Tag: Rule 37B

The Old, The New and The Ugly – Costs Consequences Involving Rule 37 and Rule 37B

I’ve blogged about most if not all of the recent reported BC Supreme Court judgements applying the new Rule 37B and don’t intend to summarize a history of the rule here (for a history of the rule and to read my previous articles on Rule 37B cases simply use the search feature on this site and type Rule 37B).
Reasons for judgement were released today considering an interesting issue.  Rule 37B, once it came into force, repealed Rule 37.  In recognizing that a transition period was necessary the rule permitted costs consequences to flow from formal offers delivered under the old Rule 37 if those offers were made before July 2, 2008.  Today;s case decided what costs consequences should flow when an old Rule 37 offer is accepted after Rule 37B comes into effect.
In this case the Defendants made a formal offer in April, 2008 under the old Rule 37.  The Plaintiff accepted the offer in November of 2008, after Rule 37B took effect.  The parties could not agree on the costs consequences of the acceptance and application was brought to the BC Supreme Court.  The point of contention was who should be responsible for the costs incurred after delivery of the offer to the time of acceptance.  The court dealt with this issue delivering the following reasons:

[11]            Both parties advanced arguments that the court has discretion under Rule 37B to make an order regarding costs.  However, it is my opinion that the court has no discretion to make an order regarding costs in this matter.  Mr. Buttar accepted the offer put forth by the defendants, including the offer regarding costs, without reservation.  It is my view that Rule 37B does not confer a discretion on the court to set aside an agreement that has been entered into between the parties regarding costs.

[12]            The offer made by the defendants reads as follows:

TAKE NOTICE that the Defendants offer to settle this proceeding on the following terms:

1.         the sum of ONE HUNDRED THOUSAND DOLLARS ($100,000.00), less deductible benefits paid or payable pursuant to Part 7 of the Insurance (Vehicle) Regulation, and Section 83 of the Insurance (Vehicle) Act, R.S.B.C. 1996, c. 231, and less any advances paid to date; and,

2.         Costs to be taxed in accordance with Rule 37(22) and (37).

[13]            Although Rule 37 was repealed and replaced by Rule 37B, by incorporating the wording of Rule 37(22), the offer provided that the defendants would pay costs to the plaintiff to the date the offer was delivered and that, if the matter were to continue, the defendants would be entitled to their costs from the date of delivery.  Former Rule 37(22) provided that if an offer made by a defendant was accepted by a plaintiff, the plaintiff is entitled to costs to the day of the offer, and the defendant is entitled to costs from the date of the offer.

[14]            In this case, there has been no determination of any issues in this lawsuit.  Rather, Mr. Buttar accepted the offer to settle as presented by the defendants.

[15]            The letter of acceptance is unequivocal and states the following:

We confirm that there have been no advances under Tort or under Part 7 to our client.

We accept the Defendants’ Offer to Settle dated April 28, 2008.

I note that the Defendants’ Offer to Settle was made under the old Rule 37, but our acceptance of that offer is clearly under the new Rule 37B which does not provide a form for acceptance.  As such, out of an abundance of caution, I also enclose an Acceptance of Offer in Form 65A.

[16]            On this application, the parties argued the effects of Rule 37B(4),which provides that the award of costs is discretionary, and Rule 37B(5)(a), which provides that the court may do one or both of the following:  deprive a party, in whole or in part, to costs that would otherwise be entitled to and award double costs of all, or some, of the steps taken in litigation after the date of the delivery of the offer to settle.

[17]            I agree that subrules 37B(4) and (5) are permissive.  However, it is my view that the court has no discretion to consider costs in this matter because Mr. Buttar accepted an offer which contained a term as to when costs would be payable and to whom.

[18]            Accordingly, Mr. Buttar’s application is dismissed.  The defendants are entitled to the costs of this application.

How Can $125,000 really equal $0 in an ICBC Claim?

Costs consequences, that’s how.  If ICBC beats their formal offer at trial they can be awarded costs under Rule 37B.  These costs can sometimes exceed the amount of a judgement and reasons for judgement were released today by the BC Supreme Court demonstrating this principle.
Trials can be risky and expensive and to the victor go the spoils.  In today’s case the Plaintiff claimed she suffered a brain injury as a result of 2 collisions.  The Defendants collectively offered to settle the Plaintiff’s claims for $450,000.  The Plaintiff made a settlement offer of $1,500,000.  After a 41 day trial Mr. Justice Gropper of the BC Supreme Court rejected the brain injury claim and awarded damages of $125,349.  The Defendants brought an application to be awarded costs from the date of their respective formal offers and succeeded.  In reading the judgement it appears that these consequences are so significant that the Plaintiff may be left with $0 or perhaps even owe money to the Defendants after all the dust settles.  In addressing this reality the court held that such an outcome in and ofitself is not enough to extinguish the Defendant’s entitlement to costs.  Specifically, Mr. Justice Gropper reasoned as follows:
As stated, the plaintiff received judgment.  The defendants’ costs and disbursements from the time of the offers may exceed the judgment.  This is an appropriate factor to consider in determining the appropriate order for costs.  It is not sufficient, in my view, to deny the defendants their costs arising from the offers to settle.  If the aim of the rule is to encourage reasonable settlements, denying the defendants their costs in the circumstance does not meet that aim.  It may be a reason to deny the defendants double costs, but the defendants have not sought double costs in this matter.  While it is an important factor to consider, it is not sufficient, in and of itself, to extinguish defendants’ entitlement to the costs.
Cases such as this which illustrate the potential costs consequences of an unsuccessful ICBC claim need to be reviewed when considering claim settlement.  Trials come with risk and settlement offers have to be weighed against this risk.  Reasons for judgement don’t always reflect who the real winner is.  In ICBC claims the real winner is often the party that beats their formal settlement offer and this is not always revealed in judgements.  
In addition to illustrating the significant costs consequences which parties can be exposed to in the BC Supreme Court, this case does a good job in discussing Rule 37B.   Mr. Justice Gropper summarized the authorities to date applying Rule 37B as follows:

[18]            The jurisprudence is developing in this court under Rule 37B(5) in regard to the effect of offers to settle on costs.  The following principles have been stated:

1.         “…Rule 37B is permissive in nature and provides the Court with a broad discretion to award double costs”: Radke v. Parry, 2008 BCSC 1397 at ¶37.

2.         “…there are important differences between Rule 37B and the predecessor rules, Rule 37 and Rule 37A.  Notwithstanding the differences … the underlying legislative policy remains the same.  The goal has been and remains to encourage the early settlement of disputes ‘… by rewarding the party who makes an early and reasonable settlement offer, and by penalizing the party who declines to accept such an offer’ (see MacKenzie v. Brooks, 1999 BCCA 623, 130 BCAC 95…)”:Radke ¶38.

3.         “Subrule (5) is permissive.  It empowers the court to make either type of order mentioned in the subrule.  By necessary implication, it contemplates that the court may make an order that denies one of the two forms of relief set out in the subrule”: BCSPCA v. Baker, 2008 BCSC 947at ¶ 15.

4.         “[Subrule (5)] does not specifically state that it is possible for the court to order costs to a defendant where an offer to settle was in an amount greater than the judgment.  Nevertheless, that is implied in the rule.  If the court can deprive a party of costs or order double costs, it must also be able to order costs, the intermediate step between those two extremes”: Arnold v. Cartwright Estate, 2008 BCSC 1575 at ¶15.

5.         “One of the goals of Rule 37B … is to promote settlements 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.  That goal would be frustrated if Rule 37B(5) did not permit the court the option of awarding costs of all or some of the steps taken in a proceeding after the date of delivery of an offer to settle”: Arnold at ¶16.

He then went on to decide that the Defendants ought to be awarded their costs in the present case and came to the following conclusion:

[35]            In all of the circumstances, applying the factors addressed by the Rules and the parties, I find that it is reasonable that the defendants recover their taxable costs and disbursements in this action.

[36]            I therefore order that the defendants Paul be awarded their taxable costs and disbursements from June 8, 2005 onwards.  The plaintiff is entitled to her taxable costs and disbursements in the Paul action up to June 8, 2005 only.

[37]            The defendants Brandy are awarded their taxable costs and disbursements from October 26, 2006 onwards and the plaintiff is entitled to recover her taxable costs and disbursements in the Brandy action up until October 26, 2006.

What interested me most in these reasons was the judge’s refusal to look at the fact that the Defendant was insured with ICBC when weighing the relative financial circumstances of the parties under Rule 37B(6).  The courts are currently split on whether this is a relevant factor and once the BC Courts come up with a consistent analysis of this topic it will be easier for ICBC claims lawyers to better predict the costs consequences for their clients following trial.  Hopefully the BC Court of Appeal has an opportunity to shed some light on this subject in the near future.

More Judicial Interpretation of Rule 37B

I have blogged many times about the relatively new BC Supreme Court Rule 37B (the rule dealing with formal settlement offers).  You can search the archives of this blog to find my previous entries.
Useful reasons were released today by the BC Supreme Court providing further clarity and development of this rule.  
The key facts are as follows:
1.  The Defendant delivered a formal offer under the old Rule 37 on August 27, 2007 (rule 37B was not in force at the time).  That offer complied with Rule 37.
2.  The offer was for a monetary amount within the Small Claims Court jurisdiction.
3.  On August 21, 2007 the Plaintiff accepted the offer.
4.  The Plaintiff and the Defendant could not agree to the costs consequences of the acceptance and brought application to court.
5.  The applicaiton was heard after Rule 37B came into force.
One of the issues that was decided was whether under these facts Rule 37B applied or should the court consider the costs consequences under the old Rule 37?  Madam Justice Garson held that Rule 37B applied because:

[10]            Whether R. 37B applies to the Offer in question is determined by the definition of “offer to settle” in R. 37B(1).  Rule 37B(1) provides three alternative situations that fall within the meaning of “offer to settle.”  The situation applicable to the case at hand is R. 37B(1)(a) and thus paras. (b) and (c) are not applicable.

[11]            Rule 37B(1)(a) requires three criteria to be met to satisfy the definition of “offer to settle”:  first, the offer to settle must have been made and delivered before July 2, 2008; second, the offer to settle must have been made under R. 37 as that rule read on the date of the offer to settle; and third, there must have been no order made under R. 37 in relation to the offer to settle.

[12]            Applying R. 37B(1)(a) to the facts in this case, I note, the Offer was drafted on August 28, 2007, and delivered on August 29, 2007.  This is prior to July 2, 2008; therefore the first criterion is met.  The Offer was made pursuant to R. 37 as that rule read on August 28, 2007, and thus the second criterion is met.  Lastly, no order was made under R. 37 in relation to the Offer.  Thus, R. 37B applies to the offer made by the defendants and the new regime applies.

[13]            In Bailey v. Jang, 2008 BCSC 1372 at para. 10, Hinkson J. held that R. 37B “… applies to offers to settle made both before and after July 1, 2008 where no order as to costs has been made.”  (See also Brewster v. Rominn Laboratories Inc., 2008 BCSC 1463 at para. 13.)

[14]            In this case the defendants argue that because the offer was made and accepted pursuant to R. 37, R. 37 should continue to apply.  I cannot accede to that argument in the face of clear legislation to the contrary as well as the two authorities of this Court just mentioned.

Having decided that Rule 37B applies to these facts (even though the offer was made and accepted before Rule 37B came into force) The court went on to award the Plaintiff her ‘costs’ despite the fact that the offer was within the small claims courts jurisdiction.  In doing so the court provided the following reasons:

[19]            The defendants contend that the plaintiff is not entitled to her costs of the entire proceeding because the settlement is within the monetary jurisdiction of the Provincial Court.  Old R. 37(37) provided that a plaintiff was not entitled to costs if the offer accepted was within the jurisdiction of the Provincial Court under the Small Claims Act and could have been appropriately brought in the Provincial Court.  Rule 37(37) was not carried forward to R. 37B.

[20]            I turn back to R. 37B(5).

Cost options

37B (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.

[21]            On the basis, that I have already decided that the words “after the date of delivery of the offer to settle” means costs incurred from and after the day following delivery, subsection (b) is inapplicable because no costs were incurred by either party after delivery of the offer to settle.

[22]            The “Cost options” as it is put in R. 37B are prescribed by the rule.  In this case the defendants argued that the plaintiff should be disentitled to all her costs because the case was one that ought to have been brought within the monetary jurisdiction of the Small Claims Court.  Even if that is one of the factors that could be taken into account under ss. (6), ss. (5) of R. 37B does not permit a court the option of depriving a party (in this case the plaintiff) of her costs before the date of delivery of the offer.

[23]            The rule only permits the Court to deprive a party, “in whole or in part” of her costs to which she “…would otherwise be entitled….after the date of delivery of the offer to settle;” [emphasis added].

[24]            Accordingly, there is no basis in R. 37B on which this Court could deprive the plaintiff of costs incurred before the date of the delivery of an offer regardless of whether the ultimate settlement is within the monetary jurisdiction of the Provincial Court.

Application of Rule 57(10)

[25]            Rule 57(10) of the Supreme Court Rules states as follows:

(10)        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.

[26]            The purpose of R. 57(10) is to encourage actions to be brought and continued in Provincial Court when there is no sufficient reason to expect that the claim might give rise to damages in excess of the monetary jurisdiction of that Court.  If the plaintiff proceeds in the Supreme Court, and the resulting monetary judgment falls within the jurisdictional limits of the Provincial Court, the plaintiff must justify his choice of forum or be denied costs other than disbursements.

[27]            However, as the action did not actually proceed to trial, R. 57(10) has no application to the case at hand.

As an ICBC claims lawyer I welcome this judgement and all other judgements giving clarity to Rule 37B.  The more consistency this rule receives in its interpretation from the BC Courts the better position all ICBC claims lawyers will be in advising clients about the potential costs consequences of accepting or rejecting formal ICBC settlement offers.  I intend to continue to blog about this rule as it receives further judicial interpretation.

More Judicial Consideration of Rule 37B

Reasons for judgement were released today by Mr. Justice Butler providing more commentary on the new BC Rule 37B.  (search this site if you wish to read my numerous previous posts on Rule 37B precedents).
In this case the Plaintiff witnessed a severe motor vehicle collision.  He was not involved in the crash nor did he know any of the people involved.   He claimed that he suffered from Post Traumatic Stress Disorder (PTSD) and sued for damages for nervous shock.  The claim succeeded and damages in the amount of $11,100 were awarded.
That in and of itself was a first in BC as far as I am aware as previous successful nervous shock cases involved circumstances where the allegedly injured party knew or had family connections to the victims of the collision.
The Defendants delivered a formal offer of settlement which was greater than the judgement amount.  The issue now was, what, if any, costs consequences should there be under the new Rule 37B.
In awarding the Plaintiff costs up to the point that the offer was made an in awarding the defendant costs from then onwards the court made the following comments:
[16]            One of the goals of Rule 37B, like the former Rule 37, is to promote settlements 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.  That goal would be frustrated if Rule 37B(5) did not permit the court the option of awarding costs of all or some of the steps taken in a proceeding after the date of delivery of an offer to settle….

[20]            While the case was novel for the reason noted above, it was not particularly complex.  The foreseeability, proximity and public policy questions have been the subject of other decisions of both this court and the Court of Appeal.  Ultimately, my decision rested upon the evidence of the three psychiatrists regarding causation.  This should not have surprised the parties, as all three psychiatrists concluded that Mr. Arnold suffered Post Traumatic Stress Disorder (“PTSD”) as a result of the nervous shock he experienced at the scene of the motor vehicle accident.  The real issue was whether the psychiatric difficulties he encountered approximately a year after the accident were caused by the motor vehicle accident induced PTSD.

[21]            Mr. Arnold received supportive medical legal opinions from two treating psychiatrists.  However, the report of Dr. Smith concluded that Mr. Arnold’s subsequent disability was not related to the PTSD or the motor vehicle accident.  Once Mr. Arnold was in receipt of that report, he had all of the information he required to properly consider the offer to settle.  Within a reasonable period after receipt of the report and the offer to settle, the offer to settle was one that ought reasonably to have been accepted.  This is the most significant consideration for me in deciding how to exercise my discretion in this case.

[22]            A reasonable period of time to consider an offer to settle is seven days:  Bailey v. Jang, 2008 BCSC 1372.  I do not know when Dr. Smith’s medical legal report was delivered to Mr. Arnold.  If it was delivered prior to the delivery of the offer to settle, then the offer to settle is one that ought reasonably to have been accepted seven days after the date it was delivered.  However, if Dr. Smith’s report was not delivered until some later date, I conclude that the offer to settle was one that ought reasonably to have been accepted seven days after delivery of the report.

[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.

[24]            In the present case, Mr. Arnold has put forward no evidence of special circumstances regarding his finances.  He has put forward no evidence of other factors that should be taken into consideration in the exercise of my discretion.  Accordingly, I will leave it to other courts to consider when it is appropriate to deprive a party of costs when that party has delivered an offer that ought reasonably to have been accepted.

Rule 37B precedents are being handed down at a very fast pace by our BC Courts and I will continue to discuss these judgments as they come to my attention, particularly in ICBC or personal injury claims.

More from BCSC on Rule 37-B

Reasons for judgment were released today further interpreting the relatively new BC Rule 37(B) (the rule dealing with formal settlement offers and costs consequences of these in BC Supreme Court Actions).
The facts of this case are a little difficult to extract from the judgement but it appears that the Plaintiff sued for damages as a result of 2 motor vehicle collisions and separate Formal settlement offers were made by the Defendants in each action.  Both actions went to trial by jury and damages were awarded.
It appears that the global Jury award exceeded the combined settlement offers but when broken down between the 2 accidents it appears that the settlement offer for the second collision exceeded the damages the Jury awarded for that collision.
The Defendants asked the court to award them costs for beating the Second Accident Rule 37 offer.  (I should point out that the settlement offers where made when Rule 37 was still in place but verdict was given after it was repealed by Rule 37B).
The court noted that:

[11]            Rule changes have overtaken this case.  Rule 37B retroactively reinstates judicial discretion in the matter of settlement offers and cost awards.

[12]            As set out in Bailey v. Jang, 2008 BCSC 1372, Rule 37B came into force on July 1, 2008.  The Rule states that it applies to offers to settle made both before and after July 1, 2008, where no order as to costs has been made.  As conceded by the defendants on this application, Rule 37B returns judicial discretion as a major factor in determining an appropriate award of costs.  Thus, the new rule makes far less applicable most of the Court of Appeal decisions relied upon by the defence.  That is, those which stated Rule 37 is a complete code in relation to which no judicial discretion is applicable.

The court then refused to exercise its discretion to award the second defendant costs or double costs for exceeding their settlement offer.  The court provided the following reasons:

[14]            The analysis requires applying the facts to Rule 37B(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

[15]            Here, while I do not find, as urged to do by the plaintiff, that the offer is ambiguous or at least significantly ambiguous, it is clear that to accept the second offer in this case would not have simplified the trial at all.  It is reasonable to assume that, particularly with a jury to have settled the second action would tend to leave the jury with more complicated instructions.

The relationship between the terms of settlement offered and the final judgment of the Court

[16]            The two offers combined were significantly less than half the award of the jury.  Thus, this factor favours not awarding costs to the defendants.

The relative financial circumstances of the parties

[17]            This was a matter of a bus company versus the modest financial circumstances of the plaintiff.  If anything, it favours the plaintiff however, I give little weight to this.

[18]            In all these circumstances – the over-riding principle here is whether, if the offer had been accepted would there have been a significant or any saving in litigation cost to either party or the Court.  Here, it would be difficult to see any saving.  It was obvious during this trial that the defence intended to call the bus driver and perhaps other witnesses to the second accident to challenge the plaintiff’s credibility generally.  There was little or no evidence by the plaintiff that painted the second accident as other than minimal physically.  The psychological impact was far greater because the second accident occurred just hours following a much more traumatic accident.

[19]            Thus, there would have been no savings in time at the trial.  In these circumstances the defendants are not entitled to any costs of these two actions and the plaintiff will have her costs throughout.

[20]            There is divided success on this application.  However, the plaintiff was successful on the costs issue which took up almost the whole of the submissions.  In these circumstances she should have her costs at the lowest scale on this application.

I will continue to post the BC Supreme Court’s interpretation and application of Rule 37B.  The factors the courts consider in exercising discretion under this rule should be of particular interest to anyone taking an ICBC injury claim to trial in BC Supreme Court where a formal settlement offer has been delivered.

More on Settlement Offers and Rule 37B

Reasons for judgement were released today refusing to award the successful litigant double costs pursuant to Rule 37B.
The Petitioner City sued the Respondent Kennel operator seeking a declaration that the Kennel was in breach of a Bylaw and seeking conjunctive orders.  Before trial (and before Rule 37 was replaced with Rule 37B) the Respondent offered to settle on the following terms ‘this proceeding on the basis that the Petitioner’s claim be dismissed and costs in accordance with Rule 37
The offer was delivered less than 7 days before the trial commenced.   The claim was dismissed at trial.
The Respondents asked that the City pay them Double Costs.  Madam Justice Loo refused to order double costs noting that the formal offer of settlement conferred no benefit to the Respondents aside from costs.  The key reasons are set out at paragraph 13-15 which hold as follows:

[13]            The Court of Appeal in a number of cases has stated that the purpose of the double costs provisions of Rule 37 is to encourage early and reasonable settlements of disputes and discourage frivolous litigation:  Skidmore v. Blackmore (1995), 122 D.L.R. (4th) 330, 2 B.C.L.R. (3d) 201 (C.A.) at para. 28; Vukelic v. Canada (1997), 37 B.C.L.R. (3d) 217 at paras. 9 to 13, 94 B.C.A.C. 147; Mackenzie v. Brooks, 1999 BCCA 623 at para. 24 (sub nom. Mackenzie v. Brooks et al.), 130 B.C.A.C. 95.

[14]            Although Rule 37 is no longer in force, I find these statements of principle helpful in view of the express language of Rule 37B(4).

[15]            The petitioner’s claim was not frivolous and it was not a claim that was bound to fail.  The offer to settle conferred no benefit on the petitioner aside from costs and conferred virtually no benefit to those who complained about the noise of the barking dogs.

This is the second case that I’m aware of in Rule 37-B’s short history which refuses to award double costs to a litigant who made what can be characterized as a nuisance value offer.  It appears that if a claim is not frivolous and is not bound to fail, double costs might not be granted when the claim does indeed fail at trial if the formal settlement offer conveys ‘no benefit aside from costs’ to the litigant.
If you are proceeding to trial in an ICBC claim or are considering an ICBC settlement offer cases such as this one are worth reviewing.  I will continue to post about Rule 37B cases as they come to my attention.

More on Rule 37-B

The first decision that I’m aware of was released today dealing with the costs consequences of accepting a Rule 37 offer under Rule 37B.
The full background facts are not necessary for this narrow post.  In this case the defendants made an offer to settle for $6,000.  This offer was made in compliance with the now repealed Rule 37.  The offer was made (and accepted) while Rule 37 was still in effect.
The parties could not agree to whether a formal settlement was agreed to nor what the costs consequences were.  The Plaintiff applied to court to enforce the settlement.  The court application was not heard until October, 2008 (well after Rule 37 was repealed and replaced with Rule 37B)
Mr. Justice Rogers held that in these circumstances a settlement did exist and that Rule 37B is applicable.
Particularly he noted that:
[10]            Like the parties, I am satisfied that the original claim advanced by the plaintiffs in their statement of claim was settled by the parties’ exchange of offer and acceptance.  There will, therefore, be a declaration that the plaintiffs’ claims against the defendants arising out of the writ and statement of claim have been settled.  There will be a declaration that the settlement price to be paid to each of the plaintiffs is $6,000….

[14]            As to whether Rule 37B applies to the present case, I believe that it does.  I have come to that conclusion because the rule permits the court to consider an offer to settle, including one made under Rule 37 but with respect to which no order has been made, when exercising the court’s discretion in relation to costs:  Rule 37B(4).  The court’s discretion relating to costs is engaged when a party asks the court to make an order.  In the case of an accepted offer to settle, a party may ask the court for a declaratory order or it may apply for judgment in the terms of the settlement.  Upon such an application, the court will have discretion as to costs with respect to the application itself and with respect to any costs contemplated by the settlement.

[15]            In the present case, the accepted offer did contemplate costs in the plaintiffs’ proceeding.  Those costs were under Rule 37, but that rule has been replaced.  The costs contemplated by the settlement must now be taken to be costs under Rule 37B.  Therefore, the plaintiffs’ present application for a declaration that their action has been settled engages the court’s discretion under Rule 37B with respect to the costs of the application itself, and also of the plaintiffs’ proceeding as a whole.

[16]            As noted above, the plaintiffs argue that the court should exercise its discretion in their favour for those steps taken in the litigation up to the date that the defendants delivered their offers to settle.  The defendants argue that no order for costs should be made until the counterclaim has been concluded.

[17]            Because the issue of the plaintiffs’ costs of the now settled action falls to be decided under Rule 37B, the court must examine that rule to learn what principles will guide its decision.  As to those principles, the new rule says:

(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.

[18]            This provision makes it clear that the Legislature intends the court to at least consider conducting a detailed examination into, among other things:  the circumstances that pertained at various stages of the litigation relating to the party’s knowledge of the strength of its own case and that of its opponent; if the case has gone to trial, the proportionality of the offer to the judgment; and the financial circumstances of all of the parties involved.  Presumably, that detailed examination will be based on some form of properly admissible evidence.

[19]            The scope of the inquiry that the court is expected to make before awarding costs under Rule 37B is, therefore, much wider than was the case under its predecessor rule.  Furthermore, the parties to a piece of litigation have, I think, a legitimate expectation that the court will at least put its mind to the factors set out in Rule 37B(6).  This raises the question of whether there may be cases where the court can properly decline to analyze a case in light of the factors set out in Rule 37B(6).  About that I will say nothing definitive, except that this case does not appear to me to be one in which it would be judicious to ignore Rule 37B(6).

No order as to costs was made in this case because “the parties have not adduced sufficient evidence on this application to permit the court to conduct a detailed examination of the factors outlined in Rule 37B(6).”

This is certainly far from the last of the judicial development of this new settlement rule.  I will continue to post and comment about Rule 37B cases as they are released by the BC Supreme Court.

Rule 37B and ICBC – J. Boyd Considers fact Defendant Insured by ICBC

As you may know Rule 37-B is the new BC rule dealing with formal settlements and costs consequences in the BC Supreme Court.  (to find my previous posts on this case search this cite for ’37B’).
This new rule will take some time to work itself out.  There are already conflicting reasons for judgement addressing whether it is appropriate to look at whether the Defendant is insured when considering costs consequences.
Last week J. Hinkson refused to consider the insurance status of a defendant when deciding whether to award ‘double costs’ after trial.
Reasons for judgement were released today considering the fact that the defendants were ‘represented by ICBC’ when weighing the ‘financial circumstances’ of the parties.
In addition to being the first precedent that has looked at the insurance status of the defendant as a relevant consideration, this case is interesting because it is the first to trigger ‘double costs’ even though a matter settled before judgement.
In this case the Plaintiff alleged a Mild Traumatic Brain Injury after a BC car accident.  She sued and made a formal offer to settle for $500,000 which expired at the start of trial.  The case settled on the 11th day of trial when the defendant’s offered to settle for $1 Million ‘plus assessable costs and disbursements’ less advances paid.  The Plaintiff’s accepted this offer.
The parties could not agree on the costs implications of the settlement were.  The Plaintiff asked for double costs because the Plaintiff’s reasonable settlement offer (which complied with Rule 37B) was rejected and the Plaintiff had to incur significant expense in running 11 days of trial prior to achieving settlement.
The court agreed the Plaintiff was entitled to double costs in these circumstances.  The key finding being made at paragraph 42 which I set out below:
  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.  Since the defendants ultimately settled for an amount which was double the plaintiff’s original pre-trial offer, it is clear in my view that her original offer to settle “…was one that ought reasonably to have been accepted”.  Certainly the terms offered in August were far more advantageous to the defendants than the ultimate amount represented by the settlement agreement.  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
 

More on ICBC, Rule 37B and Costs

I have previously blogged about the new Rule 37B (here and here) which deals with formal offers of settlement and the costs consequences of trial.
The first case that I’m aware of dealing with Rule 37B in an ICBC claim was released today.
In this case both fault and quantum were at issue.  The Plaintiff alleged that the Defendant was at fault for the car accident and claimed over $1million in damages.  The case was presented for over one week in front of a Vancouver jury.
The case was dismissed on the issue of liability meaning that the Jury found the Plaintiff was responsible for this collision thus making her entitlement to tort damages $0.
In this case ICBC (on the defendant’s behlaf) made a pre-trial offer to settle for $35,000.  This offer was made in compliance with Rule 37B.
The court refused to look at the fact that the Defendant was insured when considering ‘the relative financial circumstances of the Parties’ and concluded that the Defendant was entitled to Double Costs from the time the offer was made through trial.
I reproduce the court’s key analysis below:

a)         Ought the Defendants’ Offer to Have Been Accepted?

[20]            In her submissions, the plaintiff referred to the position that she said was taken by an unnamed ICBC adjuster respecting the responsibility for the collision.  That view was apparently a preliminary one, the basis for which is unexplained; it was not before the jury in this case, and, in any event, the conclusion would certainly not be binding on the jury or the court.

[21]            The plaintiff also referred in her submissions to the fact that she had offered to settle her claim for $160,000 plus her costs, a sum considerably less than her counsel sought from the jury.

[22]            Based upon her offer compared to the position taken by her counsel at trial, the plaintiff was clearly prepared to take a considerable gamble to achieve a significant award.  While it was open to the jury to make a sizeable award, in the event there was a finding of liability against the defendants, the discount the plaintiff was prepared to accept in order to settle the claim does not support the conclusion that she had confidence in the likelihood of securing a sizeable award at trial.  That, in my view, is one of the factors against which the reasonableness of her refusal to accept the defendants’ offer to settle must be assessed.

[23]            As I have said above, it was clearly open to the jury to dismiss the plaintiff’s claim by finding no liability against the defendants, but equally open to them to find some or even complete liability against the defendants.

[24]            While the defendants argued that the jury’s verdict proves that the plaintiff ought to have accepted their offer to settle, I do not read Rule 37B as inviting that sort of hindsight analysis.  Under Rule 37, an offer to settle was revoked once trial began.  Although Rule 37B contains no such provision, the defendants in this case stated in their offer that it was open for acceptance “at any time before 4:00 pm, Pacific Time, or the last business day prior to the commencement of the first day of trial”.  In my view, the reasonableness of the plaintiff’s decision not to accept the defendants’ offer to settle must be assessed, under that offer, only prior to the last date that the offer could be accepted, and in any case, under Rule 37B, prior to the delivery of the jury’s verdict, but not thereafter.

[25]            Weighing these factors, I am unable to say that it was unreasonable for the plaintiff to have rejected the defendants’ offer to settle.

b)         Relationship between the Offer and the Final Judgment

[26]            Implicit in the defendants’ position on costs is the argument that the complete dismissal of the plaintiff’s claim obviates a consideration of subrule 37B(6)(b).  I do not accept that that is an appropriate reading of that subrule.

[27]            With respect to this subrule, the plaintiff argues that the jury’s verdict was not one that ought to have been “seriously contemplated” by the plaintiff.  The difficulty with this position is that counsel for the plaintiff took no objection to the charge, which instructed the jury that it was open to them to dismiss the plaintiff’s claim if they were not satisfied that the plaintiff had established liability on the part of the defendant Priscilla C. Jang.  The jury’s verdict could not in these circumstances be said to be perverse, as counsel for the plaintiff argued before judgment was entered.

[28]            I do not accept the plaintiff’s submission that the jury’s verdict is difficult to accept on the evidence before it.

c)         Relative Financial Circumstances of the Parties

[29]            The plaintiff asserts by affidavit that her annual income is between $33,000 and $34,000 per year, and that her share of the expenses in the apartment she shares with a friend together with her own monthly expenses amount to approximately $2000 per month.

[30]            The plaintiff lists a debt to her lawyers of some $29,000 as well as other debts of a further $35,000, and swears that “If I am obliged to pay ICBC’s defence costs for this trial, I will be unable to meet my ongoing expenses and debts.”  I have no evidence of the extent to which the plaintiff could arrange financing to address her position, but I do not accept that her present debts or even greater financial obligations could not be accommodated by financing.  While the defendants argue that the plaintiff’s obligations to her counsel are a result of her refusal to accept their offer to settle, I do not see that the cause of the plaintiff’s debts is a relevant consideration.  The fact is that she is indebted to her counsel.

[31]            There are, however, two difficulties with the plaintiff’s position on this factor.  First, she argues that her financial circumstances are difficult.  This alone is insufficient to meet Rule 37B(6)(c).

[32]            Second, she 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.

[35]            There is no evidence before me as to the defendants’ financial circumstances.  What little I do know of the circumstances of the defendant Pricilla C. Jang is that, at the time of the accident, she was driving her mother’s motor vehicle, and that she was employed as a parts delivery person for a motor vehicle dealership.  That does not suggest to me that her financial circumstances are appreciably different from those of the plaintiff.

d)         Other Factors

[36]            No submissions were made by the plaintiff suggesting that there are other factors in this case that should influence the appropriate cost option to be employed in this case.

DISPOSITION

[37]            While I am not prepared to find that the plaintiff’s failure to accept the defendants’ offer to settle was unreasonable, I am equally unprepared to accept that the jury’s verdict was unreasonable.  I am also unprepared to conclude that there is any significant disparity in the financial circumstances of the parties so as to invoke subrule 37B(6)(c).

[38]            What then, of the function of the Rules to encourage or to deter the types of conduct referred to by Cumming J.A. in Skidmore?  As mentioned above, the plaintiff was prepared to take a considerable gamble to achieve a significant award.  Had she succeeded, she doubtless would have sought an order for double costs against the defendants following her offer to settle.

[39]            I conclude that the refusal of an award of double costs from August 11, 2008 would completely ignore the important deterrent function of the Rules.  The factors set out in subrule 37B(6) do not, in this case, persuade me that such a result would be appropriate.  I find that the defendants are entitled to an award of double costs beginning a reasonable period of time after which the plaintiff could consider their offer.  That period I find commenced on August 18, 2008, seven days after the defendants’ offer to settle.

[40]            The defendants are entitled to recover their taxable costs and disbursements of this action from its commencement until August 18, 2008 pursuant to Rule 57(9).  Those costs will be taxed at Scale B.

[41]            The defendants are entitled to double costs commencing August 18, 2008 and to their disbursements as incurred after August 18, 2008.  The disbursements will be allowed only in the amount incurred, and not at a double rate.

Rule 37B – The First Precedent

Today I’m blogging from the sunny City of Vernon, having completed an examination for discovery a little earlier than expected with some time on my hands prior to returning to Victoria.
In the first precedent that I am aware of concening Rule 37B (The new BC Supreme Court Rule dealing with formal settlement offers) reasons for judgement were released today refusing to award a successful defendant double costs after trial.
While this is not and ICBC claim, nor even a personal injury claim for that matter, the factors that the court considered in refusing to order double costs may be relevant in an ICBC claim.
The facts of the case briefly are as follows: The Defendant was sued by the SPCA for the costs of care the SPCA incurred for some neglected animals. The Defendant denied liability and made a formal offer to settle the claim for $1. The Defendant succeeded at trial. In such a scenario, under the old Rule 37, the Defendant would likely be entitled to ‘double costs’. Here, the Defendant asked the court to excercises its discretion under the new Rule 37B to award double costs.
The court refused to do so setting out the following reasons:

The Law

[12] Rule 37B(1) reads in part:

(1) in this rule “offer to settle” means

an offer to settle made and delivered before July 2, 2008 under Rule 37, as that rule read on the date of the offer to settle, and in relation to which no order was made under that rule …

[13] In the circumstances, Rule 37B applies to the offer made by Mr. Baker.

[14] Rule 37B (5) and (6) read:

(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.

[15] Subrule (5) is permissive. It empowers the court to make either type of order mentioned in the subrule. By necessary implication, it contemplates that the court may make an order that denies one of the two forms of relief set out in the subrule……….

The court then went on to canvass some prinicples of Bankruptcy law and concluded that the Defendant’s offerwas not one that reasonably ought to have been accepted (pursuant to Rule 37B(6)(a) on the date of the offer to settle or before the Rule 18A hearing at which time, pursuant to Rule 37(13), the offer was no longer capable of acceptance.

The court then went on to deal with Rule 37B(6)(b) and held as follows:

Rule 37B (6) (b)

Rule 37B (6) (b)

[34] This subrule indicates that the court, when exercising its discretion under Rule 37B should consider the relationship between the offer and the result in the action. In this case, the offer to settle was for one dollar. There was no counterclaim. BCSPCA’s only risk was costs. An offer that would confer a significant benefit, aside from costs, on a party who failed to accept the offer would be more likely to attract double costs under Rule 37B that an offer of the type made by Mr. Baker.

Rule 37B (6) c)

[35] The means of the parties may be taken into consideration when exercising discretion under Rule 37B. The BCSPCA is a non-profit society dedicated to prevention of cruelty to animals. It is a substantial society. It had an operating surplus of $379,022 in 2007. Mr. Baker has not disclosed his financial circumstances. His counsel stated in submissions that he is of “modest means”.

Result

[36] In all the circumstances, Mr. Baker has not established that the offer he made was an offer that ought reasonably to have been accepted by BCSPCA under the law applicable during its currency. Acceptance would not have conferred a significant benefit on BCSPCA other that its effect on costs. Although BCSPCA is likely the party most able to bear the costs of the litigation, Mr. Baker has not shown that an award of double costs is, considering the other factors bearing on an award of costs under Rule 37B, necessary to avoid the imposition of hardship in the litigation.

It remains to be seen what the number of soon to be coming precedents will ultimatly hold for the interpretation of this rule, but this case illustrates that courts may not take to kindly to ‘nuisance value’ settlement offers of $1.

Contact

If you would like further information or require assistance, please get in touch.

ERIK
MAGRAKEN

Personal Injury Lawyer

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

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