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Tag: Rule 37B

ICBC's Trial Policy Gets Judicial Attention

Written by admin on . Posted in BC Supreme Court Costs Cases, Civil Procedure, Jury Trials, Tort Reform, Uncategorized. 59 Comments on ICBC's Trial Policy Gets Judicial Attention

It used to be that when ICBC claims went to trial ICBC would only require the people they insure to participate at trial as necessary.  For example if fault was at issue the defendant would testify as to how the crash happened or if the Plaintiff seemed uninjured at the scene the Defendant would share his/her observations with the court.
More recently, ICBC has created a policy where the people they insure have to get extensively involved in the trial even if they have no vital role to play.   Reasons for judgement were released today by the BC Supreme Court discussing this ICBC trial policy.
In today’s case (Coates v. Marioni) the Plaintiff was injured 2006 car crash.  The at fault driver was insured by ICBC.  In the lawsuit the issue of fault was admitted leaving the court to only deal with the issue of the value of the ICBC claim.  The matter went to jury trial.  Just before trial ICBC made an offer to settle.  The Victoria jury returned a verdict just below ICBC’s formal settlement offer.  The trial judge was asked to decide what costs consequences should follow under Rule 37B since ICBC beat their formal offer (click here to read my previous posts about Rule 37B in ICBC Claims).
Madam Justice Gerow, who presided over this jury trial, refused to give the Defendant their costs despite beating their formal offer.  The Plaintiff was awarded costs through trial.  2 factors leading to this decision were the late delivery of ICBC’s formal settlement offer and the fact that the jury award was very close to the formal offer.
In asking that the Plaintiff be deprived of trial costs the lawyer hired by ICBC noted that the Plaintiff attended fewer days of the trial than the Defendant.  The court rejected this argument and in doing so discussed ICBC’s policy of forcing their insured defendants to sit through trial even if they have nothing to add to the evidence at trial.  Below are the highlights of this discussion:

[53] The defendant also argues that the plaintiff should be deprived of her costs because the defendant attended all of the trial and the plaintiff did not.  However, the defendant chose to attend the trial.  Although she testified, her evidence was very brief as liability had been admitted.  There was no requirement that the defendant attend throughout the trial, particularly in circumstances where she had to take time off work and travel to Victoria.

[54] The plaintiff argues the fact that the defendant attended more of the trial than the plaintiff is not a factor to be considered in assessing whether the plaintiff should be deprived of her costs.  The plaintiff points to an ICBC claims bulletin dated June 13, 2008 outlining a policy that requires defendants to attend the trials from start to finish.  In the bulletin it sets out that:  “This policy applies even if they will not be testifying.  The intent of the new requirement is to present a ‘face’ for the defendant to the court.  Defence counsel will be instructed to have the defendant sit at counsel’s table if possible.”  In the circumstances, I do not accept the defendant argument that her attendance at the trial is a factor that should favour depriving the plaintiff of her costs.

[55] Having considered the factors set out in subrule 6, including the relationship between the offer and the award, I have concluded that this is not an appropriate case in which to exercise my discretion to deprive the plaintiff of her costs on the basis of the offer to settle.

If you are insured with ICBC and are at fault for a car crash and injure another do you think there is any value in being forced to trial even if you have nothing to add?  Does giving a ‘face to the defendant’ make any sense when the lawsuit is an insured claim?  As always, feedback is welcome.

More on Rule 66, Rule 37B, ICBC Claims and Costs

Written by admin on . Posted in Civil Procedure, Uncategorized. 42 Comments on More on Rule 66, Rule 37B, ICBC Claims and Costs

Reasons for judgment were released today by the BC Supreme Court dealing with 2 issues of interest to me, Costs consequences under Rule 66 and Rule 37B.
In today’s case (Schnare v. Roberts) the Plaintiff was injured in a motor vehicle collision.  The Plaintiff sued for damages under Rule 66.  The Plaintiff made a formal offer of settlement and ICBC did not accept it.  The Plaintiff proceeded to trial and the verdict more than doubled the Plaintiff’s settlement offer.  (click here to read my previous post regarding the trial judgment).
Today’s judgment dealt with the costs consequences.  ICBC argued that the Plaintiff should be limited to costs under Rule 66 (which are capped at an amount less than regular Tariff costs under the BC Supreme Court Rules) because the lawsuit was brought initially under Rule 66.  Madam Justice Adair disagreed with ICBC’s submission and noted that since the trial went beyond the Rule 66 2 day limit that constituted ‘special circumstances’ which permitted the court to order costs outside of the Rule 66 costs.  Madam Justice Adair reasoned as follows:

[13]        Sub-rules (29) and (29.1) of Rule 66 provide (italics added):

(29)      Unless the court orders otherwise or the parties consent, and subject to Rule 57 (10), the amount of costs, exclusive of disbursements, to which a party is entitled is as follows:

(a)   if the time spent on the hearing of the trial is one day or less, $5 000;

(b)   if the time spent on the hearing of the trial is more than one day, $6 600.

(29.1)   In exercising its discretion under subrule (29), the court may consider a settlement offer delivered in accordance with Rule 37 or 37A whether or not other special circumstances exist.

Rules 37 and 37A have been repealed and replaced with Rule 37B.

[14]        In my view, Ms. Schnare’s case was not the type of case contemplated by Rule 66.  By October 2008, the parties themselves realized that two days would not be sufficient for trial.  Even a more generous estimate of three days turned out to be insufficient to deal with the evidence on the relevant issues in the case and with submissions (including submissions on the admissibility of documentary evidence).  Although court adjourned somewhat early in the afternoon on January 28, 2009, it sat late on January 29, 2009, to ensure that a witness’ evidence could be completed.  I did not consider counsel were inefficient in their use of time.  I am satisfied that the length of the trial itself constitutes “special circumstances” in this case.  See Kailey v. Kellner, 2008 BCSC 224, 56 C.P.C. (6th) 40, where, in comparable circumstances, Mr. Justice Parrett also found the length the trial constituted “special circumstances” justifying a departure from the fixed costs under Rule 66(29), and awarded costs on Scale B.

[15]        In my opinion, the appropriate order respecting costs (before considering matters under Rule 37B) was and is that the plaintiff should recover her costs on Scale B of Appendix B.

The second issue worth noting were the costs consequences under Rule 37B.  The Plaintiff argued that they should be awarded double costs from the date of their formal settlement offer onward.    Madam Justice agreed and engaged in the below analysis and in doing so made some critical comments about an expert physician (Dr. McPherson) who ‘was very closely tied to ICBC…for over a decade‘ in the defence of personal injury claims:

19]        Should the plaintiff’s January 26, 2009 offer have been accepted, and the costs of the trial avoided?  Analysis of this question is not to be based on hindsight once the final result is known, as noted in Bailey v. Jang, 2008 BCSC 1372, 63 C.P.C. (6th) 291, at para. 24.  Nevertheless, in my view, the defendants should have given that offer much more serious consideration when looking at the risks of going to trial. 

[20]        The defendants’ defence to Ms. Schnare’s claims for substantial damages rested primarily on the shoulders of their expert, Dr. McPherson, the only defence witness.  However, there were serious risks in that strategy.  Dr. McPherson was very closely tied to ICBC, and had been for over a decade.  This was not a secret, and had been the subject of media reports, which were used to cross-examine Dr. McPherson.  As counsel for the defendants must have appreciated, these ties made an issue of Dr. McPherson’s impartiality and credibility, and impaired his value as a expert.  Dr. McPherson’s evidence, unlike that of Dr. Van Rijn and Mr. McLean, did nothing to explain Ms. Schnare’s continuing symptoms and physical difficulties, and provided little assistance to the court.  His rejection of the possibility that there could be movement of Ms. Schnare’s sacroiliac joints led inevitably to his conclusion that her complaints could not be accident-related, and to speculate that Ms. Schnare possibly had a condition that Dr. McPherson conceded was extremely rare.  As I noted in my reasons, Dr. McPherson was unhelpfully dismissive of opinions other than his own.  In my view, the defendants’ reliance on Dr. McPherson’s opinions to defend against Ms. Schnare’s claims was unreasonable in face of the plaintiff’s eve-of-trial offer to settle.  The offer represented a very substantial discount from the amounts Ms. Schnare sought at trial.  A more reasonable assessment of the potential risk that Dr. McPherson’s opinions would be unpersuasive (as I found them) should have led the defendants to accept Ms. Schnare’s last offer, in which case the costs of the trial would have been avoided.  This factor supports the plaintiff.

[21]        The final damages awarded to Ms. Schnare were more than twice the amount of Ms. Schnare’s offer.  This factor also supports the plaintiff.

[22]        With respect to the relative financial circumstances of the parties, I consider this factor neutral.

[23]        Taking into account the underlying legislative policy behind Rule 37B, that Ms. Schnare’s offer represented a very substantial discount off her damage claims presented at trial and if accepted would have avoided the costs of the trial, and that the amount awarded was significantly more than the amount of Ms. Schnare’s offer, in my view it is appropriate to award the plaintiff double costs for steps taken after January 26, 2009.

One More Rule 37B Case

Written by admin on . Posted in Civil Procedure, Uncategorized. 55 Comments on One More Rule 37B Case

Reasons for judgement were released today by the BC Supreme Court, Vancouver Registry, giving more interpretation to Rule 37B in ICBC Injury Claims (click here to read my previous posts on this topic).
In today’s case (Smagh v. Bumbrah) the Plaintiff was injured in a 2004 motor vehicle crash.  The defendant made an offer to settle the case for $20,000 plus costs and disbursements in 2006.  This offer was rejected and the plaintiff proceeded to trial.  After a 10 day jury trial in early 2009 damages of $2,200 were awarded.
The defendant applied for double costs from the date of the offer onward.  Mr. Justice Kelleher refused to grant this motion however he did award the Defendant costs from the date of the offer onward.  In doing so he made the following observations about Rule 37B:

[7]                Rule 37B came into force in July 2008.  It is common ground that Rule 37B applies, even though the offer was made before Rule 37B came into effect.  Subrules (4), (5), and (6) are relevant here:

Offer may be considered in relation to costs

(4)        The court may consider an offer to settle when exercising the court’s discretion in relation to costs.

Cost options

(5)        In a proceeding in which an offer to settle has been made, the court may do one or both of the following:

(a)        deprive a party, in whole or in part, of costs to which the party would otherwise be entitled in respect of the steps taken in the proceeding after the date of delivery of the offer to settle;

(b)        award double costs of all or some of the steps taken in the proceeding after the date of delivery of the offer to settle.

Considerations of court

(6)        In making an order under subrule (5), the court may consider the following:

(a)        whether the offer to settle was one that ought reasonably to have been accepted, either on the date that the offer to settle was delivered or on any later date;

(b)        the relationship between the terms of settlement offered and the final judgment of the court;

(c)        the relative financial circumstances of the parties;

(d)        any other factor the court considers appropriate.

[8]                Here the defendant seeks an award of double costs pursuant to Rule 37.  I turn to the considerations in Rule 37B (5)(b) and (6).

(a)        Whether the offer to settle was one that ought reasonably to have been accepted, either on the date that the offer to settle was delivered or on any later date.

[9]                The plaintiff argues that, at worst, costs should only be awarded to the defendant commencing November 6, 2008.  That is when the defendant forwarded the report of Dr. Matushak, an orthopaedic surgeon who conducted an independent medical examination and whose report was not favourable to the plaintiff.  Before that time the plaintiff had the reports of her family doctor and two specialists.  All three of these physicians were supportive of her claim that her symptoms were related to the accident.

[10]            The difficulty with this submission is that these three reports were based on an acceptance of what the plaintiff told them.  Simply put, the jury did not believe what these physicians believed.

[11]            I conclude that the offer ought reasonably to have been accepted one week after it was made. 

(b)        The relationship between the terms of the settlement offered and the final judgment of the court

[12]            This factor favours an award of costs to the defendant.  The jury awarded an amount substantially less than the defendant’s offer.

[13]            However, this factor is not in itself determinative.  Decisions on damages by juries are somewhat more difficult to predict than assessments by judges.  Madam Justice Humphries put it this way in Lumanlan v. Sadler, 2009 BCSC 142, [2009] B.C.J. No. 224, at para. 35:

As well, an assessment of non-pecuniary damages, as every trial judge knows, is a difficult and somewhat subjective task, as hard as one tries to be consistent with other judgments.  A jury verdict can, of course, be even more disparate when compared to assessments by judges.

[14]            I agree with counsel for the plaintiff that the court should be cautious in placing too much weight on this factor.

(c)        The relative financial circumstances of the parties

[15]            The plaintiff is in difficult financial circumstances.  There is no evidence regarding the defendant’s financial position.  Counsel for the plaintiff argues that it is appropriate to consider the relevant circumstances of Ms. Smagh and the Insurance Corporation of British Columbia, which defended the action on the plaintiff’s behalf.  She relies on Radke v. Parry, 2008 BCSC 1397, 64 C.P.C. (6th) 176, where Madam Justice Boyd made note of the “substantial disparity in financial circumstances between the parties”: at para. 42.  Her Ladyship went on to state at para. 42:

The defendants, represented by ICBC, had substantially greater resources to finance a trial than the individual plaintiff.

[16]            A different view was expressed in Bailey v. Jang, 2008 BCSC 1372, 63 C.P.C. (6th) 291, where Hinkson J. made the following comments:

[32]      Second, [the plaintiff] places her financial position against that of ICBC, as opposed to that of the defendants.

[33]      While I accept that it is likely that most drivers in British Columbia are insured by ICBC, the wording of subrule 37B does not invite consideration of a defendant’s insurance coverage.  There may be good policy reasons for this.  Insurance coverage limits with ICBC are not universal, and will vary from insured to insured.  Certain activities may result in a breach of an individual’s insurance coverage, or the defence of an action under a reservation of rights by ICBC.  A plaintiff will not and likely should not be privy to such matters of insurance coverage between a defendant and ICBC.

[34]      The contest in this case was between the plaintiff and the defendants, and the insurance benefits available to the defendants do not, in my view, fall within the rubric of their financial circumstances, any more than any collateral benefit entitlement that a plaintiff may have would affect that person’s financial circumstances for the purpose of determining their loss.

[17]            In Abma v. Paul, 2009 BCSC 60, [2009] B.C.J. No. 87, Madam Justice Gropper agreed with the reasoning in Bailey.  She distinguished the different circumstances in Radke, where the defendant accepted the plaintiff’s offer after 11 days of trial.

[18]            The decision in Bailey was also followed in Kanda v. Jackson (19 December 2008), Vancouver M030259 (S.C.)).

[19]            Although the matter is not settled, the emerging consensus appears to be that the financial position of ICBC is not determinative.  As Butler J. said in Arnold v. Cartwright Estate, 2008 BCSC 1575, 86 B.C.L.R. (4th) 99, at para. 23:

[T]here will always be a substantial difference between the relative financial circumstances of the usual personal injury plaintiff and the defendant’s motor vehicle insurer.  That difference, in and of itself, is not enough for the Court to exercise its discretion to deprive the defendant of costs.  If that was the intent of the new rule, it would have been more clearly articulated.

[20]            This third factor is not helpful in this case.

(d)        Any other factor the court considers appropriate

[21]            While the relative financial positions may not be determinative, I am prepared to consider the financial circumstances of the plaintiff.  They are poor.  She invested in a laundry business which has now failed.  The lender holds a claim over her home.  As well, she is responsible for some or all of a $62,000 personal guarantee given in connection with the business.

[22]            The plaintiff has begun working at a small firm on an as-needed basis for $11 per hour.  She is unable to pay her bills.  She owes her law firm some $40,000 for disbursements.  These circumstances militate against an award of double costs.

[23]            I conclude that the plaintiff is entitled to costs up to November 2, 2006.  The defendants are entitled to costs, but not double costs, from November 2, 2006, to date.

[24]            There has been mixed success on this application for costs.  No costs are awarded in connection with this application.

One More Rule 37B Case – Formal Settlement Offers and Expiry

Written by admin on . Posted in Civil Procedure.

I just came across reasons for judgement pronounced on February 10, 2009 by the BC Supreme Court, Chilliwack Registry, but just recently transcribed dealing further with Rule 37B (click here to read my previous posts on this rule).
In this case (Smith v. Tedford and ICBC) the Plaintiff made an offer to settle her ICBC Case 10 days before trial.  The offer did not contain an expiry date in it.  The offer was not accepted by ICBC before trial but on the 6th day of the scheduled 15 day jury trial ICBC purported to accept the offer.   The Plaintiff’s lawyer, wishing to proceed with the trial,  argued that the offer could not be accepted after the commencement of trial.  Mr. Justice Grist held otherwise and found that the acceptance was viable.
The principle to take from this judgment is that if you want to have a certain expiry date in your offer to settle under Rule 37B this end date should specifically be incorporated into the written terms of the offer.
The judgement is very short and to the point and for the convenience of my readers I reproduce it below:

[1]                THE COURT:  The issue at this juncture, day 6 of a 15-day civil jury trial, is the effect of the defendants’ purported acceptance of the plaintiff’s offer to settle made January 23rd, 2009, ten days prior to commencement of the trial.

[2]                The defendants’ position is that under Rule 37B, there is no limitation requiring acceptance of an offer prior to trial as used to exist under Rule 37(13).  Further, there was no time for acceptance stipulated in the offer itself and accordingly, the offer remained open for acceptance.

[3]                The plaintiff disputes that a settlement follows the acceptance and argues that the new rule impliedly incorporates the earlier provision for expiry on the commencement of trial.

[4]                I do not find that to be the case.  There is no conflict inherent in Rule 37B(2) requiring the interpretation the plaintiff suggests.

[5]                The Plaintiff also argues that on common law principles, a reasonable time for acceptance has expired.  I am referred to the decision of Mr. Justice Curtis in Morrow v. Outerbridge(phonetic), unreported, which apparently follows this logic in rejection of a purported acceptance of an offer to settle communicated 18 days into a 20-day trial.  The defendant, in reply, refers to authority under the old rules which suggests that common law principles may not apply to the offer and acceptance process regulated by the rules.  However this may be, I do not think the common law principle argued here indicates an expiry by effluxion of time, in any event.  The offer was ten days prior to trial, a trial which has not yet proceeded to conclusion of the plaintiff’s case.  This, on the face of it, in my view, does not present such an unreasonable delay as to deem an offer, unconditional on its face, lapsed through the effluxion of time.

[6]                The plaintiff argues that the purpose of the offer process is to settle litigation and that this objective is not advanced by allowing a “wait and see” stance by the opposite party.  There may be some force to this, but the remedy is in the hands of the party wanting to avoid this outcome through the structure of the form of the offer, as is now available under Rule 37B.  Further, avoidance of the length of litigation of itself may also have a similar form of a social benefit and the fact that costs may be doubled for the interrupted trial process, continues to be a benefit to the party making the offer.

[7]                The new rule has, I think, two main characteristics not evident under the earlier enactment.  First, the parties are free to structure offers of settlement as they consider appropriate to the case.  And secondly, a generally greater degree of judicial discretion can be employed in the order of costs to be crafted in the circumstances presented by the offer and acceptance process.

[8]                The first of these characteristics frees the parties from the strictures that were evident in the prior rules.  If I were to find implied rules built into the new enactment, the obvious attempt to try and move away from the problems those strictures presented, would be to a degree, defeated.

[9]                Accordingly, I find the acceptance to be viable and to have the effect of settling the issues outstanding in this litigation.

Rule 37B and Withdrawn Formal Settlement Offers

Written by admin on . Posted in Civil Procedure.

I’ve written many times about the relatively new Rule 37B and its consequences in BC personal injury claims (click here to read my previous posts), yesterday reasons for judgement were released by the BC Supreme Court (New Westminster Registry) giving more clarity to this rule.
In yesterday’s case, ICBC v. Patko, ICBC sued the defendant alleging fraud.  In the course of the proceedings the Defendant made 2 offers to settle, one of which was withdrawn prior to trial and replaced with a subsequent formal offer.  The Jury dismissed ICBC’s claim against the Plaintiff.  In deciding what costs consequences should flow from these facts one of the issues decided by Mr. Justice Grauer of the BC Supreme Court was whether costs consequences can flow from a formal Rule 37B settlement offer when that offer is withdrawn prior to trial.  In finding that Rule 37B does permit costs consequences to be triggered in these circumstances the court stated as follows:

[31]            Jonathen Patko made a formal offer to settle to ICBC in the amount of $22,500 on June 5, 2007.  On June 4, 2008, after Mr. Patko had pleaded guilty to the quasi-criminal charge against him and had been fined and ordered to pay restitution, he withdrew that offer.  On October 23, 2008, when it became clear that a summary trial was impracticable and this matter would therefore proceed to a full trial, Mr. Patko delivered a further offer to settle in the amount of $11,000.

[32]            Because the action against Mr. Patko was dismissed, the issue addressed by my brother Goepel in A.E. v. D.W.J., 2009 BCSC 505, does not arise, except to confirm that my discretion is limited by the provisions of Rule 37B(5).

[33]            The plaintiff argues that the first offer to settle, dated June 5, 2007, is of no consequence and cannot be considered, because it was revoked a year later.  As to both offers, the plaintiff argues that neither was “one that ought reasonably to have been accepted” in accordance with Rule 37B(6)(a).  In this regard, the plaintiff pointed out that it had paid out over $55,000 as a consequence of the accident and its aftermath, and that Mr. Patko admitted his lie.  Accordingly, the plaintiff argued, both offers were for far less than what the plaintiff had paid out and might have reasonably expected to recover.  ICBC would, of course, have had to pay out that $55,000 even if Mr. Patko had not lied.  This reality did not seem to factor in its assessment of the claim and Mr. Patko’s offers.

[34]            The first question is whether I am limited to considering the second offer to settle, given that the first was revoked a year after it was made.

[35]            In my view, there is nothing in Rule 37B that would place that limitation on my discretion.  Notwithstanding the evolution of the treatment of offers to settle in the Rules, it is clear that one of the principal purposes of Rule 37B remains the same as that noted of the former Rule 37 by Cumming J.A. in Skidmore v. Blackmore (1995), 2 B.C.L.R. (3d) 201, 122 D.L.R. (4th) 330 (C.A.):

… to encourage conduct that reduces the duration and expense of litigation, and to discourage conduct that has the opposite effect.

[36]            Both offers constitute an “offer to settle” within the meaning of Rule 37B(1)(a).  Although the first offer was indeed revoked, it was outstanding for a full year.  The real question is whether, notwithstanding its eventual withdrawal, it was an offer that ought reasonably to have been accepted while it remained open.  To treat it this way is, in my view, consistent with the object described by Cumming J.A. in Skidmore.

[37]            Turning to the issue of reasonableness, I do not think that this question turns on the losing party’s view, at the time that the offer was made, of the result it might expect to achieve.  Rather, reasonableness must be viewed from the perspective of the state of the litigation at the time of the offer, and from the perspective of the result.  In this case, the issues were clear at the time of the first offer, let alone the second.  This was not a case where, for instance, further discovery and investigation was required before the plaintiff could reasonably evaluate its position in light of the offer.

[38]            As to the reasonableness of the plaintiff’s expectation, I note that it was ICBC who had chosen trial by jury, thereby accepting the degree of uncertainty that arises from that mode of trial.

[39]            Moreover, it was the plaintiff that chose to bind itself by a “zero tolerance” policy, which prevented the possibility of a compromise settlement in a case that was not a typical automobile insurance fraud claim. It was certainly open to ICBC to adopt such a policy, no doubt for its own good reasons.  But in this proceeding, the policy worked against ICBC, allowing for no flexibility notwithstanding the unique facts of the case.

[40]            In all of these circumstances, I conclude that the first offer was one which ought reasonably to have been accepted.  In choosing not to accept it because of its own assessment of the strength of its position and its “zero-tolerance” policy, ICBC took its chances, and it lost.

[41]            Taking that into account, as well as the other factors set out in Rule 37B(6), and the course of the litigation in general, I conclude that Jonathen Patko should be awarded double costs of all steps taken in this proceeding after June 5, 2007, when the first offer to settle was delivered.

ICBC Negotiations – Formal Rule 37B Offers and the Effects of a Counter Offer

Written by admin on . Posted in Civil Procedure, Uncategorized. 86 Comments on ICBC Negotiations – Formal Rule 37B Offers and the Effects of a Counter Offer

Under the old Rule 37 when a formal settlement offer was made by ICBC the Plaintiff could continue to negotiate and make counter offers without jeopardizing the ability to accept ICBC’s formal settlement offer at a later date.  This was so due to rule Rule 37(10) and 37(13) which held that a formal offer to settle did not expire by reason that a counter offer was made.
As readers of this blog know Rule 37 has been repealed and replaced with Rule 37B.  What if ICBC makes a formal settlement offer under Rule 37B that does not contain any language addressing under what circumstances the offer expires.  Would a counter offer act as a rejection of the formal offer such that it can’t be accepted at a later date?
The first case that I’m aware of dealing with this issue was released today by the BC Supreme Court (More Marine Ltd v. The Ship “the Western King”).
In today’s case the Defendant made a formal offer under Rule 37B to settle a lawsuit for “$40,000 inclusive of interest and costs“.  The Plaintiff made several counter offers which were not accepted.  The Plaintiff then purported to accept the defence formal settlement offer.  The parties could not agree on the documents that would be signed to conclude the settlement and the Plaintiff brought a motion to enforce the settlement.
In dismissing the Plaintiff’s motion Madam Justice  Satanove held that in the circumstances of this case the Plaintiff’s counter offer acted as a non-acceptance of the Rule 37B formal offer which then extinguished the formal offer of settlement.
Her summary of the law as applied to this case could be found at paragraphs 5-11 of the judgement which I reproduce below.

[5]                The plaintiffs’ argument would have succeeded under the old Rule 37 which provided in subsections (10) and (13) that an offer to settle did not expire by reason that a counteroffer was made, and an offer to settle that had not been withdrawn could be accepted at any time before trial.  Rule 37(8) provided that a party could withdraw an offer to settle before it was accepted by delivering a written notice of withdrawal in the prescribed form.

[6]                However, Rule 37B contains none of these provisions.  It simply provides a mechanism for the Court to consider an offer to settle when exercising its discretion in relation to costs.  It has been described as “significantly different, and represents a radical departure, from its predecessor Rule 37” (Alan P. Seckel & James C. MacInnis, British Columbia Supreme Court Rules Annotated 2009 (Toronto: Thomson Carswell, 2009) at 372-374).

[7]                In my view, Rule 37B does not change the common law with respect to settlement agreements, which in themselves are just another form of contract.  The old Rule 37 expressly changed the common law in this regard, but the old Rule 37 is repealed.  If the Legislature had intended the provisions of old Rule 37(8), (10), and (13) to continue to apply to the new Rule 37B, it would have retained the wording of those subsections.

[8]                Turning then to the common law of contracts, it is trite to say that a counteroffer constitutes non-acceptance of a previous offer.  The previous offer must be revived in order to be accepted after a counteroffer has ensued.  (United Pacific Capital v. Piché, 2004 BCSC 1524; Cowan v. Boyd (1921), 49 O.L.R. 335 (C.A.)).

[9]                Applying these principles to the chronology of facts in this case, when the plaintiffs issued the counteroffer of January 6, 2009, they were communicating non-acceptance of the Rule 37B offer of November 28, 2008 from the defendants, and this latter offer was no longer extant.

[10]            The only question that remains is whether the November 28, 2008, offer was revived.  The plaintiffs’ purported acceptance in their letter of March 3, 2009, could be construed as a form of offer to the defendants in the same terms as the defendants’ November 28, 2008 offer, but the defendants’ letter of March 5, 2009, once again evidences a counteroffer by its terms.  The subsequent correspondence between the parties reflects further negotiations between them, but no consensus ad idem.

[11]            In conclusion then, based on my interpretation of new Rule 37B, there is no binding separation agreement for me to enforce and the plaintiffs fail in their application.

This case is a reminder that the common law of contract is alive and well regarding settlement offers under Rule 37B and that many of the statutory terms that applied to Rule 37 formal offers no longer are in place.  Formal settlement offers made by ICBC should be carefully scrutinized to see if a counter offer can be made or if doing so will extinguish the formal offer.

Working out the Kinks – More on Rule 37B and BC Injury Cases

Written by admin on . Posted in Civil Procedure, Uncategorized. 50 Comments on Working out the Kinks – More on Rule 37B and BC Injury Cases

Very important reasons for judgment were released today (AE v. DWJ) by the BC Supreme Court giving more interpretation to Rule 37B.  (Click here to read my previous posts discussing this rule.)
Rule 37B is still relatively new and the courts have not come up with a consistent application of this rule.  Today’s case takes this rule in a potentially new direction that can make access to justice a little less costly and risky for Plaintiff’s advancing injury claims.
In today’s case the Plaintiff was awarded damages of $348,075 after taking into account contributory negligence.  After statutory deductions the judgment in the Plaintiff’s favor was less than the Defendant’s formal offer of settlement.
The Defendant’s lawyer applied to court for an order that “the defendant should receive his costs (After the date that they made their formal settlement offer)”.
In declining to make this order Mr. Justice Goepel stated that under Rule 37B “the court cannot award costs to the defendant (where the defendant beats their formal settlement offer at trial) but is limited to depriving a party of costs or awarding double costs“.  This is the first case I’m aware of interpreting Rule 37B in this fashion.
Below I reproduce the highlights of Mr. Goepel’s reasoning:

Judicial Discretion In Awarding Costs

[48] The discretion a Supreme Court judge has in awarding costs was summarized in Stiles v. British Columbia (Workers’ Compensation Board) (1989), 38 B.C.L.R. (2d) 307 at 310, 39 C.P.C. 2(d) 74 (C.A.):

The power of a Supreme Court judge to award costs stems from s. 3 of the Supreme Court Act which confirms that the judges of the Supreme Court have the inherent powers of a judge of superior court of record.  The power to award costs is governed by the laws in force in England before 1858 and by the enactments, including the Rules of Court, affecting costs made in British Columbia since 1858.  Generally, the decisions on costs, including both whether to award costs, and, if awarded, how to calculate them, are decisions governed by a wide measure of discretion.  See Oasis Hotel Ltd. v. Zurich Ins. Co., 28 B.C.L.R. 230, [1981] 5 W.W.R. 24, 21 C.P.C. 260, [1982] I.L.R. 1-1459, 124 D.L.R. (3d) 455 (C.A.).  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.

[49] In Cridge, Lowry J.A. noted the right of the Lieutenant Governor in Council to restrict the exercise of a Supreme Court judge’s discretion in awarding costs at para. 23:

While, subject to abiding by established principles, a Supreme Court judge has a broad discretion in awarding costs, it remains open to the Lieutenant Governor in Council in promulgating the Rules of Court to restrict the exercise of that discretion as may be appropriate where it is thought that to do so will achieve a desired objective.  The purpose of Rule 37 is to encourage the settlement of litigation through prescribed consequences in costs as in sub-rule (24).  Given that the sub-rule provides for the litigants’ entitlement to costs while affording no discretionary alternative, I consider it clear that there is no room for judicial discretion where sub-rule (24) applies.

[50] A trial judge cannot impose cost sanctions that are not authorized by the Rules.  An example of an ill fated attempt to do so is Kurtakis v. Canadian Northern Shield Insurance Co.(1995), 17 B.C.L.R. (3d) 197, 45 C.P.C. (3d) 294 (C.A.).  In Kurtakis, the trial judge awarded the plaintiff three times special costs.  The Court of Appeal reversed noting at para. 9 that there was “no statutory authority for such an order … and therefore no basis upon which such an order could be made.”

[51] Rule 37B has returned to judges a broad discretion in regards to costs orders arising from an offer to settle.  The discretion is however not unlimited and must be exercised within the parameters set out in the Rule.  Rule 37B(5) dictates the cost options open to a judge when an offer to settle has been made.  A judge can either deprive the party, in whole or in part, of costs to which the party would otherwise be entitled in respect of steps taken in the proceeding after the date of the delivery of the offer to settle or award double costs of some or all of the steps taken in the proceeding after the delivery of the offer to settle.  As noted in Baker, the section is permissive and a judge is not compelled to do either.

[52] What a judge cannot do, however, in my respectful opinion, as a result of an offer to settle, is to order costs to a defendant where the offer to settle was in an amount greater than the judgment.  While that cost option had existed since the time of the 1890 rules, either as an exercise of the court’s discretion or because it was mandated by the terms of the rule, it is not an option available under Rule 37B.  The drafters of Rule 37B(5) have removed that option and presumably determined that the potential deprivation of costs to which a plaintiff would otherwise be awarded is a sufficient incentive for plaintiffs to settle litigation.  As noted in Cridge, the Lieutenant Governor in Council has the right to limit the court’s discretion.  Accordingly, I hold that pursuant to Rule 37B(5) the court cannot award costs to the defendant but is limited to depriving a party of costs or awarding double costs

[53] The defendant does not seek double costs in this case.  It would be a rare case that a plaintiff who recovers damages would face the sanction of double costs. I would expect those sanctions would be limited to situations in which a plaintiff’s case is dismissed or when the plaintiff was awarded more than its offer to settle.

If this precedent holds then Plaintiffs will face fewer financial risks when proceeding to trial.  The costs consequences of going to trial and losing (not beating an ICBC formal offer of settlement) can be prohibitive and today’s case may lead the way to better access to justice in British Columbia for the victims of others negligence.

More on Rule 37B and ICBC Injury Claims

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Reasons for judgement were released today by the BC Supreme Court providing more interpretation to Rule 37B in the context of ICBC Claims.  (for background on Rule 37B and ICBC Claims see my former blog posts).
In today’s case (Jacobs v. McLaughlin) the Plaintiff sued 3 separate Defendants as a result of 3 separate accidents.  All 3 Defendants made formal settlement offers before trial.   2 of the Defendants bested their formal settlement offers at trial.  At issue was what costs consequences should follow as a result of this.
The court summarized the case law to date interpreting Rule 37B with the following analysis:

[20]            The new rule broadens the discretion of the court, permitting it “to take offers to settle under the rule into account based on the factors set out later in the rule”:  Cowichan Bay Contractors Ltd. v. Insurance Corporation of British Columbia (29 July 2008) Victoria 05/1639, at para. 5 [Cowichan Bay]. 

[21]            Unlike its predecessor, Rule 37B does not mandate outcomes; if the plaintiff fails to beat an offer to settle, it does not mean that the plaintiff will automatically be deprived of costs, as this “interpretation would fetter what is clearly intended to be an unfettered discretion”:  Bailey v. Jang, 2008 BCSC 1372, [2008] B.C.J. No. 1952, at para. 19 [Bailey].

[22]            In addition to providing for the court’s discretion to consider offers to settle, the new rule is permissive in its effect:  British Columbia Society for the Prevention of Cruelty to Animals v. Baker, 2008 BCSC 947, [2008] B.C.J. No. 1635 [B.C.S.P.C.A.].  Subrule (5) empowers the court to deprive a party, in whole or in part, of costs to which it would otherwise be entitled, or award double costs of all or some steps taken in the proceedings.

[23]            The policy underlying the new Rule 37B remains the same as under the former Rule 37:  to encourage reasonable early settlement of disputes “by providing that there will be consequences in the amount of costs payable when a party fails to accept an offer that ought reasonably to have been accepted”:  Arnold v. Cartwright Estate, 2008 BCSC 1575, 86 B.C.L.R. (4th) 99, at para 16; Abma v. Paul, 2009 BCSC 60, [2009] B.C.J. No. 87, at para. 23.  The rule also exists to “deter certain kinds of conduct”:  Bailey, at para. 18. 

Rule 37B(6)(a):  Reasonableness of the Offers to Settle

[24]            The onus is on the defendants to establish that the offer was one that the plaintiff ought reasonably to have accepted:  B.C.S.P.C.A., at para. 36.

[25]            The plaintiff submits that this Court should not give any weight to the defendants’ offers to settle not solely because they were unreasonable, but because she was incapable of accepting any of the offers in isolation of the others.  The plaintiff relies on Carvalho v. Agnotti, 2008 BCSC 386, [2008] B.C.J. No. 559 [Carvalho], to support her argument.

[26]            In Carvalho, the defendants made separate offers related to two separate car accidents involving the plaintiff.  Mr. Justice N.H. Smith held that the substantial overlap in damage claims precluded acceptance of only one of the offers; instead, the plaintiff had to consider the two offers together.  In this case, each of the three accidents caused separate and discrete injuries to Ms. Jacobs.  Plaintiff’s counsel had overwhelming evidence prior to the onset of Ms. Jacobs’ MS that there were no “overlapping” injuries.  Carvalho is distinguishable on this basis. 

[27]            I am satisfied that the factual evidence before the plaintiff should have led her to conclude that the offers could have been accepted in isolation of each other.  This is not the imposition of hindsight reasoning, as argued by the plaintiff.  Rather, it is the fair assessment of the factual evidence before the plaintiff as it related to her claim. 

[28]            Ms. Jacobs submits that at the date of delivery, following so soon after the third motor vehicle accident and the definitive diagnosis of her MS, she did not have an opportunity to obtain medical and legal opinions respecting the role of the trauma in the exacerbation of her MS.

[29]            Under Rule 37B, a party must be afforded a reasonable period of time to “consider an offer and decide in the circumstances existing at the time of the offer whether it should be accepted or rejected”:  Coquitlam (City) v. Crawford, 2008 BCSC 1507, [2008] B.C.J. No. 2095, at para. 17 [Coquitlam].

[30]            All parties agree that the plaintiff required a reasonable opportunity to investigate this allegation before deciding to reject the offers to settle. 

[31]            The defendants state that there should have been a reasonable time period in which to investigate the MS causation issue after July 17, 2006, when the issue became “alive”.  The defendants submit that by December 31, 2006 the plaintiff should have been able to fully assess the legal principles and scientific research on the MS causation analysis as it related to her claim.  Thus, they submit, it would have been reasonable for Ms. Jacobs to accept their offers to settle by that time.

[32]            I note that the plaintiff amended her statement of claim to include the MS causation issue in October 2006.

[33]            The plaintiff submits that it was reasonable for her to advance the MS causation issue up until a few weeks before trial, as her particular claim was supported by medical science, her physicians, and the law in British Columbia. 

[34]            At a pre-trial settlement conference on September 27, 2007, Mr. Justice Halfyard commented that the defendants’ defenses on the MS causation issue were strong and it would be difficult for the plaintiff to prove this allegation on a balance of probabilities. 

[35]            The plaintiff argues that it was unreasonable to accept the offers to settle after the settlement conference because it would have had serious cost implications for the plaintiff, ultimately leaving her with no compensation and in a deficit position, notwithstanding the admitted negligence of the defendants.  Thus, the plaintiff submits, at no time was it reasonable for her to accept the offers to settle.

[36]            The trial commenced on October 14, 2007. 

[37]            The plaintiff appears to have initiated the investigation into her injuries and their relationship to her MS around November 16, 2006, which is the date of Ms. Jacobs’ first appointment with Dr. Devonshire.  However, any serious evaluation into this claim occurred much later; all reports relating to the plaintiff’s MS were dated July 2007 (Devonshire report) and August 2007 (Rathbone, Freeman, and Bateman reports), with the requests for these reports dated between two and four months prior to their receipt.  The majority of Ms. Jacobs’ appointments related to these reports took place in the late spring and early summer of 2007. 

[38]            I find it difficult to accept Ms. Jacobs’ argument that it was unreasonable at essentially all times to accept the offers because she expected to succeed on the MS causation issue, given that she ultimately abandoned the argument.  At some point, the medical and legal research done by counsel should have suggested that the factual and scientific evidence linking Ms. Jacobs’ injuries and her MS were not sufficient to bring to trial.  As Mr. Justice Hall noted at para. 16 of Catalyst Paper Corporation v. Companhia de Navegação Norsul, 2009 BCCA 16, [2009] B.C.J. No. 52:

[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.

[39]            I accept the defendants’ submission that at some point before the settlement conference, neither the factual nor the scientific evidence supported the MS causation issue allegation.  Knowing this, plaintiff’s counsel took the gamble anyway.

[40]            Taking into consideration when the statement of claim was amended to include the MS causation issue, and the plaintiff’s receipt of her experts reports, I am satisfied that the plaintiff should have been able to evaluate her claim by August 15, 2007.  At this point, the MS causation issue should have been abandoned, and the McLaughlin and Meehan offers ought reasonably to have been accepted.

[41]            The plaintiff further submits that accepting the two offers which exceeded the judgment in this case would have saved neither time nor money, as the case against Ms. Moyer would have commenced in any event, and this court would have been required to hear all the evidence related to the three accidents. 

[42]            There are two difficulties with this submission.  First, the injuries sustained in the accidents were discrete, thus, a claim against Ms. Moyer would not have required any evidence pertaining to the accidents involving Ms. McLaughlin and Ms. Meehan.  Second, there are multiple purposes for assessing offers to settle in the award or deprivation of costs under Rule 37B, only one of which is indemnification.

Rule 37B(6)(b):  Relationship Between the Terms of 
Settlement Offered and the Final Judgment of the Court

[43]            Subrule 37B(6)(b) could be used to assess, among other things, whether an offer is strategic (MacKinlay v. MacKinlay Estate, 2008 BCSC 1570, 44 E.T.R. (3d) 48) or confers a significant benefit aside from costs:  B.C.S.P.C.A., at para. 34. 

[44]            The plaintiff submits that this Court should look at the difference between the global amount offered by the defendants and the global damages awarded by this Court and hold that the amount is insignificant.  However, the offers were not made globally. 

[45]            I find that the differences between the offers to settle and the awards of both defendants are significant.  The plaintiff recovered approximately 60% of the amount on offer by the defendant McLaughlin and precisely 60% of the amount on offer by the defendant Meehan. 

Rule 37B(6)(d):  Any Other Factor the Court Considers Appropriate

[46]            The defendants argue that the old Rule 37(24) and the plaintiff’s unreasonableness should be considered.

[47]            First, the defendants point out that they had no ability to structure offers with regard to the current rule, as they were made two years before it came into effect.  The issue of the application of Rule 37B in the context of settlement offers made prior to its enactment was considered by Mr. Justice Macaulay in Cowichan Bay, who stated the following at para. 12 of his oral judgment:

[12]      Finally, I take into account that at the time the offer was made in this case, the parties then reasonably expected that the rule in its then form would govern the consequences of the offer.  Accordingly, there is no question that the plaintiffs have had notice of the potential consequences throughout the proceedings.

[48]            I agree with the defendants that there was an expectation at the time the offers were made that success on the part of the defendants would inevitably give rise to an award of costs.  This factor will diminish in significance over time, but so long as there is litigation involving offers to settle under the former rule, the consequences under that regime are factors to consider.

[49]            The defendants also argue that the court should impose a penalty on Ms. Jacobs.  The plaintiff caused a great deal of unnecessary costs and resources, which were expended by both sides in this litigation.  In particular, the defendants prepared for a 30-day trial, and then had to modify this preparation after the plaintiff abandoned the MS causation issue on the first day of trial.  This, alone, added significant costs to the defendants. 

[50]            The purposes of Rule 37B, to promote settlement, prevent unnecessary claims, and deter poor conduct, will lose its efficacy if a reasonable party is denied relief after attempting to resolve the case by settlement.

 

More from BCSC on Rule 37B and ICBC Claims

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Reasons for judgement were released today (Lumanian v. Sadler) by the BC Supreme Court giving further consideration to Rule 37B in an ICBC claim.
In this case ICBC made a settlement offer before trial.  The Plaintiff proceeded to trial and ultimately received judgement below ICBC’s formal offer.  In an application for costs the court refused to award ICBC costs or double costs but did deprive the Plaintiff of costs from the date of the offer onward.
The court’s key reasons are set out below.

Costs

[17]            ICBC presented a formal offer to settle on May 23, 2008, in the amount of $110,000 “after taking into account Part 7 benefits paid or payable,” and any advances, plus costs and taxable disbursements.  There is no disagreement that the plaintiff should get 75% of her costs up to May 23, 2008. 

[18]            The plaintiff submits she should have 75% of her costs to the end of trial; or in the alternative, that each party should bear its own costs after the date of the offer.  The defendant seeks double costs for all steps in the proceeding after May 23, 2008.

[19]            There is no dispute that the offer was a valid offer to settle within the terms of Rule 37, notwithstanding an issue that I will address below.

[20]            The relevant subsections of Rule 37B for the purposes of this application are:

(4)        The court may consider an offer to settle when exercising the court’s discretion in relation to costs.

(5)        In a proceeding in which an offer to settle has been made, the court may do one or both of the following:

(a)        deprive a party, in whole or in part, of costs to which the party would otherwise be entitled in respect of the steps taken in the proceeding after the date of delivery of the offer to settle;

(b)        award double costs of all or some of the steps taken in the proceeding after the date of delivery of the offer to settle.

(6)        In making an order under subrule (5), the court may consider the following:

(a)        whether the offer to settle was one that ought reasonably to have been accepted, either on the date that the offer to settle was delivered or on any later date;

(b)        the relationship between the terms of settlement offered and the final judgment of the court;

(c)        the relative financial circumstances of the parties;

(d)        any other factor the court considers appropriate.

[21]            Recent decisions on this new Rule are clear that the court’s discretion is now unfettered, but that the underlying purpose of the old rule – encouraging settlement through the use of costs — remains an important objective.

[22]            The amount the plaintiff will receive as a result of the judgment is approximately $81,000 before deductions.  The settlement offer was $110,000 plus costs.  ICBC submits that the result at trial was a significant win for them, and that the plaintiff, having rejected their reasonable offer, assumed the risk of cost ramifications and should pay double costs as a result.

Ought the offer to have been accepted?/Relationship to final judgment

[23]            Although Rule 37B(5)(a) and (b) separate the issues of “reasonable acceptance” and “relationship between the offer and the final judgment,” in the circumstances here, where the plaintiff received a substantial award but one which is less than the offer, it is in my view appropriate to consider these factors together.  The offer was for $110,000; the award at trial will be between $70,000 and $80,000, depending on deductions, and the plaintiff retains the potential to claim Part 7 benefits up to approximately $138,000.

[24]            Argument on this issue proceeded on the basis that the plaintiff would have been required, if she had accepted the offer, to sign a release of her Part 7 benefits.  I requested further submissions on that aspect of the argument, based on the decision of the Court of Appeal in Anderson v. Routbard, 2007 BCCA 193, 239 B.C.A.C. 98, in which a similarly worded offer was held to be clear and unambiguous, and was deliberately drafted to ensure that full access to Part 7 benefits remained unimpaired by acceptance of the offer.  Although the legislation makes no such differentiation, the Court of Appeal decided in that case that the use of the word “payable” in these offers means only those Part 7 claims that have been submitted and are outstanding at the time of the offer, leaving the rest of the potential Part 7 fund available to be claimed.

[25]            Counsel for ICBC now acknowledges that she was in error in submitting that the plaintiff would have been required to sign a release before accepting the offer, although she says it is common practice to settle both claims at once. 

[26]            Counsel for the plaintiff says it was clear in all negotiations concerning this matter that ICBC would require a release of both the tort and Part 7 claims if the offer were accepted.  He does not go on to say that the offer itself is unclear in these circumstances, but says the issue of the reasonableness of rejecting the offer should be analyzed on the basis that such a release would have been required.  Counsel for ICBC disputes plaintiff’s counsel’s assertion that there was an understanding that acceptance of the offer was predicated on a release of Part 7 claims.

[27]            Although in law the plaintiff would not have been required to sign a release of Part 7 benefits as a term of accepting the offer, it appears from the positions of both counsel during oral argument and even from the subsequent written submissions that in the course of settlement negotiations, they both understood that a release would have been required.  To resolve the dispute between counsel as to their respective understandings of whether the provision of a release would also have been a condition of the acceptance of the formal offer to settle would require counsel to provide additional information about their discussions and the settlement process.  It might even require counsel to give evidence.  This application for costs risks being complicated unproductively by such an examination, which would only add expense to the proceeding.   

[28]            Since I have found that the amount of future care costs is low, I will proceed on the basis that the issue of Part 7 benefits would not be conclusive either way in the assessment of whether or not the offer ought reasonably to have been accepted.

[29]            ICBC says the plaintiff was unreasonable in rejecting the offer.  She was obviously able to quantify her claim by the time the offer came in, as she submitted her own offer to settle for $185,000 the day before.  ICBC then put in its offer, and also participated in mediation which the plaintiff instigated. 

[30]            Plaintiff’s counsel says he had medical and other expert reports backing up his client’s position, and to accept the offer would have meant ignoring all their evidence.  Counsel for ICBC responds quite properly that a consideration of an offer does not mean that a party must ignore its own evidence; instead it requires an assessment of whether the offer is reasonable and this requires a realistic look at the whole case.    

[31]            A significant difference between the plaintiff’s position at trial and the amount of the award is in the area of future care costs, and this is reflected in the disparity between the plaintiff’s own offer and the result at trial.  A trial judge is required to look into a crystal ball and assess future care costs for the tort claim based on the evidence adduced at trial, and then to look even further and assess future contractual Part 7 claims that might be made by the plaintiff insured against its insurer for the purpose of deductions from the tort award.  This is an exercise fraught with uncertainty and potential unfairness, especially for a plaintiff like Ms. Lumanlan, whose future care costs are not clear and are contingent on whether and to what extent she develops arthritis, whether she moves into a house, whether she assumes care of her son (which she now deposes she is attempting to do), and what career she decides to pursue.  She is young; her future plans are uncertain.  Prior to the accident she had two good hands.  Now she does not.

[32]            As counsel for the plaintiff pointed out, this type of claim for future care, unlike one where no future care is required, or one where significant future care is required, is difficult to assess. 

[33]            The court in this tort action was circumscribed by the lack of evidence, and by its duty to be fair to both the plaintiff and the defendant, which prevents speculation unsupported by evidence.  In terms of her relationship with her own insurer, however, within the Part 7 context, the plaintiff may well have to make claims in the future under her insurance contract as she matures and gains perspective on her limitations, especially if the court is shown, by the crystallization of events in the future, to have been unfairly limited by the lack of evidence at the tort trial.

[34]            The result at trial was not dismissal of the action; Ms. Lumanlan obtained a not insignificant award.  She suffered extensive damage to her hand.  She was uncomplaining and not particularly adept at putting forth her evidence, and these limitations did not accrue to her advantage, but she did have a serious claim to advance.

[35]            As well, an assessment of non-pecuniary damages, as every trial judge knows, is a difficult and somewhat subjective task, as hard as one tries to be consistent with other judgments.  A jury verdict can, of course, be even more disparate when compared to assessments by judges.  In my view, one should be cautious, with the advantage of hindsight, in equating having guessed wrongly with having been unreasonable in rejecting an offer, especially when the plaintiff receives a substantial award at trial.

[36]            In Bailey v. Jang, 2008 BCSC 1372, the plaintiff’s entire claim was dismissed by a jury.  Nevertheless, the trial judge held that he was unable to say she had been unreasonable in rejecting the offer.  Rule 37B is worded in the affirmative.  It is suggested that the court may consider “whether the offer … ought reasonably to have been accepted,” not whether the plaintiff was unreasonable in rejecting it.  Nevertheless, given the broad discretion now existing in the section, I am of the view that the important conclusion to be taken from that decision is that this consideration is not one to be done with “hindsight analysis.”

[37]            The trial judge in that case held that dismissal of the claim was not determinative of the reasonableness of rejection of the offer.  Conversely, however, in my view, the size of the award at trial may offer some assistance in assessing the reasonableness of the plaintiff’s position at the time the offer was made.  Here, the award was significant, although not as high as the offer. 

[38]            Bearing in mind the above considerations and the relationship between the offer and the eventual award at trial, I am unable to say in all these circumstances that the plaintiff, who did not have the benefit of hindsight, ought reasonably to have accepted the offer at the time it was made and prior to the commencement of the trial.

Financial circumstances

[39]            ICBC submits that the relative financial circumstances of the parties should be at best a neutral factor.  Although they defended the action, it is really the defendant whose finances are relevant.  They will pursue their expenses against him.

[40]            The plaintiff submits that ICBC was the party who conducted the litigation, and they did so because the defendant breached his insurance by driving dangerously and injuring the plaintiff.

[41]            The fact that the defendant will have to pay ICBC back because he breached his contract through conduct which also resulted in the plaintiff’s injury should not be used to her detriment.  However, I agree with counsel for the Third Party that it is not reasonable to compare the plaintiff’s financial circumstances to those of ICBC, even where ICBC has entered the action as a Third Party.

[42]            The plaintiff deposes that she continues to make the salary she made at trial, that is $8.00 an hour, and she has moved out of her parents’ house to live with a friend temporarily while she asserts custody/access rights to her son, who is now cared for by her mother.

[43]            The defendant, 26, is presently unemployed but intends to look for work as a heavy machine operator, which has been his employment since he was 16, when he gets his licence back later in 2009.

[44]            There is not a sufficient imbalance in the parties’ relative financial circumstances to make this a significant factor in the present analysis.

Other factors

[45]            The plaintiff has presented a draft bill of costs to show what a substantial penalty she should incur if forced to pay double costs to the defendant for steps taken after the offer to settle.  It would indeed substantially deplete her award. 

[46]            In Bailey v. Jang, supra, double costs were awarded to the defendant under the new rule, even though the judge held that the offer was not rejected unreasonably, on the basis that to fail to do so would ignore the deterrent effect of the rule.  There, the defendants had made an offer to settle of $35,000 and the jury dismissed the plaintiff’s claim entirely. 

[47]            Obviously, in the case at bar, the plaintiff’s claim was not dismissed.  She received an award that is reasonably close to the offer, until reduced by contributory negligence.  Under Rule 37(24)(b), which was in effect when the offer was presented, the defendants would have been entitled to double costs only if the action had been dismissed.

[48]            ICBC argues that the plaintiff’s failure to acknowledge any contributory negligence was a barrier to settlement.  The plaintiff did indeed pursue that position at trial.

[49]            Counsel for the plaintiff takes the position that the mistake regarding the requirement for a release, which he contends was mutual and which counsel for ICBC contends was not, is another factor to consider.  It is unfortunate that this dispute has arisen and remains unresolved, but as I stated earlier, the ultimate significance of future care claims is small.

Result on costs

[50]            Whether or not the plaintiff was under the impression that she would have had to release future Part 7 benefits to accept the offer, it is apparent that she would have to establish entitlement to some $30,000 to $40,000 worth of Part 7 benefits to attain the amount of the offer, and she would, of course, have received taxable costs and disbursements.  This is all without regard to her own legal costs, which obviously increased through the trial.

[51]            Nevertheless, I have concluded that the plaintiff’s decision not to accept the offer was reasonable at the time, and although the award at trial was less than the offer, it was still substantial. 

[52]            Although the use of hindsight is not appropriate in the consideration of the reasonableness of accepting/rejecting the offer, an overall analysis of all of the factors under Rule 37B must be done with the advantage of hindsight, also keeping in mind the court’s unfettered discretion.  From that perspective, the plaintiff would have been better off if she had accepted the offer.  Her position on some aspects of the trial, such as contributory negligence, appears to have been a stumbling block to settlement. 

[53]            There should be some consequence in costs as a result, but in my view, it would be unfair and excessively penal to award double costs against the plaintiff, especially where these costs would not have been available under the rule in place when the offer was presented.  Given the significant injury to the plaintiff, which was caused by the defendant’s foolish and reckless behaviour, and the effect on the award of a further reduction for costs, even if not doubled, and taking into account all of the above considerations, in my view it would not be fair or just to require the plaintiff to pay ICBC’s costs after the date of the offer.

[54]            In the result, it is appropriate to give the plaintiff 75% of her costs up to the date of the offer and to deprive her of her costs thereafter.  Each party will bear their own costs after the date of the offer.

This is the second ICBC Injury Claim that I am aware of that went to trial where ICBC beat their formal offer but were not awarded costs under Rule 37B.  It seems that a middle of the road approach is being taken in some circumstances where the ‘punishment’ purpose of Rule 37B is being fulfilled by simply denying the Plaintiff costs.  This may be a just result in cases where ICBC’s offer is not much greater than the amount awarded at trial and requiring a plaintiff to pay costs would be prohibitive in relation to the judgement.  Interestingly the court here seems to have considered the defendants ‘foolish and reckless behaviour’ in causing the collision as a factor in determining costs consequences.
The judgements applying Rule 37B to ICBC Injury Claims keep coming and I will keep posting these as they come to my attention.

Even More Analysis of Rule 37B

Written by admin on . Posted in Civil Procedure, Uncategorized. 70 Comments on Even More Analysis of Rule 37B

Well the cases seem to be coming in at a good pace and hopefully Rule 37B will start seeing some consistency in its interpretation by the BC Supreme Court.  
Today another case was released by the BC Supreme Court applying and interpreting this rule.  In this case the Plaintiff was involved in a motor vehicle collision and sued for damages.  The Defendants made an offer to settle for $16,000 plus costs under the old Rule 37.  The Plaintiff rejected the offer, went to trial and was awarded just over $12,000.  Madam Justice Morrison made the following findings about the costs consequences flowing from these facts:

Policy Reasons for the Offer to Settle Rule

[42]            I turn first to the policy reasons behind the new rule.

[43]            The Court of Appeal commented on the purpose of the former Rule 37 in several cases.  Although Rule 37 was repealed and replaced with Rule 37B, the underlying rationale of Rule 37 is, in my opinion, still informative.  Rule 37 was designed to encourage settlement.  In MacKenzie v. Brooks, 1999 BCCA 623, 130 B.C.A.C. 95, the court made the following comment on the purpose of Rule 37:

[21]      Rule 37 is clearly designed to encourage the early settlement of actions. It does so by rewarding the party who makes an early and reasonable settlement offer, and by penalizing the party who declines to accept such an offer. The reward or penalty takes the form of costs (in some cases, double costs) from the date the offer is made. The significant role which costs now play in the litigation process operates as a powerful incentive to parties to make early offers of settlement under the Rule and to accept reasonable offers.

[44]            In Skidmore v. Blackmore (1995), 2 B.C.L.R. (3d) 201, 122 D.L.R. (4th) 330 (C.A.), the Court of Appeal commented on an older version of Rule 37 and Rule 57(9) (costs follow the event) at para. 37:

[37]      These Rules are designed to discourage frivolous actions and defences and to encourage the parties to make reasonable offers to settle as early as possible. Thus, party and party costs serve many functions. They partially indemnify the successful litigant, deter frivolous actions and defences, encourage both parties to deliver reasonable offers to settle, and discourage improper or unnecessary steps in the litigation.

[45]            Rule 37B is still designed to discourage frivolous actions and encourage parties to make and accept reasonable offers.  In Alan Seckel & James MacInnis, B.C. Supreme Court Rules Annotated 2009 (Toronto: Thomson, 2008), the authors commented on the introduction of Rule 37B.  They say that the new rule was necessary because the old rules had become dysfunctional, largely because of the lack of flexibility.  They describe the new rule as a welcome improvement.  They add at 373 that “the difficulty with Rule 37B will invariably be its lack of direction for parties and trial judges as to how to effect fairness in the face of the same problems which made interpretation and application of Rules 37 and 37A so difficult.”

[46]            I agree in this respect with the following observation by Hinkson J. in Bailey v. Jang, 2008 BCSC 1372, a personal injury case heard before a jury, at paras. 17-18:

[17]      In Mackenzie v. Brooks et al, 1999 BCCA 623 (sub nom. Mackenzie v. Brooks et al) 130 B.C.A.C. 95 at p. 21, the British Columbia Court of Appeal described the predecessor rules to Rule 37B as designed to encourage settlement by, among other things, “penalizing the party who declines to accept” an offer to settle.

[18]      While Rule 37B has brought about the reversion from a strict code to a reliance on judicial discretion with respect to costs, the use of costs to encourage or to deter certain types of conduct remains, albeit based upon the factors set out in subrule 37B(6).

The Factors under Rule 37B

[47]            I turn now to the factors under Rule 37B.

[48]            In my opinion, given the fact that the offer was made three years and almost four months after the date of the accident and well over a year after the action was commenced, the plaintiff should have known what medical information was available to him.  I agree with the defendants that this is a case where Mr. Leus was working full time from the date of the accident.  It is true that in Fast Track Litigation it is not cost efficient to end up with several medical legal reports from one doctor.  However, Mr. Leus did not have any information from Dr. Hodgeson, informal or otherwise, at the time of the offer.

[49]            As the defendants point out, the plaintiff could have contacted Dr. Hodgeson earlier.  By the time the report was requested, it was already 60 days before the trial so the rule requiring notice could not have been met in any event.  The further requests that were made were well within the 60 days.

[50]            The offer was made in timely manner and at a time when the plaintiff should have known his case.  It was an offer that ought reasonably to have been accepted at the date of the offer.

[51]            While I have considered the argument that the defendants, because of the participation of ICBC, can take advantage of making an early, low offer, in my opinion there is no such unfairness demonstrated.

[52]            In this case, $16,000 is a more favourable amount to the plaintiff than the $12,748.48 ordered by the court.  This factor favours the plaintiff being penalized for not accepting an award 20 percent greater than the judgment.  The fact that the numbers are low does not change the analysis.

[53]            The plaintiff argues that he should get preference under this factor because ICBC has significantly more resources to absorb the costs of litigation than he does and, as a result, ICBC is in a unique position to make early offers to settle.

[54]            The defendants argue that ICBC is not a party and the legal principles that developed under the old rule should still apply.  It would not be fair, they argue, if they were forced to pay the entire judgment, disbursements, and their own costs after they made a reasonable formal offer that was more than the final award.

[55]            Different views have been expressed by members of the court on the question of the relevance of fact that the defendants have insurance.

[56]            Mr. Justice Hinkson made the following comments in Bailey at paras. 32-34:

[32]      Second, [the plaintiff] places her financial position against that of ICBC, as opposed to that of the defendants.

[33]      While I accept that it is likely that most drivers in British Columbia are insured by ICBC, the wording of subrule 37B does not invite consideration of a defendant’s insurance coverage.  There may be good policy reasons for this.  Insurance coverage limits with ICBC are not universal, and will vary from insured to insured.  Certain activities may result in a breach of an individual’s insurance coverage, or the defence of an action under a reservation of rights by ICBC.  A plaintiff will not and likely should not be privy to such matters of insurance coverage between a defendant and ICBC.

[34]      The contest in this case was between the plaintiff and the defendants, and the insurance benefits available to the defendants do not, in my view, fall within the rubric of their financial circumstances, any more than any collateral benefit entitlement that a plaintiff may have would affect that person’s financial circumstances for the purpose of determining their loss.

[57]            Mr. Justice Butler in Arnold said that the mere fact that the defendant is insured is not enough to deprive the defendant of costs at para. 23:

[23]      Mr. Arnold has asked that I take into account the relative financial circumstances of the parties when exercising my discretion.  I find that I am unable to do so.  First, Mr. Arnold has provided no evidence regarding his financial circumstances other than the assertion that the likely result of a costs award in favour of the defendant will leave him with no recovery from the action.  Rule 37B gives this Court greater discretion than it had under the old Rule 37.  It specifically allows the Court to consider the relative financial circumstances of the parties.  However, there will always be a substantial difference between the relative financial circumstances of the usual personal injury plaintiff and the defendant’s motor vehicle insurer.  That difference, in and of itself, is not enough for the Court to exercise its discretion to deprive the defendant of costs.  If that was the intent of the new rule, it would have been more clearly articulated.

[58]            Conversely, Madam Justice Boyd in Radke v. Parry, 2008 BCSC 1397, did consider the fact that the defendants were insured by ICBC at para. 42, a case where costs were awarded against the defendants:

[42]      In the case at bar, on a review of the Rule and the authorities, I conclude that the plaintiff is indeed entitled to double costs from the date of the August 12th offer of settlement forward…It is also clear that there is a substantial disparity in financial circumstances between the parties.  The defendants, represented by ICBC, had substantially greater resources to finance a trial than the individual plaintiff.  Had the defendants accepted the plaintiff’s initial reasonable offer, the plaintiff would not have had to incur the significant costs associated with nearly two weeks of trial.

[59]            Even if there may be cases in which the fact that a party is insured may be relevant to that party’s financial circumstances and hence the party’s ability to pay a costs award, this is not one of those cases.  Here, there is very little information about the actual financial circumstances of the plaintiff, Mr. Leus.  Though Mr. Leus says he has a mortgage and a family to support, no details are provided as to his actual income and expenses.   Nor is there much information about the actual financial information of the defendants, John Laidman, Marjorie Laidman, and Ference Sandor.  The Court cannot draw permissible inferences from the very

[60]            The defendants argue that Rule 57(10) should be considered whereas the plaintiff says that the Court is only being asked to decide entitlement to costs and not quantum, so Rule 57(10) is not applicable.

[61]            Rule 57(10) says:

A plaintiff who recovers a sum within the jurisdiction of the Provincial Court under the Small Claims Act is not entitled to costs, other than disbursements, unless the court finds that there was sufficient reason for bringing the proceeding in the Supreme Court and so orders.

[62]            I am satisfied that Mr. Leus has shown that at the time his claim was initiated, there was a sufficient reason to bring the action in Supreme Court.  The amount he was claiming was close to the line; it was appropriate to use the discovery process to obtain evidence of the others involved in the accident:  Reimann v. Aziz, 2007 BCCA 448, 72 B.C.L.R. (4th) 1.

Conclusion

[63]            In conclusion, the purpose of Rule 37B is to encourage settlement and avoid frivolous use of court resources by imposing punitive cost sanctions.  In the present case, the defendants made a reasonable offer to settle that ought to have been accepted by the plaintiff.  The offer was 20 percent higher than the plaintiff’s final award.  Given the overarching purpose of Rule 37B, Mr. Leus should be denied his costs, including his disbursements of $7,500, from the date of the offer, because he failed to accept the offer to settle.

[64]            However, though the court could award the defendants single costs, I have decided it is not appropriate to do that in the particular circumstances of this case.  The decision depriving the plaintiff of his costs meets the objectives of the Rule.  I have considered, in particular, the size of the award, the fact that it was less than $4,000 lower than the offer, and the impact of this decision on what Mr. Leus will actually receive.