The implication of settlement offers and their ability to trigger cost awards was substantially changed by the introduction of the new Rules of Court on July 1, 2008. Former Rule 37(23) provided a relatively straightforward method for determining costs when would be assessed as double from the date of a settlement offer:
If the plaintiff has made an offer to settle a claim for money, and it has not expired or been withdrawn or been accepted, and if the plaintiff obtains a judgment for the amount of money specified in the offer or a greater amount, the plaintiff is entitled to costs assessed to the date the offer was delivered and to double costs assessed from that date.
On July 1, 2008, the Court was given a great deal of discretion pursuant to Rule 37B. Now, the Court “may consider an offer to settle when exercising the court’s discretion in relation to costs.” Under Rule 37B, the Court “may” now 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.
The change from a “hard and fast rule” in former Rule 37(23) has caused concern for all counsel, and particularly for defence counsel who are often advising clients that have significantly greater financial circumstance than the other parties. The factor of relative financial circumstances of the parties has caused us to wonder whether insurance companies will even receive double costs if they “beat” their offers to settle.
A recent ICBC case, Garcha v. Gill, 2011 BCSC 1125, gives insurers and defence counsel cause for optimism, and sends a clear message to plaintiffs about the possible consequences for refusing settlement offers.
This recent decision followed the trial decision Garcha v. Gill 2008 BCSC 1756. At trial, the Honourable Mr. Justice Cohen found that the defendant was soley responsible for the car accident and was 100% liable for the plaintiff’s personal injuries. The Court awarded damages of $30,212.98 ($25,000 for non-pecuniary damages, $1,712.98 for special damages and $3,500 for past income loss).
The Plaintiff subsequently applied for double costs based on a settlement offer made 8 days before trial for $22,499.
The chronology of the litigation and the settlement negotiations was as follows:
- The motor vehicle accident was on March 25, 2005.
- In July 2006 the plaintiff submitted an income loss to ICBC claiming a loss of $7,461. This was not accepted, and he retained counsel in December 2006. The Action was commenced in 2007.
- The defendant delivered an offer to settle in the amount of $19,000 to the plaintiff on November 22, 2007 pursuant to former Rule 37.
- It would be an understatement to say that obtaining the business records from the plaintiff was tortuous. Defence counsel were required to bring 3 motions to compel production of documents that should have been produced by the plaintiff in accordance with the Rules of Court. Defence counsel did not succeed in persuading the Court to dismiss the Plaintiff’s action on this basis alone. ICBC was awarded costs in any event of the cause from the various motions.
- On May 20, 2008, 8 days before trial the plaintiff delivered an offer to settle to the defendant pursuant to Rule 37 in the amount of $22,499.
The plaintiff argued that they had beaten the May 20, 2008 offer, and the defendant ought to have accepted it. The plaintiff further submitted that Rule 37B should operate as did former Rule 37(23) in order to promote settlement of disputes before trial.
The Court found that ICBC not accepting the May 20, 2008 offer was reasonable. They two key factors were the lateness of the offer, and that it would mean that the costs awarded by the Court to ICBC following the interlocutory motions would be abandoned.
The Court also commented that the November 22, 2007 offer from the defendant was only “marginally” less than the plaintiff’s pre-trial offer, but that between those two offers, the plaintiff had caused “unnecessary” litigation costs to be incurred by the defendant.
The Honourable Mr. Justice Cohen concluded with pity comments on the purpose of Rule 37 and the conduct of the plaintiff in this action:
As aptly stated by the defendant, “Would awarding double costs to the plaintiff for his ongoing and sustained failure to produce documents, refusal to entertain an early, reasonable settlement in the fall of 2007 and delivery of a late offer 8 days before trial encourage the orderly conduct of litigation and the policy of early, reasonable offers to settle?” The answer is that given by the defence: “… the time and expense of both the trial and several months of litigation could have been avoided had the plaintiff accepted the defence offer which was only a few thousand dollars less, or, alternatively, countered at that time with the plaintiff’s offer which would have been accepted as per the affidavit of  [the ICBC adjuster]”.
Thus, the court refused to award double costs against ICBC despite the fact that there was an obvious disparity in the parties relative financial circumstances and the plaintiff was not only successful, but beat their offer of costs.
In addition, the Court apportioned 30% of costs to the defendant, ICBC on the basis that the Plaintiff has not been successful on all counts, and the defence had been required to prepare for issues that were abandoned at trial.
This decision is encouraging for insurers making settlement offers that the conduct of the plaintiff will be considered, and weighed appropriately. It also serves as a good reminder to plaintiffs generally that the costs provisions in Rule 37B have teeth, even when they are going against a “big bad” company.