COURT CASES on COSTS and FORMAL SETTLEMENT OFFERS
Formal settlement offers can be made either by the Plaintiff or the Defendant prior to trial in an effort to resolve ICBC claims. If the ICBC claim does in fact proceed to trial, then such formal settlement offers become a focal point with respect to any costs awards. The Court’s power to award costs to a party, or to disentitle a party to costs, is wholly discretionary.
For example, a Plaintiff who is successful at trial in terms of being awarded an amount for damages, but who does not beat ICBC’S last formal offer to settle, can be ordered by the Court to pay some legal costs to the Defendant. Depending on the size of the trial award, sometimes this entire amount can be wiped out by a costs award against the Plaintiff. On the flip side, a Plaintiff who beats ICBC’S last formal settlement offer can also benefits from costs payable by the Defendant. Sometimes the Court will award double costs as well. Other examples of the Court’s discretion include stripping the Plaintiff of all post offer costs and disbursements, or ordering that the Plaintiff and/or Defendant pay their own post offer costs and disbursements.
When the time comes, deciding whether or not to proceed to trial involves a risk assessment, with the potential negative award of costs always being a very important factor in any final risk assessment.
Rules 9-1(5) and (6) of the British Columbia Supreme Court Rules outline the options at a court’s disposal with respect to awarding costs, and what factors they consider in doing so.
RULE 9-1
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 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 or service 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 or service 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 or service 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 served 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.
The case of Tompkins v. Bruce is a good illustration of the Court’s discretionary nature as it pertains to an award of costs. The Plaintiff refused a $950,000.00 offer from ICBC prior to trial, and at trial was awarded slightly over $850,000.00. Despite the Plaintiff being successful, the amount awarded was less than the amount of ICBC’S last formal settlement offer, which triggers the Court’s discretion to award costs.
In this case, the Court stripped the Plaintiff of any post-offer costs and disbursements, yet did not order the Plaintiff to pay any of ICBC’S post-offer costs and disbursements of the Defendant’s.
[29] The offer in this case was reasonable on the facts of the case as they were known to the parties. It could reasonably have been accepted as being within the range of possible recovery, although likely it would not have been thought by either party at the high end of the range. The amount of the Offer was reasonable as was its timing: the information necessary to assess the claim was in the possession of the parties, yet there was plenty of time to give careful consideration to the matter before the November trial date. On the other hand, Mr. Tompkins was seriously injured. He and his counsel’s view of the matter was that it was worthwhile going to court in the hope of getting a significantly higher award. It cannot be said that such a decision was unreasonable at the time.
[30] The purpose of cost consequences of reasonable offers is to encourage settlement. On the other hand, onerous cost penalties should not discourage the seriously injured from a proper hearing and a chance to obtain a higher award, nor should they seriously subtract from what the court has found is appropriate compensation for the injury.
[31] Considering the factors set out in the Rules, it is my opinion that the interests of justice are best served in this case by awarding Mr. Tompkins his costs and disbursements up to and including October 31, 2011, but disallowing them after that date, with the Third Party to bear its own costs. There is then a consequence for not accepting a reasonable Offer, but the consequence is not unduly punitive in the circumstances.
In Paskall v. Scheithauer, the Plaintiff was involved in a motor vehicle accident, and brought an ICBC claim for damages. ICBC’S lawyer had made a $700,000.00 formal offer prior to trial. An unfavourable liability finding by the jury resulted in the Plaintiff receiving approximately $65,000.00 in damages only. Given that this amount was far below ICBC’S lawyer’s formal settlement offer, ICBC’S lawyer argued for post offer costs and disbursements, arguing that the offer ought reasonably to have been accepted. The Court disagreed, however, as the Defendant did not obtain any expert medical reports, which made it almost impossible for the Plaintiff to gauge whether or not the offer was one which reasonably should have been accepted.
[32] In order to determine whether an offer is reasonable and ought to be accepted, the plaintiff must be able to consider it in relation to the evidence expected at trial and the apparent range of possible outcomes. In a personal injury case, that exercise usually includes consideration of conflicting medical opinions, along with the possibility and likely consequences of the court preferring certain opinions over others. Plaintiff’s counsel who is relying on an opinion from Dr. X can advise his or her client of the reduction in damages that may result from the court rejecting the evidence of Dr. X and accepting the opinion of Dr. Y that is being relied on by the defendant.
[33] In this case, the evidence relied on by the plaintiff included opinions of a neuroradiologist, a neuropsychologist, a psychiatrist, an otolaryngologist and two physiatrists. The only experts put forward by the defendant on the question of damages were the occupational therapist dealing with cost of future care and the economist. The defendant served no medical expert opinions, although the plaintiff had attended two independent medical examinations at the request of defence counsel.
[34] The onus of proof at trial is on the plaintiff. The defendant is under no obligation to produce medical evidence and may rely entirely on cross-examination of the plaintiff and the plaintiff’s medical experts to support an argument that the plaintiff has failed to prove damages. That is what defence counsel chose to do in this case, apparently with great success.
[35] But the onus of proof at trial is not necessarily relevant to the question of whether an offer made before trial “had some relationship to the claim” or “could be easily evaluated”. In choosing to defend this case in the way he did, the defendant also chose not to provide the plaintiff with evidence on which she could judge the reasonableness of the offers to settle. With the plaintiff’s medical reports in hand, and in the absence of contrary medical opinions, I do not see how reasonable counsel could have recommended acceptance of either of the defendant’s offers or justified such a recommendation to the plaintiff.
In Bevacqua v. Yaworski, the Plaintiff was injured in a car accident, and brought an ICBC claim for damages, primarily for a fractured wrist. Prior to trial, ICBC’S lawyer made a formal offer to settle. At trial, the Plaintiff was successful in obtaining damages, however in an amount less than what was offered by ICBC’S lawyer. This triggered the Court’s discretion to award costs against the Plaintiff, or to disentitle the Plaintiff to any costs. In this particular case, the Court stripped the Plaintiff of post-offer costs, and ordered that the Plaintiff pay the Defendant’s trial costs. The overriding reason for the Court’s ruling was that the offer made by ICBC’S lawyer was one which ought to have been reasonably accepted.
[8] In personal injury claims, in which liability has been admitted, there is in most cases a somewhat predictable range of possible awards. It is to be expected that counsel taking a case to trial will have discussed with their clients the possible range of damages, the evidentiary issues and the risks of and expense of proceeding to trial. It is to be expected therefore that as the trial approaches, counsel and their client have in mind a possible range of recovery and the risks of litigating. Naturally, a plaintiff hopes for an award in the high end of the range and the defendant for an award at the low end.
[9] The Rule relied upon by the defendant is clearly intended to encourage settlements on the basis of reasonable offers. To be fair, of course, the offer must have been one which ought reasonably to have been accepted, and must have been presented in a reasonable manner and in sufficient time to be properly assessed.
[10] Clearly, in this case, the plaintiff and her counsel were of the opinion that it was worth taking the chance that she would do better than the offer at trial.
[11] In my opinion, on my analysis of the medical evidence put forward to support the claim for future care costs, there was little likelihood of an award of $400,000 for future care costs, however, the general damages could have been $100,000 and $15,000 was received for the in trust claim – which suggests the $210,000 new money offer was an offer of something like $100,000 for future care costs.
[12] In my opinion, a rigorous analysis of the evidence for the claim for costs of future care at the time the offer was open would have lead to the conclusion that the offer was one that ought reasonably to have been accepted. The recovery at trial, particularly for future care costs was markedly less than offered.
In Mazur v Lucas, the Plaintiff was awarded over $500,000 for injuries sustained in a motor vehicle accident. ICBC’S lawyer appealed, and was successful in having the Court of Appeal order a new trial. Before the second trial, the lawyer for ICBC made a formal settlement offer in the amount of $300,000, which was rejected by the Plaintiff. At the second trial, the Plaintiff was awarded less than this amount. ICBC’S lawyer sought costs for both trials, however the Court granted the Plaintiff costs for both trials.
In discussing Rule 9-1(6)(a), whether the offer ought reasonably to have been accepted, the Court noted that:
[57] Whether the offer made in August should reasonably have been accepted cannot be determined through hindsight, or by reference to the judgment ultimately pronounced (Hartshorne v. Hartshorne, 2011 BCCA 29 (CanLII), 2011 BCCA 29).
[58] The plaintiff had received a much higher award from the first jury. Should the defendants’ success on appeal have compelled the plaintiff to discount the first award and accept the second offer, which was three/fifths of the first award?
[59] The information before me for the second trial was that both parties had chosen to have the second trial tried by a jury. I do not have information about the first trial.
[60] The awards in civil jury trials are unfortunately (although understandably, given that they receive no instructions on ranges of damages) very difficult to predict or explain. They sometimes even seem random and arbitrary. However, the vagaries of the civil jury system should not be a basis for compelling a plaintiff to accept an offer simply because juries are so unpredictable.
[61] The defendants did not appeal the amount of the damages awards. The point on which the defendants were successful on appeal was, as I have stated, not taken up on the second trial, at least in respect of Dr. O’Shaughnessy, who was the focus of the Court of Appeal decision. I am not persuaded that this was, overall, such a telling point in the circumstances of this case that it should have caused the plaintiff real apprehension as she considered the offer in the context of the upcoming second trial. The defendants’ position that they were liable for the accident and that the plaintiff had developed a pain disorder as a result of the accident was unchanged. Dr. O’Shaughnessy’s position was the same on both trials: the plaintiff’s depression was in remission and she remained disabled as a result of the pain disorder. This position was supported on the second trial by Dr. Parker, despite the disagreement on diagnostic criteria. Dr. Janke also agreed Ms. Mazur had a pain disorder caused by the accident, although he differed on his assessment of the effect of her pre-existing disability.
[62] This court has stated many times that parties should be encouraged to settle, and if unreasonable in not doing so, may be punished in costs. As well, the fact that an award of costs against a party may wipe out their award of damages is not determinative. However, given all the circumstances that existed at the time the offer was made which did not change throughout the trial, I am not persuaded that the plaintiff ought to be denied her costs on the basis that she ought reasonably to have accepted the offer that was made twelve days before the trial began. Having in mind the amount of the first award, the narrow issue upon which a new trial was ordered, the amount of the second offer, and the expected similarity of the evidence at the second trial, the plaintiff was reasonable in deciding not to accept the offer and to have the action adjudicated by a second jury.
In discussing Rule 9-1(6)(c), the relative financial circumstances of the parties, the Court commented that:
[49] In Smith v. Tedford, 2010 BCCA 302, the defendant had resisted accepting an offer to settle until well on into the trial, which was before a jury at the defendant’s request, and the plaintiff sought double costs. In upholding the trial judge’s decision to award double costs to the plaintiff, the Court of Appeal stated, after considering the conflicting decisions in the trial court at para. 22:
While I recognize arguments over the implications of a defendant’s insurance coverage being considered in relation to an award of costs may go back and forth, like the judge I consider precluding such from consideration renders an assessment of the parties’ relative financial circumstances, at least in a case of this kind, very artificial indeed.
[50] The defendants argue before me that Smith is confined to its facts. They rely on Hunter v. Anderson, 2010 BCSC 1591 (CanLII), 2010 BCSC 1591, in which the court said, referring to Smith, that insurance coverage becomes relevant “where a defendant’s insurance coverage creates an unfair advantage leading to unnecessary costs through testing the plaintiff’s case”.
[51] The defendants say this is further supported by a recent case of the Court of Appeal, A.E. (litigation guardian of) v. D.W.J. 2011 BCCA 279 (CanLII), 2011 BCCA 279. In that case, the court considered the issue of whether, as a matter of statutory interpretation under the previous iteration of the rule, a defendant is entitled to an award of single costs, rather than double costs, if their offer exceeds the amount at trial. The court did not comment on the trial judge’s statement that “the wording of Rule 37B(6)(c) [the same wording as Rule 9-1(6)(c)] does not allow the court to consider the defendant’s insurance coverage”.
[52] I do not read Smith as limiting a consideration of insurance coverage to its specific facts, and the judge in Hunter used general language when describing his interpretation of the circumstances in which insurance coverage was a relevant consideration – “where it creates an unfair advantage leading to unnecessary costs through testing the plaintiff’s case”. The Court of Appeal in A.E., supra, was not asked to consider this issue and did not do so.
[53] In my view, the statement in Bailey, supra, that the factor of relative financial circumstances “does not invite consideration of the defendant’s insurance coverage” has clearly been overtaken by Smith. While insurance coverage is not automatically a factor to be considered against the insured party, the facts of the particular case will govern whether it should be considered, and if so, what weight should be given to it.
[54] In this case, the plaintiff was injured. The defendants have not only admitted liability, but their own evidence supports causation for soft tissue injuries and a pain disorder resulting from the accident. The plaintiff, having received a generous award from the jury on the first trial, was required to defend the award at an appeal based on alleged errors of the trial judge in making particular rulings pertaining to expert reports. She lost on appeal, must pay the defendants’ costs of the appeal, and was required to face a new trial. At the new trial, the primary points of concern to the Court of Appeal were not pursued.
[55] I have been unable to find that the trials, though similar, were identical. There were, as I have noted, some differences. Nevertheless, I think that the relative financial circumstances of the parties should be given some consideration in these particular circumstances.
In Dickson v ICBC, the Plaintiff did not beat ICBC’S offer at trial. When this occurs, it is usually the case that the Plaintiff must pay ICBC’S post-offer costs, and sometimes even double the amount of such costs. In this case, however, even though the Plaintiff was stripped of his post offer costs, the Court refused to make an order that the Plaintiff pay ICBC’S post offer costs, citing the Plaintiff’s disadvantaged financial circumstances.
[11] Under the previous Rule 37 it is clear the defendants would have been entitled to double costs for matching the offer since it was equal to or better than the result achieved. However, the “new” Rule 37B, as it then was, is clearly open-ended and affords discretion to the court to consider the following factors:
(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 circumstance of the parties; and
(d) any other factor the court considers appropriate.
[12] The question of liability was not simple and it was not unreasonable for the plaintiff to have refused the defendant’s offer at the date it was made or before the hearing. This factor is in favour of the plaintiff.
[13] It is my view that the plaintiff’s position is one of serious disadvantage as a result of the accident. I recall that he was unable to work for a long period of time as a result of his injury and was still unable to return to work by the time of the hearing.
[14] The plaintiff is the sole support of his family and either had run out of disability benefits or was close to the end of those benefits by the time of the summary trial.
[15] Because the identity of the defendant driver was unknown, I am not aware of his financial circumstances and cannot consider them.
[16] I may not consider the relative financial power of the named defendant, the Insurance Corporation of British Columbia, since it is the circumstances of the parties, not of their insurer which should be considered. (Bailey v. Jung, 2008 BCSC 1372 (CanLII), 2008 BCSC 1372, paras. 33 and 34.)
[17] I view the financial circumstances of the plaintiff as compelling on the issue of whether double costs should be awarded.
[18] In Osooli-Talesh v. Emami, 2008 BCSC 1749 (CanLII), 2008 BCSC 1749, the offer to settle matched the judgment achieved and Sigurdson, J. concluded that the court may award payment of double costs where an offer to settle matches the results at trial. However, he went on to consider all the factors listed in Rule 37B. He determined that the parties had divided success and should therefore bear their own costs.
[19] I am guided by that decision and consider it apposite to the circumstances of this case.
[20] I award costs of this case to the plaintiff to the date of the receipt of the defendants’ offer to settle and order both parties to bear their own costs thereafter.
DOUBLE COSTS AWARD FOR LIABILITY ONLY TRIAL
In Pike v. Dandiwal, the Plaintiff was injured in a motor vehicle collision, and brought an ICBC claim for damages. As there was a liability dispute, it was agreed that there would first be a liability only trial. The Plaintiff was successful, and sought an award of double costs against the Defendant. ICBC’S lawyer argued that this award could not apply without also having a ruling on quantum, however the Court disagreed.
[32] The defendants resist Mr. Pike’s application for costs on a two-pronged basis.
[33] The first one is that costs should not be determined until after the assessment of damages because if Mr. Pike does not beat the dollar amount of the defendants’ offer, he should be denied his costs not only in respect of that (second) trial but this trial in which he was successful. No case law has been provided in support of this submission.
[34] As for its second basis of opposition, the defendants argue that it was not reasonable for them to accept Mr. Pike’s offer in the circumstances because they have only just received my determination that Mr. Gej Dandiwal was not credible and that I could not rely on the evidence of a number of witnesses.
[35] One of the offers that I saw from the defendants stated that they accepted Mr. Pike’s offered liability apportionment of 75/25 so long as Mr. Pike accepted their assessment of damages; further, that offer was only open for acceptance for several hours.
[38] In my view, double costs should be awarded to Mr. Pike. I find it most troubling that defence counsel has not brought me any case law to support his submissions. We are now at 5:05 p.m. I am going to impose a stay on the operation of my judgment for costs for 48 hours to allow the defendants the opportunity to find case law that supports their position, because the last thing I wish to do is commit an error in law.
[39] If the defendants find that case law and wish to seek to have me reconsider my decision, I will hear it, so long as I receive advice of that by next Wednesday at noon through Trial Scheduling. Otherwise, the order will stand that the defendants pay double costs to Mr. Pike.
RISKS of GOING to TRIAL
