(Update: December 14, 2011 – the 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:
 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.
 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.
 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.
 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.
 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.
 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…
 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.
 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.
 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.