Tag: Loser pays

No "Principled Basis" To Award ICBC Costs Following Trial in Place of Defendant


As previously discussed, the BC Supreme Court has a “loser pays” system.  In short this means that the losing party generally has to pay the winning sides costs.  Since most personal injury lawsuits are defended by ICBC (or other insurance companies) do they get the benefit of a costs award when they are on the winning side of a lawsuit or do the costs get paid to the insured Defendant?  Reasons for judgement were released last week by the BC Supreme Court, Vancouver Registry, addressing this interesting issue.
In last week’s case (Wong v. Lee) the Plaintiff sued for damages following a motor vehicle collision.  The lawsuit was dismissed with Jury finding that the Defendant was not responsible for the crash.  Ultimately the Plaintiff was ordred to pay the Defendant costs.  ICBC argued the costs award should be in their favour (presumably to make it easier to exercise their collections rights under the Insurance (Vehicle) Act).  Madam Justice Dardi refused to make this order finding that there is no ‘principled basis’  to do so.  The Court provided the following reasons:
[35] The defendants contend that any costs awarded to them ought to be paid directly to ICBC, who is not a party to this proceeding. The defendants acknowledge that there does not appear to be any authority directly on point.


[36] The paramount principle to be derived from the authorities is that any discretionary exceptions to the usual costs rules must be made judicially: Bailey v. Victory (1995) 4 B.C.L.R. (3d) 388, 57 B.C.A.C. 23 (C.A.) at para. 13.

[37] The defendants primarily anchor their submissions on s. 84(1) of the Insurance (Vehicle) Act, R.S.B.C. 1996, c. 231 [formerly s. 26 of the Insurance (Motor Vehicle) Act]. Section 84(1) of the Insurance (Vehicle) Act provides as follows:

84  (1) On making a payment of benefits or insurance money or assuming liability for payment of benefits or insurance money, an insurer

(a) is subrogated to and is deemed to be the assignee of all rights of recovery against any other person liable in respect of the loss, damage, bodily injury or death of a person to whom, on whose behalf or in respect of whom the payment of benefits or insurance money is made or to be made, and

(b) may bring action in the name of the insured or in its own name to enforce the rights referred to in paragraph (a).

[38] On a plain reading of s. 84(1) of the Insurance (Vehicle) Act, the provisions pertain to the statutory subrogation issues between the insured and the insurer, which issues were not before me in this litigation. It is axiomatic that this subsection is not determinative of the dispute between the plaintiff and the defendants in this case. An award of costs to ICBC, who is not a party to this proceeding, would constitute a departure from the usual rule that the defendants who were the successful parties in this litigation be awarded costs. In my view, these statutory provisions do not establish a basis for an order displacing the usual rule…

[44] While the Court of Appeal in Perez v. Galambos, 2008 BCCA 382, recognized the jurisdiction to make a costs award in relation to a non-party, the Court observed that such an award is unusual and exceptional, and should only be made in “special circumstances” (at para. 17). The Court stated that a non-party who is funding litigation can be liable for costs as the real litigant if they have put forward an insolvent party as a “man of straw” to avoid liability for costs or if the non-party has promoted the litigation improperly so as to be liable for the tort of maintenance. The Court in Perez declined to order that the insurer who defended the action pay the costs of the successful plaintiff. Since the facts in this case are clearly distinguishable from those in Perez, that case does not assist the defendants. Moreover, I also note that neither counsel brought it to the Court’s attention that this decision was reversed by the Supreme Court of Canada and the issue of costs was left to the parties to resolve or, in the alternative, remanded back to the Court of Appeal for further consideration. It does not appear that there has been any further consideration by the Court of Appeal.

[45] In their submissions the defendants also cite Qureshi (Guardian ad litem of) v. Nickerson (1991), 77 D.L.R. (4th) 1, 53 B.C.L.R. (2d) 379 (C.A.). However, in my view there is no principle to be derived from Qureshi that supports the defendants’ submission that ICBC should be entitled to an award of costs in this case. In that case, the plaintiff argued that the defendant had not incurred any costs in his successful defence of a medical malpractice claim because those costs had been paid on his behalf by the Canadian Medical Protective Association. The Court of Appeal found that there was no contract of indemnification and no right of subrogation between the defendant and the Canadian Medical Protective Association. The Court concluded that in the absence of a right of subrogation, and having not incurred any liability for fees and disbursements in defending the claim, the defendant was not entitled to a costs award against the plaintiff.

[46] In summary on this issue, I am not persuaded that in the circumstances of this case, there is any principled basis upon which this Court should order that the plaintiff pay costs to the non-party ICBC.


"Special Costs" Clause Takes the Teeth Out of ICBC's Formal Settlement Offer


I’ve written many times about the risks and consequences formal settlement offers can create in the course of a personal injury lawsuit.  Interesting reasons for judgement were released this week by the BC Supreme Court, Vancouver Registry, refusing to give ICBC double costs after the dismissal of a lawsuit because of a ‘special costs‘ clause in their formal offer.
In this week’s case (Wong v. Lee) the Plaintiff was injured in a 2003 motor vehicle collision.  She sued her driver but the lawsuit was dismissed with a Jury finding the driver was not negligent.  Typically such a result obligates the Plaintiff to pay the Defendant’s costs due to the BC Supreme Court’s Loser Pays system.
Prior to trial ICBC made a formal settlement offer of $60,000.  In these circumstances the Court has the discretion to award ‘Double Costs‘.  ICBC, on the Defendant’s behalf, asked for the Court to make such an order.  Madam Justice Dardi refused, however, finding that the ‘special costs’ clause which is contained in many of ICBC’s formal settlement offers operates to create uncertainty in the settlement process.  The Court provided the following useful reasons:








[27] The plaintiff’s overarching submission is that the inclusion of para. 6 in Appendix A of the Offer to Settle is fatal to the defendants’ application for double costs. The Offer to Settle was subject to the conditions in Appendix A which provides in para. 6 as follows:

Nothing in this offer detracts from the Defendants’ right to seek special costs against the Plaintiff or his counsel above and beyond the Defendants’ entitlement to costs under this offer. Neither the making nor the acceptance of this offer shall be deemed a waiver or estoppel by the Defendants in respect to any reprehensible or improper conduct on the part of the Plaintiff and / or his counsel in respect of this proceeding. [Emphasis added.]

[28] Based upon these terms, even if the plaintiff had accepted the Offer to Settle, the defendants nonetheless would have been at liberty to pursue the plaintiff for special costs. Thus, there was a potential risk that the acceptance of the offer may not have ended all of the outstanding disputes between the parties.

[29] The Court of Appeal, in discussing Rule 9-1(5) in Evans v. Jensen, 2011 BCCA 279, articulated at para. 35 that “the most obvious and accepted intent of this Rule, namely to promote settlement by providing certainty to the parties as to what to expect if they make, or refuse to accept, an offer to settle”. The Court reasoned as follows:

[41]      This conclusion is consistent with the importance the Legislature has placed on the role of settlement offers in encouraging the determination of disputes in a cost-efficient and expeditious manner. It has placed a premium on certainty of result as a key factor which parties consider in determining whether to make or accept an offer to settle. If the parties know in advance the consequences of their decision to make or accept an offer, whether by way of reward or punishment, they are in a better position to make a reasoned decision. If they think they may be excused from the otherwise punitive effect of a costs rule in relation to an offer to settle, they will be more inclined to take their chances in refusing to accept an offer. If they know they will have to live with the consequences set forth in the Rule, they are more likely to avoid the risk.

[42]      This certainty in terms of the result of either making, accepting or refusing to accept an offer is also more conducive to the overall object of the Rules, which is “to secure the just, speedy and inexpensive determination of every proceeding on its merits”.

[30] It clearly emerges from the authorities that an important objective of offers to settle under the Rules is to bring certainty and finality to litigation. The reservation of the defendants’ right to seek special costs from the plaintiff after the acceptance of the offer is antithetical to this objective. It cannot be said that the Offer to Settle provided a genuine incentive to settle. As was stated inGiles v. Westminster Savings and Credit Union, 2010 BCCA 282 at para. 88, “plaintiffs should not be penalized for declining an offer that did not provide a genuine incentive to settle in the circumstances”.

[31] In short, para. 6 in Appendix A of the Offer to Settle militates against an award of double costs…





[34] In weighing all of the factors, the most significant being the inclusion of para. 6 in Appendix A of the Offer to Settle, I conclude that the plaintiff should not be required to pay double costs.



ICBC Under "No Obligation" To Advise You of Your Legal Rights

As previously discussed ICBC adjusters often operate in a legally permissible conflict of interest.  When dealing with ICBC it is important to know that “your” adjuster has no obligation to advise you of your legal rights regarding a claim for compensation against the at fault motorist.  This was demonstrated in reasons for judgement released this week by the BC Supreme Court, New Westminster Registry.
In this week’s case (Morris v. Doe) the Plaintiff was injured in a hit and run collision.  She sued ICBC under s. 24 of the Insurance (Vehicle) Act although the claim was dismissed at trial with Madam Justice Ker finding that the Plaintiff failed to make all reasonable efforts to identify the at-fault motorist.
The Plaintiff was ordered to pay ICBC costs following trial.  The Plaintiff opposed arguing this would “financially cripple” her and that such a result would be unfair because ICBC failed to advise the Plaintiff of the steps she needs to take to make a successful claim for compensation.  Madam Justice Ker rejected this argument finding that the law imposes no duty on ICBC adjusters to do so.  In upholding the costs award against the Plaintiff the Court provided the following reasons:











[8] During his oral submissions, counsel for the plaintiff argued that costs ought not to be awarded against the plaintiff as the defendant, the Insurance Corporation of British Columbia (“ICBC”), through its adjusters ought to have advised the plaintiff of the importance of immediately obtaining legal advice on the steps she needed to take to satisfy the unidentified motorist provisions of the Act.  Counsel appears to argue that it is this failure and circumstance connected with the case that renders it manifestly unfair to award costs against the plaintiff in this case, citing Currie v. Thomas Estate (1985), 19 D.L.R. (4th) 594 (B.C.C.A.) at para. 47 and the reference therein to the speech of Viscount Cave in Donald Campbell & Co. v. Pollack, [1927] A.C. 732 (H.L).

[9] No statutory authority or case authority was provided to support the proposition that ICBC through its employees has a duty to provide a potential plaintiff with a warning that it is in their interests to obtain legal advice.  Indeed, counsel recognized and seemed to suggest that the law, although not there yet, ought to be moving in that direction. ..

[51] It is clear from the decisions cited in my original judgment dismissing the action that ICBC has no obligation to advise a plaintiff of the nature of the steps they need to take in order to satisfy the court they have taken all necessary and reasonable steps to ascertain the identity of the offending unidentified driver.

[52] I do not understand the jurisprudence or the governing statutory provisions to place any sort of positive obligation on ICBC through its employees to either advise a plaintiff of the steps they must take to ascertain an unknown driver’s identity or of the need to obtain independent legal advice on this provision.

[53] I cannot accede to counsel’s suggestion that ICBC or an insurer has a positive obligation to advise an insured of the need to obtain legal advice.  To do so would fundamentally change the nature of the contractual relationship between the insurer and insured and place the insurer in a position of quasi-authority requiring it to provide an element of legal advice, something adjusters and claims managers may not be well suited to do and may create a host of unanticipated and unforeseen consequences.

[54] While the comments of Barrow J. in Tessier are compelling as to the fairness that at least notifying a plaintiff of the provisions of the Act would appear to create, the fact of the matter is that there is no statutory authority mandating that ICBC advise or alert a potential plaintiff of the provisions of s. 24(5) of the Act.

[55] Moreover, the jurisprudence since 2003, and most recently re-stated in Wah Fai Plumbing, establishes that denying a successful litigant its costs based on pre-litigation conduct or for reasons that appear to impose quasi-liability on the successful party and sanction non-actionable conduct is not an appropriate or principled application of the costs rules.

[56] I must say again that, in this case, I have a great deal of sympathy for the unsuccessful plaintiff, particularly in light of ICBC’s failure to set her straight at the outset when it was apparent she did not understand the process.  However, by the time the statement of defence was issued in October 2007, it would have been clear to the plaintiff and her counsel that her case was in peril, or definitely not nearly as strong as initially believed.













If all of this seems unfair you can click here to read my views regarding a solution to this conflict of interest.

The High Risk of Personal Injury Trials: The Costs and Disbursements Swing


As previously discussed, personal injury trials can be risky and expensive.  The British Columbia Supreme Court has a so-called ‘loser pays’ system which generally makes the losing side pay the winning side’s costs and disbursements (the hard expenses associated with running a trial such as court filing and expert witness fees).  Last month the BC Supreme Court, Victoria Registry, released reasons for judgement demonstrating this reality.
In this recent case (Sartori v. Gates) the Plaintiff was injured in 2005 when a truck owned by his friend accidentally struck him.  The Plaintiff sued for damages.  As the lawsuit progressed ICBC made a formal settlement offer of $230,000 plus costs and disbursements.
The Plaintiff presented his own formal offer of $600,000 plus costs and disbursements.   These offers were rejected and the claim proceeded to trial.  Ultimately a jury found the Plaintiff 33.3% at fault for the collision but accepted that he was injured and awarded damages.
When all the dust settled, the Plaintiff was awarded $234,000.  ICBC argued that since the final result was “within a knife’s edge” of their offer that the Plaintiff should be stripped of his post offer costs and disbursements.  This was a significant development because the Plaintiff spent over $120,000 in disbursements while advancing his claim.
Ultimately Mr. Justice Wilson found that this result would not be fair.  However, the Court disallowed disbursements associated with one of the Plaintiff’s expert witnesses and further reduced the disbursements the Plaintiff was entitled to by 1/3 to take into account the jury’s finding of fault and section 3 of the Negligence Act.  Some quick math reveals this results in about $40,000 of the real costs of advancing the claim not being recovered by the Plaintiff.  This large swing highlights the need to consider potential costs consequences when deciding whether to settle an ICBC claim or to proceed to trial.
This recent case is also noteworthy for a few other reasons.  ICBC argued that the usual rule of a winner receiving costs should not be followed given how close the settlement offer was to the jury verdict.   Mr. Justice Wilson rejected this argument providing the following useful reasons:

[42] The governing principle on the first issue, is R. 14-1(9).  The material words of that subrule, on this application, are:

… costs of a proceeding must be awarded to the successful party unless the court otherwise orders.

[43] The onus is on the defendant to persuade me why I should otherwise order….

[55] The plaintiff reminds me that the discretion conferred by the cost rules must be exercised judicially.  The parameters of that judicial duty were referred to in Stiles v. B.C. (Workers’ Compensation Board), and iterated consistently thereafter.  The court said:

… The discretion must be exercised judicially, i.e. not arbitrarily or capriciously.  And, as I have said, it must be exercised consistently with the Rules of Court.  But it would be a sorry result if like cases were not decided in like ways with respect to costs.  So, by judicial comity, principles have developed which guide the exercise of the discretion of a judge with respect to costs.  Those principles should be consistently applied; if a judge declines to apply them, without a reason for doing so, he may be considered to have acted arbitrarily or capriciously and not judicially.

[56] The Rules of Court mentioned in that extract are those cited above.  The “principles … developed …” or “purposes”, were referred to in Giles v. Westminster Savings and Credit Union:

The purposes for which costs rules exist must be kept in mind in determining whether appellate intervention is warranted.  In addition to indemnifying a successful litigant, those purposes have been described as follows by this Court:

•     “[D]eterring frivolous actions or defences”:  Houweling Nurseries Ltd. v. Fisons Western Corp. (1988), 37 B.C.L.R. (2d) 2 at 25 (C.A.), leave ref’d, [1988] S.C.C.A. No. 200, [1988] 1 S.C.R. ix;

•     “[T]o encourage conduct that reduces the duration and expense of litigation and to discourage conduct that has the opposite effect”:  Skidmore v. Blackmore (1995), 2 B.C.L.R. (3d) 201 at para. 28 (C.A.);

•     “[E]ncouraging litigants to settle whenever possible, thus freeing up judicial resources for other cases”:  Bedwell v. McGill, 2008 BCCA 526, 86 B.C.L.R. (4th) 343 at para. 33;

•     “[T]o have a winnowing function in the litigation process” by “requir[ing] litigants to make a careful assessment of the strength or lack thereof of their cases at the commencement and throughout the course of the litigation”, and by “discourag[ing] the continuance of doubtful cases or defences”:  Catalyst Paper Corporation v. Companhia de Navegaçao Norsul, 2009 BCCA 16, 88 B.C.L.R. (4th) 17 at para. 16.

[57] Giles is also authority for the proposition that the “usual rule” is that costs follow the event…

Here, this plaintiff did succeed.  The defendant’s argument is that he did not succeed to the extent of his aspirations.  Therefore, goes the argument, the defendant should have the costs of establishing that failure.

[81] In my opinion, that proposition is not a phenomenon contemplated by R. 14?1(14) or Forrest v. Gaidner.

[82] My conclusion on the first issue is that the defendant has not persuaded me that this is a case on which I should otherwise order.  The plaintiff is entitled to his costs, subject to the disallowance of one day of trial and disbursements associated with Dr. Hunt’s involvement.

The "Loser Pays" System: Rule 14-1(9) and Principles of Costs Consequences

Rule 14-1(9) of the BC Supreme Court Rules typically requires a losing party to pay costs to a successful party unless the Court “otherwise orders“.   Useful reasons for judgement were released last week by the BC Supreme Court discussing this Rule and the legal principles in play when a Court should deviate from the default “loser pays” result.
In last week’s case (LeClair v. Mibrella Inc.) the Plaintiff sued the Defendant for damages.  The lawsuit was ultimately unsuccessful and dismissed at trial largely because the court “did not accept the plaintiff’s evidence”.   The Plaintiff asked the Court to deviate from the usual costs result.  The Court found that the usual ‘loser pays‘ result should apply although the costs the Defendant was entitled to should be reduced by 50% to take into account some “improper” behaviour of the Defendant in the course of the lawsuit.  In discussing the principles behind Rule 14-1(9) Mr. Justice Voith provided the following useful summary:

[10] The following legal principles are relevant:

i)          Costs represent an important instrument by which courts can either promote or, conversely, sanction given conduct. Rule 14-1(9) provides one means of achieving this overarching object. The broad role served by cost awards is captured in the following statements:

a)         In Houweling Nurseries Ltd. v. Fisons Western Corporation (1988), 49 D.L.R. (4th) 205 at 226, 37 B.C.L.R. (2d) 2 (C.A.) at 25, leave to appeal ref’d, [1988] 1 S.C.R. ix, McLachlin J.A., as she then was for the courts, said:

… Parties, in calculating the risks of proceeding with a particular action or defence, should be able to forecast with some degree of precision what penalty they face should they be unsuccessful.

b)         In Karpodinis v. Kantas, 2006 BCCA 400 at para. 4, Hall J.A., for the court, said:

Cost considerations are meant to guide counsel and litigants in the choices and strategies they pursue in litigation. …

c)         In Skidmore v. Blackmore (1995), 122 D.L.R. (4th), 2 B.C.L.R. (3d) 201 (C.A.), Cumming J.A., speaking for a five member panel of the court, said:

[28] … the view that costs are awarded solely to indemnify the successful litigant for legal fees and disbursements incurred is now outdated. A review of Rule 37, which deals with offers to settle, reveals that in certain circumstances a party may be entitled to costs, or double costs, or to no costs at all. One of the purposes of the costs provisions in Rule 37 is to encourage conduct that reduces the duration and expense of litigation, and to discourage conduct that has the opposite effect. Thus, although it is true that costs are awarded to indemnify the successful litigant for legal fees and disbursements incurred, it is also true that costs are awarded to encourage or to deter certain types of conduct.

[Emphasis added.]

d)         Recently, in Catalyst Paper Corporation v. Companhia de Navegação Norsul, 2009 BCCA 16, Hall J.A., in the context of addressing Rule 57(9), said:

[15] In the recent case of Bedwell v. McGill, 2008 BCCA 526, a case dealing with a particular aspect of costs not relevant to this appeal, Newbury J.A., for the court, at para. 33, noted the purpose of former R. 37(24) as being “aimed at encouraging litigants to settle wherever possible, thus freeing up judicial resources for other cases.”

[16] It seems to me that the trend of recent authorities is to the effect that the costs rules should be utilized to have a winnowing function in the litigation process. The costs rules require litigants to make careful assessments of the strength or lack thereof of their cases at commencement and throughout the course of litigation. The rules should discourage the continuance of doubtful cases or defences. This of course imposes burdens on counsel to carefully consider the strengths and weaknesses of particular fact situations. Such considerations should, among other things, encourage reasonable settlements.

ii)         The onus is on the person who seeks to displace the usual rule that costs follow the event: Grassi v. WIC Radio Ltd., 2001 BCCA 376 at para. 24.

iii)        Though Rule 14-1(9) conveys a discretion to the court, that discretion is to be exercised in a “principled way”: Rossmo v. Vancouver Police Board, 2003 BCCA 677 at para. 59; or on “sound principle”: Brown v. Lowe, 2002 BCCA 7 at para. 147.

iv)        The exercise of discretion must be connected to the conduct (or misconduct) of a party in the litigation: Lawrence v. Lawrence, 2001 BCCA 386 at paras. 31-32; Smith v. City of New Westminster, 2004 BCSC 1304 at para. 9.

v)         The conduct in question can arise either at trial or at some earlier stage in the proceeding. For example, conduct that has been held to justify a denial of costs includes giving false evidence on discovery: Brown at para. 149-150. It also includes a failure to make timely and thorough production of relevant documents; Forsyth v. Pender Harbour Golf Club Society, 2006 BCSC 1108 at para. 72.

vi)        Costs are not to be used to sanction a party whose evidence was exaggerated or who gave evidence in error: Brown at para. 149. Where the appropriate dividing line lies was explained in each of Roberts v. Wilson (1997), 10 C.P.C. (4th) 188 (B.C.S.C.) at para. 25; Cardwell v. Perthen, 2007 BCSC 366 at para. 13; Noyes v. Stoffregen, [1995] B.C.J. No. 73 at paras. 79-80.

vii)       Where a court concludes that a party has intentionally or deliberately sought to mislead the court that party will normally be deprived of its costs: Medeiros v. Vuong, 2001 BCSC 326 at para. 12.

[11] I would add the following additional comments. First, Rule 14-1(9) is not intended to provide an unsuccessful party with an opportunity to parse through the litigation conduct of the opposing party searching for behaviour that might be criticized. I do not say that the discretion which is conferred in Rule 14-1(9) is limited to exceptional cases. The Rule is not, however, intended to address imperfect or less than optimal conduct. It is generally not intended to address questionable judgment. Instead it provides the court with an objective means of communicating its censure in relation to conduct that manifestly warrants rebuke.

[12] Second, the Rules of Court and the rules of evidence apply equally to both parties who are represented by counsel and to those who are self-represented. Self-represented litigants are not insulated from these requirements or the obligations they create. Nevertheless, depending on the nature of the concern expressed, some greater flexibility or tolerance may be accorded a self-represented litigant. For some issues, the need for honesty being the clearest example, no different standard can or does apply to a lay litigant. The requirement that parties be forthright is readily understood by all and is inflexible.

[13] In other cases, some increased measure of lenience will be appropriate and necessary. For example, a well-intentioned lay litigant’s imperfect understanding of relevance may cause that litigant to fail to produce certain documents, or to ask unnecessary questions of a witness or to object to what are proper questions. So long as that litigant acts properly once alerted to the deficiencies in his or her conduct, little is achieved in seeking to sanction the earlier conduct. There is no intentional conduct or abuse of the court’s process that warrants sanction.

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ERIK
MAGRAKEN

Personal Injury Lawyer

When not writing the BC Injury Law Blog, Erik is the managing partner at MacIsaac & Company, based in Victoria, B.C. He is also involved with combative sports regulatory issues and authors the Combat Sports Law Blog.

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