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I Accept Your Settlement Offer…Wait a Minute, What Settlement Offer?

Reasons for judgement were released yesterday by the BC Supreme Court, New Westminster Registry, dealing with a very interesting set of facts.  Can a Defendant accept a Formal Settlement Offer from a Plaintiff when the Plaintiff forgot the offer was made in the first place?
In yesterday’s case (Burton v. Bakker) the Plaintiff was injured in a 2005 BC motor vehicle accident.  He hired a lawyer to help him advance his ICBC claim.  In the course of the lawsuit the Plaintiff’s lawyer made a formal settlement offer to resolve the claim for $40,000.  Some time after this the Plaintiff switched lawyers.  When the new lawyer took over the file “there was no copy of the settlement offer made (by the last lawyer) in the file and the correspondence accompanying the file made no reference to (the) offer“.
Almost one year passed.  During this time the potential value of the Plaintiff’s claim appreciated significantly.  The Plaintiff’s new lawyer continued to be unaware of the outstanding offer made by the first lawyer.  Then the Defendants lawyer, without any prior notice to the Plaintiff’s new lawyer, accepted the formal settlement offer.  The parties could not agree if there was a binding settlement which resulted in the Defendants applying to Court for “a declaration that there is a binding settlement agreement“.
Madam Justice Bruce of the BC Supreme Court presided over the application.   The Plaintiff’s lawyer argued that “the offer to settle was made under a misapprehension of the facts underlying the claim such that it would result in an injustice to enforce the settlement“.  Ultimately the Court held that this is an issue that would better be dealt with by the trial judge as opposed to in a pre-trial chambers application.  Before reaching this conclusion, however, Madam Justice Bruce provided a useful discussion of the powers of BC Courts to offer remedies in the enforcement of settlement agreements.  Here are the highlights of the Courts discussion:

[20] The enforcement of settlement agreements is not a separate field of law exempt from the ordinary principles of contract law and the rules of procedure. The various means of enforcing a settlement agreement may involve equitable principles, discretionary remedies, and rules regarding the entry of consent orders; however, this does not oust the general principles of contract law. This proposition of law is amply supported by the reasoning of the Court of Appeal in Robertson where Lambert J.A. says at 386:

The law in relation to the enforcement of settlement agreements by stays of proceedings brings together principles of contract law, principles of the law of agency as they apply to barristers and solicitors, rules of equity as they apply to discretionary remedies, and rules of procedure as they apply to the pronouncement and entry of consent orders. In each case, the issues between the parties must be dealt with in accordance with those principles. The effectiveness and the enforcement of settlement agreements does not constitute a separate field of law to which the ordinary principles of contract law, agency, and equity, and the ordinary rules of procedure, do not apply.

[21] It is because the enforcement of settlement agreements involves such a collage of legal and equitable principles that the remedies available to the court have become somewhat muddied. On the one hand, it is apparent that the Rules of Court and in particular, Rules 37A and 37B addressing settlement offers, are not a complete code that have ousted the principles of contract law in respect of the enforcement and interpretation of settlement agreements. As Madam Justice Ross says in Thom at paras. 33 to 34:

[33] In my view, the decision in Acadia Hotels did not have the effect contended by counsel for the respondent of completely ousting the principles of mistake from a consideration of Offers to Settle.

[34] I find support for this conclusion in Craig Estates and in Vickaryous v. Vickaryous (2001), 19 R.F.L. (5th) 195, [2001] B.C.J. No. 1343, 2001 BCSC 930 (S.C.) per Garson J. In both decisions, the principles applicable to unilateral mistake were applied in relation to the acceptance of an Offer to Settle. Moreover, in 256593 B.C. Ltd., Mr. Justice Donald approved of the statement of law made by Baker J. in the Craig Estate decision.

[22] Thus, on an application for a declaration that a settlement agreement is binding on the parties, the court may apply the ordinary principles of contract law to determine the matter and grant or dismiss the application based on these principles.

[23] On the other hand, in an application to enforce a settlement agreement, the court has a broader range of remedies available to it that in an ordinary contract case, particularly because of s. 8 of the Law and Equity Act. This provision authorizes the court to grant a stay of proceeding in any cause or matter before it if it is just and fit in all of the circumstances. Alternatively, the court may exercise its discretion to leave the issue of the settlement agreement to the trial judge. As Garson J. (as she then was) says in Vickaryous v. Vickaryous, 2001 BCSC 930, 19 R.F.L. (5th) 195 at paras. 28 to 29:

[28] This application is brought pursuant to Rules 1, 2, 18A, 27 and 57 of the Rules of Court and s. 8 of the Law and Equity Act.

[29] In an application such as this, the court may grant or dismiss the application to enforce a settlement, pursuant to Rule 18A. Alternatively, pursuant to s. 8 of the Law and Equity Act the court may exercise its discretion in favour of granting a stay of the proceedings pending completion of the settlement agreement. The court also has a discretion to leave the settlement issue to be resolved at trial. (English v. Storey, [1999] B.C.J. No. 1647 (B.C.S.C.) and Hawitt v. Campbell (1983), 148 D.L.R. (3d) 341, 46 B.C.L.R. 260 (C.A.).)

[24] In Hawitt v. Campell, (1983) 148 D.L.R. (3d) 341, 46 B.C.L.R. 260 (C.A.) [Hawitt CA], , the Court of Appeal articulated the circumstances in which the court may refuse a stay of proceedings and held that the same factors should apply whether the application is for a stay of proceedings or for summary trial on the issue. These factors are described by MacFarlane J.A. in Hawitt CA at paras. 20 to 23:

[20] The judge may refuse the stay if:

1. there was a limitation on the instructions of the solicitor known to the opposite party;

2. there was a misapprehension by the solicitor making the settlement of the instructions of the client or of the facts of a type that would result in injustice or make it unreasonable or unfair to enforce the settlement;

3. there was fraud or collusion;

4. there was an issue to be tried as to whether there was such a limitation, misapprehension, fraud or collusion in relation to the settlement.

[21] Refusal of a stay would leave the parties to their remedy in the action or in an action on the settlement.

[22] My fourth point arises from an analogy between a summary application to stay, and an application for summary judgment. In either case, if there is a triable issue then the parties ought to be left to their remedy at trial.

[23] In exercising his discretion to refuse to grant a stay, a judge will consider not only whether there was the required misapprehension by the solicitor but whether the result of that would be unreasonable or unfair to the client. It is in that sense that I understand the reference to reasonableness and fairness in the authorities cited.

[25] Finally, in Robertson the Court of Appeal clarified that the judgment in Hawitt CA deals with an application for a stay of proceedings or summary relief and does not address the legal and equitable principles that ultimately govern whether the settlement is binding on the parties. The latter question is to be determined by the ordinary principles of contract law. As Lambert J.A. says in Robertson at 388:

…But the remarks made in the course of the reasons in Hawitt v. Campbell that a stay might be refused if a settlement obtained as a result of a misapprehension was unreasonable or unfair should not be regarded as introducing a rule that settlements are not binding if they are unreasonable or unfair. In my opinion, those remarks were intended to apply to the exercise of the judge’s discretion upon a summary application for a stay. A judge hearing such an application might refuse a stay, if there had been a misapprehension of instructions, on the ground that to allow it might be unjust. The result of a refusal would be to leave the parties to seek their remedies in the action, in which the settlement might be pleaded, or to seek them separately in an action on the settlement. In short, Hawitt v. Campbell deals with the considerations which apply to the judicial discretion under s. 8 of the Law and Equity Act to grant or refuse a stay. But those same considerations do not determine whether a settlement is binding or not.

[26] Applying these principles to the case at hand, I find it would be inappropriate to grant a stay of proceedings or to grant the summary relief claimed by the defendants. In my view, Mr. Burton has raised a triable issue that there was a unilateral mistake and unfair reliance upon it by the defendants. Further, he has raised a triable issue that the offer to settle was made under a misapprehension of the facts underlying the claim such that it would result in an injustice to enforce the settlement. The parties should be left to pursue their remedies in respect of the settlement agreement at the trial of the action set to commence on April 19, 2010.

Ultimately this case serves as an important reminder that great care should be taken before making a settlement offer in an ICBC Claim otherwise the consequences could cause regret.  If the parties to this lawsuit are unable to come to a resolution before the case goes to trial the presiding Judge will certainly be asked to grapple with this interesting issue.  If that occurs I will be sure to write about the reasons for judgement once they are released

Purpose of Rule 37B in Injury Litigation Discussed

(Update: December 14, 2011the below decision was modified somewhat by the BC Court of Appeal in reasons for judgement released today)
Precedents with respect to costs consequences under Rule 37B are still developing as this rule is slowly being molded into place.  The one clear pattern under Rule 37B is that of varying results which is a welcome relief from the strict and sometimes harsh costs results that flowed to litigants who could not beat a formal offer under the old Rule 37.
Today, reasons for judgement were released by the BC Supreme Court, Vancouver Registry, discussing the purpose of Rule 37B in Personal Injury Litigation.
In today’s case (Fan v. Chana) the Plaintiff sued as a result of alleged disability flowing from a motor vehicle collision which occurred in 2000.  The Plaintiff’s claims were largely rejected at trial with Mr. Justice McEwan finding that the crash caused nothing more than an “unexceptional soft-tissue injury” and that the litigaiton was “driven largely by parents…and a series of medical interventions premised on their representations, which were significantly at odds with certain basic information“.  In the end Mr. Justice McEwan awarded the Plaintiff just over $31,000 in damages.  (click here to read my blog post on the trial judgement)
Before trial the Defendant made a formal offer of $75,000 plus costs.  Since the Defendant beat their formal offer they brought an application for costs under Rule 37B.  Illustrating just how expensive personal injury litigation can be the Plaintiff’s costs and disbursements totaled over $85,000 and the Defendants totaled over $43,000.
In making a rather conventional award giving the Plaintiff most of her costs and disbursements up to the time of the formal offer and awarding the Defendant their costs and the disbursements from the time of the offer forward Mr. Justice McEwan made the following useful observations about Rule 37B:

[14] I agree that it is very difficult to see how the plaintiff’s guardian ad litem could have accepted the offer given the medical evidence at hand.  I doubt that the public trustee would have considered it prudent.  Nor do I see how a pre-trial judge could have made a sensible suggestion without hearing the evidence.

[15] The circumstances of this case illuminate a difficulty that arises with some kinds of personal injury cases.  Those with evident injuries and predictable consequences can usually be located within a range that allows for informed discussion.  Some soft tissue injuries, however, sometimes take a course that includes poorly founded medical opinions that seem to verify claimants’ beliefs that they have been seriously harmed.

[16] I have observed in other cases that it is not part of doctors’ function to cross-examine their patients.  On the other hand, I do not think it asks too much of medical professionals who know their reports are going to be used in forensic contexts, that matters that can be verified by objective evidence be verified.  The cogency of medical reports erodes pretty quickly when, for example, someone who plays on the school basketball team is otherwise described as seriously limited in his or her physical capacities.  There were several examples of such difficulties in this case.

[17] It is disturbing to find that a matter has come to trial on a costly series of opinions, founded on premises that a rudimentary effort at fact checking would reveal to be dubious.  It is not asking experts to trespass the fact-finding responsibilities of the court to ask that they take some responsibility for the soundness of the premises on which they proceed.  It may be that disbursements for such reports ought to be more carefully scrutinized for value, when bills of costs are taxed.

[18] Rule 37B is relatively recent.  I do not say new, because it amounts to a restoration of a broad discretion which had been curtailed by a series of rules amendments, the last of which occurred in 1999.  Even then, the court retained its inherent jurisdiction until that was essentially eliminated with respect to costs by appellate rulings (see: Cridge v. Harper Grey Easton, 2005 BCCA 33, 37 B.C.L.R. (4th) 62; Bedwell v. McGill, 2008 BCCA 526. The results were sometimes hard on parties who had guessed wrongly about their claims. The recent history of the costs rule is briefly, and helpfully, set out by Goepel J., in A.E. v. D.W.J., 2009 BCSC 505.

[19] The reintroduction of judicial discretion in costs certainly serves the ends of justice. Costs should be a penalty for unreasonable conduct in the litigation, not a penalty for failing to guess the outcome. In this regard, Courts must, I think, extend some leeway to litigants holding honest but, ultimately, mistaken views of their claims. It is generally better that such expectations be disposed of at law, rather than discouraged.  The public should not be given the impression that there is no reasonable access to a legal resolution.  It must be recognized that some people will only be comfortable if they “hear it from the judge.” This should be a valid option for those who seek it, not a form of deemed unreasonableness.  As such, inducements to settle, and to avail oneself of alternate dispute resolution, ought to complement rather than obstruct judicial determinations…

[21] The obstacle to the acceptance of a reasonable settlement offer in this case was clearly a belief that, by the alchemy of endorsement by experts, a set of facts that was or should have been assessed as dubious would be accepted by the trier of fact.

[22] These factual weaknesses should have been evident by the time the offer was made, but by then, a great deal had been invested in medical and other reports.  It seems likely that that investment contributed to an unreal expectation on the part of the plaintiff’s guardian.

[23] I am of the view that the fairest disposition of costs in the circumstances is to allow the plaintiff’s costs and disbursements to the date of the offer, and the defendant, its costs and disbursements thereafter, with the exception that I would disallow from the plaintiff’s disbursements the reports of Dr. Hahn, and the disallowed report of Dr. Kuttner.  Dr. Kuttner’s report was not proper opinion evidence.  Dr. Hahn’s reports should not be disbursements that the defendants should pay either before or after the tender of the offer to settle.

ICBC Claims, Settlement Offers and Timelines for Acceptance

Interesting reasons for judgement were released today by the BC Court of Appeal setting aside a settlement of an ICBC injury claim.
In this case the Plaintiff was allegedly injured as a result of a 2001 BC motor vehicle collision.  In September, 2006 the parties attended a mediation and ICBC made an offer to settle the Plaintiff’s claim for $50,000 plus costs and disbursements.  The Plaintiff did not accept the offer at mediation and the mediation came to an end.  
The following month the Plaintiff’s lawyer attempted to accept the settlement offer.  The defendants refused to proceed with the settlement, stated that the offer was revoked and attempted to proceed to trial.
The Plaintiff brought an application to enforce the alleged settlement and appeared before the BC Supreme Court.  The presiding judge ordered that there was a binding settlement.  The Defendants appealed.  The Court of Appeal ordered that there was no settlement or if a settlement was reached it was ‘void for uncertainty and unenforceable‘.
The court’s key discussion is set out at paragraphs 15 – 21 which I set out below:

[15]            In my view, on the evidence presented in this rather unsatisfactory record, a settlement cannot be said to have been reached for two reasons.  First, the offer made in mediation was not accepted within a reasonable time.  Second, the terms of the purported settlement lacked certainty. 

[16]            What is a reasonable time is a question of fact.  However, it is a question to which the learned chambers judge never directed her attention in either of the two sets of reasons she gave.  In the absence of any express provision, a reasonable time for acceptance of the offer at mediation depended on all the circumstances.  The mediation concluded with no agreement.  The trial date was approaching.  Both sides were no doubt preparing for trial and incurring the attendant costs.  The reasonable observer would, if asked, have concluded that the time for acceptance of the offer, even if it continued after the mediation had ended, had gone by.

[17]            Nor can the terms of the purported settlement be said to be certain.  The offer at mediation was to pay $50,000 plus costs and disbursements.  The letter of 20 October 2006 purported to accept an offer of $50,000 “plus party and party costs in the tort action”.  The letter did not specify the date at which such costs were to be determined.  It did not specify the amount of the costs, nor the manner in which they were to be determined.  If the letter of 20 October 2006 can be said to have concluded an agreement, it was at best an agreement to agree. 

[18]            The learned chambers judge recognized this difficulty.  She said:

It is apparent that the parties have not agreed upon the matter of costs.

[19]            She then directed that the issue “be referred to the trial judge”.  There was no trial, and there was no trial judge.  Moreover, there was no order as to who should pay what costs, at what level, or for what period of time.  None of the factors which might guide a judge in making a ruling on costs were known or knowable.

[20]            Even if one were to read this direction as one for taxation of costs before the Registrar, there is nothing in the evidence to suggest that this was what either party intended, or the basis on which a Registrar could conduct a taxation.

[21]            If there was any kind of an agreement reached, it was void for uncertainty and unenforceable.  And in any event, the offer not having been accepted within a reasonable time, no agreement can be said to have been reached.

This case illustrates the fact that if an informal settlement offer is made (as opposed to a formal settlement offer under Rule 37B) it is important for the parties to have a meeting of the minds and know exactly what is being offered.  Does the offer include court costs?  Disbursements?  How long is the offer open for acceptance?  These and other questions are important factors when considering a settlement offer for an ICBC claim.