More on Formal Settlement Offers – Relevance of Insurance and a Novel Use of Rule 37B
In my continued efforts to write about the development of Rule 37B (the rule that deals with costs consequences after a party beats a formal settlement offer at trial) two cases were released this week further interpreting this rule.
The first case (Ostiguy v. Hui) the Plaintiff was injured in a 2003 BC car crash. She ultimately represented herself. In the course of the lawsuit ICBC made a formal settlement offer under the old Rule 37 for $30,000. The Plaintiff did not accept this offer and went to trial. The Jury awarded the Plaintiff $10,000. The Defendants brought a motion for costs.
After addressing a technical issue about the offer’s general compliance with the old Rule 37 Mr. Justice Williams decided that the offer was capable of triggering costs consequences under the new Rule 37B. The Court went on to award the Defendant 60% of their costs from the time that liability was admitted onward. In reaching this decision the Court held that whether the Defendant was insured with ICBC was not to be considered (an issue the BC Supreme Court cannot agree on and needs to be addressed by the Court of Appeal).
The Court made the following notable comments:
[68] I have no knowledge as to the circumstances of the defendants; I will proceed on the basis that they are ordinary people of ordinary means. I should note parenthetically that, although they were represented by an insurer, it is their circumstances and not those of the insurer which are to be considered…
[71] In this case, the costs which the plaintiff is liable to pay are substantial. That is attributable in significant part to the fact that this litigation dragged on considerably. The plaintiff hired and subsequently discharged two different lawyers before proceeding to act for herself. There were a number of delays. Costs have mounted.
[72] The law is clear that sympathy is not a basis to determine the outcome of matters such as this. Nevertheless, it is quite disconcerting to see the plaintiff’s award of damages for her injury completely obliterated and overshadowed by a costs obligation, and for the consequences in fact to go further, to leave the plaintiff with a huge bill to pay as well.
[73] At the same time, the Court must be cautious that the sound and basic principles that underlie the costs regime are not simply disregarded because the plaintiff chose to represent herself and chose to proceed as she did.
[74] In the final result, the matter requires a balancing of a number of considerations and a significant application of judgment to try and fashion an outcome that is fair in the circumstances. Approaching the task in that fashion, I have decided as follows:
(a) The effective date of the Offer will be July 14, 2008, when the defendants advised the plaintiff that liability was being admitted.
(b) Up to July 14, 2008, the plaintiff is entitled to recover from the defendants her costs and disbursements.
(c) For the time period following July 14, 2008, the defendants are entitled to recover from the plaintiff their disbursements and 60% of their costs.
For my readers not familiar with the potential extent of cost consequences I should point out that on these findings there is a good chance that the Plaintiff, despite being awarded $10,000 by the Jury, would end up owing ICBC money. When preparing for trial it is imperative that parties consider the potential consequences of formal settlement offers.
________________________________________________________________________________________________
The second case released this week was interesting because the Defendant made what appears to be a novel use of Rule 37B. Usually parties restrict formal settlement offers to the issues to be addressed at trial. In this week’s case (Moro v. El Mantari) the Defendant used Rule 37B in a Chambers application.
The parties could not agree on a lot of issues in the lawsuit. Prior to trial the Parties brought cross motions to be decided in Chambers. Prior to this pre-trial hearing the Defendant made a formal settlement offer under Rule 37B asking that the Plaintiff consent to various aspects of their motion.
The Defendant was largely successful in Chambers. The Court was asked to award the Defendant double costs for Chambers because of the formal offer. In the first case that I’m aware of using Rule 37B in this fashion Mr. Justice Chamberlist agreed that it was a permitted use of the Rule. Specifically the Court held as follows:
[18] The defendant submits that it should be entitled to double costs on the basis of its offer to settle to the plaintiff made on June 26, 2009. At that time the defendant asked the plaintiff to consent to items 1, 4, 6, 7, 8, and 10 of her notice of motion.
[19] The fact is that R. 37 has since 2008 been amended by deleting the subrules that an offer to settle did not apply to interlocutory proceedings. The overriding fact is that there must be substantial success. ..
22] Thus R. 37B(4) permits the court to consider an offer to settle when exercising the court’s discretion in relation to costs.
[23] As a result, the fact that the defendant has failed to meet the terms of the offer to settle will no longer necessarily mean that she would be deprived of her double costs. In various decisions of this court it would appear that an issue which has been discussed in many cases is whether the offer to settle is one that ought reasonably to have been accepted (R. 37B(6)(a))….
[26] The enactment of R. 37B so that it now applies to interlocutory applications as well as trial, demonstrates the purpose of the new rule is to allow an offer to settle to be made, and if I were to follow the plaintiff’s position it would completely ignore the important deterrent function of the rule…
[32] In this case the offer to settle was made on June 26, 2009, and I find that the defendant was substantially successful. The defendant shall have her costs of her attendance before me on August 27 and 28, 2009, as calculated in accordance with R. 37B, namely double costs.
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 which should help cases such as these retain their value as precedents.