there shall be a further set off of the respective amounts and judgment shall be given accordingly.
The relevant of the old Rule 37 read as follows:
R. 37(24) read:
37(24) If the defendant has made an offer to settle a claim for money, and it has not expired or been withdrawn or been accepted,
(a) if the plaintiff obtains judgment for the amount of money specified in the offer or a lesser amount, the plaintiff is entitled to costs assessed to the date the offer was delivered, and the defendant is entitled to costs assessed from that date.
(b) if the plaintiff’s claim is dismissed, the defendant is entitled to costs assessed to the date the offer was delivered and to double costs assessed from that date.
The Plaintiff asked the Court of Appeal to find that Rule 37 was trumped by the Negligence Act and to adjust the costs award accordingly.
The Court of Appeal dismissed this argument finding that Rule 37 and the Negligence Act are not in conflict with each other and can stand together. The Courts key analysis is set out at Paragraph 29 of the Reasons which I set out below:
 I do not find this analysis altogether persuasive. I would have thought that the Act, as superior legislation to the Rules, would be looked to first to determine each parties’ liability for costs in a situation to which s. 2 of the Act applies, and that R. 37, as an item of subordinate legislation, would then be applied if possible. Applying the classic definition of “conflict” – whether the two laws can “stand together and … operate without either interfering with the other” (see Tabernacle Permanent Building Society v. Knight  A.C. 298 (H.L.) at 302, and the leading Canadian case, Friends of the Oldman River Society v. Canada (Minister of Transport)  1 S.C.R. 3, 88 D.L.R. (4th) 1 at para. 42) – however, I agree with the Court’s conclusion in Smith v. Knudsenthat s. 3 of the Negligence Act and R. 37(24) do not conflict. I reach this conclusion not only on the basis of the opening phrase of s. 3, but also on a close construction of the Act. As was held in Flatley, the phrase “person sustaining the damage or loss” in s. 2(c) is apt to refer only to the plaintiff in any case in which the defendant sustained no injury or damage. Section 3 states that each party’s liability for costs shall be in the same proportion as his or her liability to make good the damage or loss. Having sustained no damage or loss, the defendant has no ‘entitlement’ to recovery under s. 2(c) and thus his or her liability for costs does not “track” under s. 3. As McFarlane J.A. stated in Lutes, s. 2(c) “does not provide for the awarding of damages as between persons who are at fault. This sub-section cannot apply to entitle [a defendant] to recover anything because he has sustained no damage or loss.” (Supra, at 466.)
This will be, in all likelihood, one of the last judgements dealing with the old Rule 37. I look forward to continue reporting on judgements dealing with the new Rule 37B particularly in the context of ICBC injury claims.