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Tag: settlement

Rule 37B and the Discretion of the Court

As I’ve previously written, one of the biggest improvements in the new Rule 37B over it’s predecessor (Rule 37) is that it gives the Court discretion when assessing costs consequences when a party beats a formal settlement offer at trial.
Reasons for judgment were released today by the BC Supreme Court demonstrating the flexibility of this discretion in assessing fair costs consequences.
In today’s case (Petojevic v. Solari) the Plaintiff sued for personal injuries.  Prior to trial the Defendants made a formal settlement offer of $60,000.  After trial the Plaintiff was awarded a total of just over $42,000 in damages.  In the defence of the claim the Defendants incurred “costs” of $5,051 and disbursements of $2,060.
The Defendants brought an application to be awarded “double costs”.  Under the old Rule 37 the Judge would have had no discretion in making such an award and double costs would automatically be awarded in these circumstances.  Under the new Rule 37B, the court has significant discretion over the costs to be awarded when a formal settlement offer is beat due to Rule 37B(5) and (6) which read as follows:

Cost options

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

(a) deprive a party, in whole or in part, of any or all of the costs, including any or all of the disbursements, to which the party would otherwise be entitled in respect of all or some 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.

(c) award to a party, in respect of all or some of the steps taken in the proceeding after the date of delivery or service of the offer to settle, costs to which the party would have been entitled had the offer not been made;

(d)  if the offer was made by a defendant and the judgment awarded to the plaintiff was no greater than the amount of the offer to settle, award to the defendant the defendant’s costs in respect of all or some of the steps taken in the proceeding after the date of delivery of the offer to settle.

[am. B.C. Reg. 165/2009, s. 1 (a), (b) and (c).]

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.

In today’s case Mr. Justice Williamson refused to award the Defendant double costs but did award increased costs at 125% of the actual costs.  In justifying this result Mr. Justice Williamson highlighted the following facts:

[5] Here, the offer was not accepted and the matter went to trial. Nevertheless, the Court retains a discretion with respect to costs. Generally, litigants will be limited to the maximum costs allowable pursuant to Rule 66 (29) unless the Court rules otherwise.  In determining whether to “otherwise order” the circumstances to be considered may include the making of an offer pursuant to Rule 37, the relationship of the award to the offer, the length of the trial, the degree of complexity, the conduct of the litigation, the financial circumstances of the parties, and any other relevant circumstances.

[6] In addition, I have in mind the express object of Rule 66 to provide a speedier and less expensive determination of certain actions, and the object of Rule 37 to encourage settlement.

[7] The defendant concedes that in exercising a discretion pursuant to Rule 37B(5) an award may be discounted for work done prior to the delivery of an offer to settle.  They note that the ceiling for double costs awards pursuant to Rule 66 would amount to $13,200. They therefore say that their claim for costs in the amount of $10,102.24 plus disbursements is reasonable as it is equivalent to a discount of approximately 25%. In addition, the defendants note that the plaintiff was granted several adjournments and given the fact that the plaintiff was represented by counsel during two periods after the delivery of the offer to settle, he had considerable time to consider the appropriateness of the offer and the consequences of failure to accept it.

[8] The plaintiff submits Rule 66 should apply. He submits in any case the offer came after examination for discovery, an attempt at mediation, and an application to strike portions of the plaintiff’s claim. As such, he submits, any award of costs to the defendants should be limited.

[9] Here the trial took two days, the period contemplated by Rule 66. Liability was admitted, and the trial was not particularly complex, although previously existing injuries were a somewhat complicating issue. The defendant submits the plaintiff’s conduct of the litigation had a negative impact on the proceedings, a situation unfortunately not unusual when litigants represent themselves. I have no direct evidence of the financial circumstances of the plaintiff, although I infer from the evidence of impact of his injuries that he is in financial difficulty.

[10] The amount awarded at trial is more than two thirds of the amount offered by defendants. As well, on the second day of the proceedings the plaintiff succeeded in obtaining an award of special damages greater than that offered at that point by the defendants.

[11] The defendants proffered Bill of Costs in the amount of $5,051.12 plus disbursements of $2,060.02. They seek a doubling of the costs plus the disbursements ($10,102.24 plus $2,060.02 = $12,162.26).

[12] Taking all of these factors into consideration, and exercising the discretion permitted a trial judge pursuant to the Rules, I am satisfied that it would be contrary to the object of these Rules to deny the defendants application. However, I am not persuaded in the circumstances of this case that the award of costs sought by the defendants is warranted. In the result, I award costs to the defendants at 125% of their claimed costs ($5,051.12 X 1.25 = $6,313.90) plus disbursements of 2,060.02 for a total of $8,373.92.

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.