(Please note the case discussed in this post was overturned on Appeal, you can click here for an updated post and click hear to read the BC Court of Appeal decision)
Reasons for judgement were released today dealing with costs consequences under Rule 37B.
Although Rule 37B has some flexibility to its outcomes, normally when a Plaintiff fails to beat a defence formal settlement offer after trial the Plaintiff is deprived of his/her costs and the Defendant is awarded theirs. Today’s case had a result which departs from this norm.
In today’s case (Gehlen v. Rana) the Plaintiff was injured when she was a passenger involved in a rear-end car crash. The Defendant admitted fault for the crash but denied liability to the Plaintiff claiming that the Plaintiff “was not present in the vehicle at the time of the accident“. The Defendant made a formal offer to settle the Plaintiff’s claim for $22,000 plus disbursements. The Plaintiff rejected this offer and went to trial. After trial the Jury awarded the Plaintiff total damages of just over $13,000.
The Plaintiff brought a motion for her costs and the Defendant brought a counter motion for their costs from the time of the offer onward. Mr. Justice Leask held that the Plaintiff should be awarded her full costs, even for steps taken after the formal settlement offer despite not beating the offer. His reasoning was as follows:
 As to s-s. (d), I consider two other factors to be relevant. First, the defendant’s choice of trial by jury, which considerably increases the costs. Second, the manner in which the defence was conducted – to accuse the plaintiff and her family of fraud – that accusation having been rejected by the jury.
 Turning last to s-s. (a) – the most important question – whether the offer was one that ought reasonably to have been accepted. On this issue, I agree with Goepel J.’s judgment in A.E. v. D.W.J., 2009 BCSC 505, at paragraph 55:
 … this analysis is not one to be done based on hindsight once the final result is known. The reasonableness of the plaintiff’s decision not to accept the offer to settle must be assessed without reference to the court’s decision.
 I am satisfied that the defendant’s denial of liability, and the allegations of fraud that underlay that denial, dominated the plaintiff’s thinking at the time the offer to settle was made and, indeed, throughout the entire pre-trial period. Knowing that her claim was not fraudulent and knowing the persuasive evidence she had to rebut the allegation of fraud, the plaintiff thought she had a good answer to the defendant’s “low ball” offer to settle. With hindsight, it is obvious that her counsel did not anticipate the defendant’s vigorous attack on her credibility including the detailed attack on her employment resumé and the emphasis on her second accident. Her counsel’s trial preparation did not include preparing her or her witnesses for these issues. However, analyzing the plaintiff’s decision not to accept the defendant’s offer to settle without the benefit of hindsight, I am satisfied that it was not an offer that ought reasonably to have been accepted.
 Analyzing all the Rule 37B(6) factors, I am satisfied that the plaintiff is entitled to a judgment under Rule 37B(5)(c) and is entitled “in respect of all … of the steps taken in the proceeding after the date of delivery … of the offer to settle, costs to which the party would have been entitled had the offer not been made” (emphasis added).
I turn now to the plaintiff’s submission for 1.5 times Scale B costs because of the allegation of fraud made by the defendant and the manner in which those allegations were pursued at trial. Having taken that factor into account in my analysis of Rule 37B(6), I believe it would represent a form of “double counting” to award increased costs for this factor. My conclusion is that the plaintiff is entitled to her costs and reasonable disbursements of the entire proceeding on Scale B.