Reasons for judgement were released today by the BC Supreme Court considering whether a Defendant should be awarded double costs for successfully defeating a lawsuit where they made a formal settlement offer before trial.
In today’s case (McVeigh v. McWilliams) the Plaintiff sued the Defendant alleging defamation. Before trial the Defence lawyer made a ‘walk away’ offer under Rule 37B (click here to access my previous posts and recent video discussing formal settlement offers and costs consequences) which was phrased as follows: Our client will waive costs in exchange for your consent to a dismissal of your claim on a “without costs” basis. Our client reserves the right to bring this offer to the attention of the court for consideration in relation to costs after the court has rendered judgment on all other issues in this proceeding, in accordance with Rule 37(b) of the Rules of Court.
The Defendant, who was awarded Costs for succeeding in the lawsuit, asked the Court to exercise its discretion under Rule 37B and award double costs. Mr. Justice Shabbits refused to do so finding that the Plaintiff was entitled to his day in Court and should not be penalized with an order of double costs for failing to beat a walk away offer. The Court reasoned as follows:
 A defendant in every case in which a non-monetary issue is at stake could offer to “settle” on the basis that the plaintiff concede the cause of action, and they could do so as soon as they file the statement of defence. The issue is whether such an “offer” should attract double costs.
 I acknowledge that in this case the defendant did offer to waive costs to the date of the offer. But, costs here were never the issue. In my view, the defendant’s offer did not really involve any meaningful element of compromise. In respect of the cause of action, the defendant’s position after delivery of the offer to settle was the same as before delivery. It was as set out in the pleadings.
 In my opinion, it was not unreasonable of the plaintiff to refuse the defendant’s offer. He, too, was entitled to have the issue tried.
 In my opinion, no order for double costs is warranted. The defendant is entitled to his costs on Scale B except for the costs of this application. The plaintiff has enjoyed substantial success on this application, and he is entitled to his costs of it on Scale B.
I should point out that it is possible for a Defendant to be awarded double costs for beating a settlement offer if the lawsuit is dismissed, however, in cases where the settlement offer was no more than a ‘nuisance’ offer or a ‘walk away’ offer the BC Supreme Court may be reluctant to make such an award.
In my continued efforts to get us all prepared for the New BC Supreme Court Civil Rules I will again point out that Rule 37B will be replaced with Rule 9 under the New Rules. The new rule uses language that is almost identical to Rule 37B which should help cases such as this one retain their value as precedents.
Where to begin…
Important reasons for judgement (Burdett v. Mohamed) were released on Friday by the BC Supreme Court, Vancouver Registry addressing a host of topics in the context of BC personal injury litigation.
By way of background the Plaintiff was a passenger in a 2002 motor vehicle accident. She was riding in a vehicle operated by Mr. Mohamed and this vehicle collided with a vehicle operated by a Mr. Samuel.
The Plaintiff suffered various injuries including a traumatic brain injury.
The Defendant Mohamed was charged with Dangerous Driving and was deemed to be in breach of his insurance policy. Accordingly, ICBC, Mr. Mohamed’s insurer defended the claim as a ‘statutory third party.’
There was reason to believe that Mohamed was solely responsible for the collision however the Plaintiff’s lawyer sued both Mohamed and Samuel. The reason being was concern about limited insurance coverage. Mohamed only had $1 million in insurance coverage. The Plaintiff was not the only injured party and when sharing this money with the other claimants the Plaintiff was concerned she would be significantly undercompensated if this was the extent of her recovery.
ICBC made an offer to the various claimants to “get together to divide among themselves the $1,000,000 third party liability (coverage).” This offer was not accepted and the Plaintiff proceeded to trial.
Prior to trial the Plaintiff made a formal offer to settle her claim against Mohamed for $1.5 million. The Defendant Samuel made a formal offer to the Plaintiff to ‘walk away’ on a costs free basis. After a lengthy trial the case against Samuel was dismissed, the Jury found Mohamed responsible for the Plaintiff’s injuries and the Plaintiff 20% contributorily negligent for her own injuries. After this reduction in liability the Plaintiff was awarded over $1.8 million in damages.
The Court was asked to decide, amongst other things, whether the Plaintiff should be awarded double costs against Mohamed, whether Samuel should be awarded double costs against the Plaintiff and whether the Mohamed should pay to Samuel any costs the Plaintiff is exposed to. Rule 37B – Is it reasonable to go to trial for a claim exceeding the Defendants insurance coverage?
The Plaintiff was awarded double costs for beating her formal offer of settlement against Mohamed. In coming to this decision the Court had to grapple with an area of law that is still open to debate, specifically, when considering whether to award double costs can a court consider the insurance coverage available to the parties?
There are cases that go both ways on this topic and the law is not yet set in stone. Usually Plaintiff’s argue that this is a relevant consideration and Defendants argue it is not. Interestingly, here it was ICBC that was arguing the presence of insurance could be “the central factor driving the Court’s analysis under Rule 37B.”. The Defendant submitted that the Plaintiff was unreasonable in going to trial “knowing of the third party liability policy limits“.
Madam Justice Boyd “entirely reject(ed) this submission.” Specifically the Court held as follows:  In my view, having never received an actual offer of settlement from the Third Party, it was reasonable for the plaintiff to choose to proceed to trial in this case. She could expect that she would recover judgment against at least Mohammed and Dubois. The judgment would also likely be in excess of the policy limits. While the quantum of the judgment actually recovered would not exceed her pro rata share of the insurance funds (the calculation of which depended on settlements reached or judgments obtained by Maxwell and Sahota), she would still be left with the ability for the next ten years to pursue execution on the judgment against Mohammed and Dubois. While the Third Party apparently insists that any such judgment will be dry, there is simply no evidence one way or another to confirm that likelihood. It should also be noted that had the insurance monies been paid into court, and had the three claimants reached some agreement as to an appropriate division of the funds, the Third Party could not have enforced any requirement for a release of her claim against either Mohammed or Dubois. Can a “Walk Away” offer trigger Double Costs under Rule 37B?
A ‘walk away’ offer is one where a Defendant, confident of winning at trial, offers that if the Plaintiff discontinues the lawsuit pre-trial that the Defendant will waive their entitlement to costs. The Defendant Samuel made exactly such an offer to the Plaintiff. The Plaintiff rejected this offer and went to trial. The Plaintiff indeed was unsuccessful against Samuel. Samuel asked for an order of Double Costs for beating their formal offer.
Madam Justice Boyd sided with the Defendants and granted the order for double costs. The Court held that while not automatic, a walk away order is capable of triggering double costs and here it was appropriate to do so. Specifically the court held as follows:  My own impression is that faced with the grim realities of the other defendants’ limited insurance coverage, the plaintiff made a calculated decision to pursue a claim of very doubtful merit against Samuel, realizing that she would realize a substantial benefit even if Samuel’s liability was limited to a small percentage. But for the insurance situation, I am confident that the Samuel offer would have been accepted early on by the plaintiff. ..
 As Hinkson J. noted in Bailey v. Jang, 2008 BCSC 1372, the underlying purpose of the offer to settle provisions survived the repeal of Rule 37 and the implementation of Rule 37B. That purpose is to encourage conduct which reduces both the duration and the cost of litigation, while also discouraging the conduct which has the opposite effect.
 I conclude that all of these factors weigh in favour of the defendant Samuel recovering double costs.
The Sanderson Issue:
When a Plaintiff sues 2 parties and succeeds only against one (which was the case here) the Court has a discretion under Rule 57(18) to order that the unsuccessful defendant pay the successful defendants costs. This is called a “Sanderson Order”.
Here the Plaintiff, not wanting to have the ‘double costs’ order eat into into the limited $1,000,000 of insurance coverage applied for a Sanderson Order. Madam Justice Boyd granted the order and required Mohamed to pay Samuel’s court costs. Vital in this decision was the fact that ICBC, in their Third Party Statement of Defence, alleged that Samuel was negligent in causing the collision.
In reaching this decision the Court held as follows:
 This raises the issue, was it reasonable for the plaintiff to have sued and continued her action against the defendant Samuel? I accept that at the outset, given the evidence of the eyewitness to the effect the Dubois vehicle (driven by Mohammed) had fishtailed back and forth across the road before its collision with the oncoming Samuel vehicle, it was reasonable for the plaintiff to have joined Samuel as a defendant to the action. However, after the receipt of the many engineering reports which overwhelmingly laid the blame on Mohammed and absolved Samuel of any negligence, was it reasonable for the plaintiff to have continued her action against Samuel? …
 In my view, faced with ICBC’s plea that Samuel caused or contributed to this accident, the plaintiff had no choice but to continue her claim against Samuel.
 In all of these circumstances, I exercise my discretion under Rule 57(18) and find that a Sanderson order is appropriate in the case at bar, thus requiring the defendants Mohammed and Dubois to pay the costs which the plaintiff would otherwise pay to the successful defendant Samuel.
The lesson to be learned here is that if a Defendant is going to allege that another party is responsible for a car crash they should do so with caution. The Plaintiff is free to bring them into the lawsuit and if the claims are not successful ultimately it is the Defendant who may be on the hook for the extra court costs.
Not Done Yet…
One last point. A companion set of reasons was also released in this case on Friday addressing tax gross ups and management fees. You can find that decision here.
If you would like further information or require assistance, please get in touch.
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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