2009 BCSC 60 Abma v. Paul

Before: The Honourable Madam Justice Gropper

Supplementary Reasons for Judgment on Costs

Counsel for Plaintiff	P. Gordon
Counsel for Defendants	R. Brun, Q.C.
Date and Place of Trial/Hearing:	October 16, 2008
	Vancouver, B.C.

INTRODUCTION

[1] The defendants Steven Albert Paul and Ronald Paul (the “defendants Paul”) and the defendants Tamara Brandy and Pauline Sylvia Brandy (the “defendants Brandy”) seek orders of the court awarding taxable costs and disbursements following Rule 37 offers of settlement made in their respective actions. Their offers to the plaintiff before trial totalled $450,000. In my reasons for judgment (2008 BCSC 783), I awarded the plaintiff $125,349.

ISSUE

[2] The issue is the appropriate order for costs.

BACKGROUND

[3] On November 14, 2001, the plaintiff was involved in a motor vehicle accident with the defendants Paul. The writ of summons in that action was issued on November 12, 2002. The pleadings were completed by February 24, 2003.

[4] On August 21, 2003, the defendants Paul made an offer to settle to the plaintiff in the amount of $80,000. On February 7, 2005, the defendants Paul withdrew that offer and sent a new offer for $160,000 plus costs and disbursements to the plaintiff. On June 8, 2005, the defendants Paul withdrew their offer again and made a new offer for $250,000 plus taxable costs and disbursements.

[5] On September 21, 2005, the plaintiff was involved in a second motor vehicle accident with the defendants Brandy. On May 17, 2006, the writ of summons was issued in the Brandy action.

[6] On October 26, 2006, the plaintiff made an offer to settle to the defendants Brandy jointly, for $500,000 which was received by the defendants Brandy on October 31, 2006. On October 27, 2006, the defendants Brandy made an offer to settle for $200,000 to the plaintiff.

[7] On October 27, 2006 the plaintiff made an offer to settle to the defendants Paul, jointly, in the amount of $1,500,000.

[8] The trial in both actions commenced November 6, 2006, and lasted 41 days.

[9] On June 17, 2008, I released my reasons for judgment in both actions. In total, the plaintiff was awarded $125,349.

RULE 37B

[10] On July 1, 2008, Rule 37B was enacted, Supreme Court Rules, B.C. Reg. 221/90, as am. by B.C. Reg. 130/2008; it replaced Rules 37 and 37A. The relevant sections of Rule 37B are:

Offer may be considered in relation to costs

(4) The court may consider an offer to settle when exercising the court's discretion in relation to costs.

Cost options

(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.

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;

(d) any other factor the court considers appropriate.

[11] Unlike Rule 37, Rule 37B gives the court a wide discretion concerning the costs order it should make in circumstances where an offer to settle has been made.

POSITION OF THE PARTIES

[12] The defendants Paul seek their taxable costs and disbursements from February 7, 2005 onwards. They agree that the plaintiff is entitled to her taxable costs and disbursements up to that date. The defendants Brandy seek their taxable costs and disbursements from October 26, 2006 onwards. The plaintiff is entitled to her taxable costs and disbursements up to that date. The defendants do not seek double costs.

[13] The defendants assert that if they are unsuccessful in receiving costs under Rule 37B, they are entitled to their costs under Rule 57(9), as they were substantially successful in the trial because the plaintiff did not succeed in her claim that she suffered a mild traumatic brain injury as a result of the accidents.

[14] The defendants assert that the focus of Rule 37B is to encourage settlement, not to eliminate a party’s right to make an offer of settlement. They say that the rule was changed to make it less “a code” than Rules 37 and 37A by providing greater opportunity for judicial discretion. They urge that the discretion permits the court to consider the items listed in subrule (6) and make the appropriate order.

[15] The plaintiff argues that Rule 37B entitles a defendant to costs only where a plaintiff’s claim is dismissed. In this case, the plaintiff’s case was not dismissed; she received judgment although for an amount less than the offers to settle. The plaintiff argues that because the plaintiff received judgment, the court can only deny the plaintiff her costs or award double costs as provided in subrules (5)(a) and (b).

[16] The plaintiff submits that Rule 37B was intended to address the disproportionate effect of the predecessor rules. She argues that under Rule 37 and 37A, if the plaintiff did not receive judgment greater than the defendants’ offer, the penalty was that the plaintiff was deprived of costs from the offer onward; the plaintiff was deprived of disbursements from the offer onward; the plaintiff had to pay the defendants costs from the offer onward; and, the plaintiff had to pay the defendants disbursements. On the other hand, the plaintiff asserts, if the judgment was greater than an offer made by the plaintiff, the only penalty to the defendants was that the plaintiff receive double costs from the offer onward, but not additional disbursements.

[17] Finally, the plaintiff submits that her judgment will be extinguished by an order for costs to the defendants in this case. Such a result is unfair to the plaintiff, who will not be compensated with the damages assessed by the court.

LEGAL PRINCIPLES

[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.

DECISION

Rule 37B(5)

[19] I endorse the principles stated above; and, with regard to the issue in this case, I follow the reasoning of Butler J. in Arnold. The plaintiff’s position is to restrict the court’s cost response where the offer to settle exceeds the judgment. This is contrary to the notion that Rule 37B was intended to provide the court the discretion to consider the offer to settle in relation to costs, with no dictated results, unlike the Rule 37 and Rule 37A. Those rules were considered a complete code, and the court had no discretion but to order double costs if the offer exceeded the judgment.

[20] Having determined that awarding costs as sought by the defendants is one of the options available to me, I must proceed to consider Rule 37B(6) which outlines the factors which the court may consider.

[21] The plaintiff’s analysis of Rule 37 and 37A and its “lopsided” result demonstrates faulty logic. If the plaintiff’s offer to settle is higher than the judgment, the defendant’s penalty is payment of the plaintiff’s costs throughout, and from the offer onward double costs; payment of the plaintiff’s disbursements throughout; and payment of its own costs and disbursements throughout. In any event, the analysis does not create a limitation on the courts discretion under Rule 37B.

[22] In respect of the argument that the plaintiff is denied her judgment, because she must pay the costs of the defendants, which may be the same amount or higher than the assessed damages, I find that this is a factor to be considered under Rule 37B(6).

Rule 37B(6)(a): whether the offer was one that ought reasonably to have been accepted

[23] The policy underlying Rule 37B as to promote early and reasonable efforts to settle litigation. In this case, the plaintiff maintained her position that she had suffered a mild traumatic brain injury, which was caused by the motor vehicle accidents, and that her damages were over $4,000,000. She received an offer which amounted to $450,000, which she rejected. She made offers to settle to the defendants for $1,500,000.

[24] The plaintiff knew that her claim of having suffered a mild traumatic brain injury in the accidents was hotly disputed by the defendants. Both sets of defendants took the position that the plaintiff failed to prove that she suffered a mild traumatic brain injury and that such an injury did not result from the accidents. I found that the plaintiff had failed to prove that she had injured her head in either accident and in any event, she had not proved that she suffered from any brain injury, despite her apparent belief that she did.

[25] The defendants’ offers are higher than what the defendants considered the range of damages for the soft tissue injuries, which I determined where caused by the accident. From that, I deduce that the defendants were making offers which considered the existence of a brain injury resulting from the accidents, but in amounts more modest than that sought by plaintiff in her offers, and significantly less that what she sought at trial. I did not assess the damages she would have received had she proven that the accidents caused a mild traumatic brain injury, but the defendants’ offers were far closer to the plaintiff’s offers before trial than what she claimed at trial. On that basis alone, I can conclude that the amount of damages claimed at trial was excessive. However, the plaintiff took that risk.

[26] In all the circumstances, I find that it was unreasonable for the plaintiff to have rejected the defendants’ offers to settle. This factor favours the defendants.

Rule 37B(6)(b): relationship between offer and final judgment

[27] The defendants offered to settle the plaintiff’s claim almost four times what was awarded. This factor favours the defendants.

Rule 37B(6)(b): relative financial circumstances of the parties

[28] The plaintiff asserts that she has no income and her only asset is a half interest in a heavily mortgaged house. She asserts that if she is required to pay her own and the defendants’ costs and disbursements she will be “left with nothing… and … with a debt she could not possibly pay”. She also points out that the defendants are in reality a large crown corporation and as such are able to absorb the financial costs.

[29] The defendants argue that the plaintiff was a sophisticated litigant who chose to go to trial rather than accept the defendants’ offers. She got far less than what she sought and less than what was offered to her by the defendants before trial. The defendants say that the insurance premium payers of British Columbia should not have to fund the litigation.

[30] In Bailey v. Jang, 2008 BCSC 1372, Hinkson J. made the following comments at ¶32 - 34:

[32] Second, [the plaintiff] 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.

[31] Madam Justice Boyd did consider the fact that the defendants were insured by ICBC in Radke, where the plaintiff accepted the defendants’ offer to settle her tort claim after 11 days of trial. In that case, the court found that the defendants had rejected a reasonable offer made by the plaintiff before trial and, therefore, the fact that they were represented by ICBC and, thus, that there was a substantial disparity in resources to finance the trial was appropriately considered. That is not what happened in the case at bar.

[32] I agree with the analysis in Bailey. The financial circumstances which must be considered are of the parties to the litigation. ICBC is not a party to the litigation and its financial circumstances should not be compared with those of the plaintiff.

[33] I find this factor to be neutral.

Rule 37B6(d): any other factors the court considers appropriate

[34] 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.

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.

[38] The defendants have also sought costs throughout pursuant to Rule 57. As I have acceded to the defendants’ argument regarding Rule 37B, it is unnecessary for me to consider the application of Rule 57.

“Gropper J.”

Citation:	*Abma v. Paul,*
	2009 BCSC 60