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Failure to Accept a Pre-Trial Settlement Offer Results in Cost Consequences

In the recently reported case of Khunkhun v. Titus, 2011 BCSC 1677, Mr. Justice Willcock considered costs issues related to a jury trial which took place in May 2011. At trial, the plaintiff sought damages of close to one million dollars. The case turned on the credibility of the plaintiff and the duration of her “vestibular injury”. After hearing the case, the jury awarded damages of $45,500.00. Prior to the trial, ICBC’s lawyers had made a formal settlement offer to the plaintiff of $70,000. As a result of the plaintiff failing to beat the formal offer at trial, the defendant sought an order that the plaintiff recover her disbursements to the date of the offer and that the defendant be awarded legal costs and disbursements from the date of the offer onward.


In the opening to his analysis, Justice Willcock stated:


[18] Where a successful party fails to accpet a pre-trial settlement offer that exceeds her ultimate recovery, that failure should have some cost consequences.
The question for the court was what those cost consequences would be. The court acknowledged that the consequences to the plaintiff would be serious if it were to award costs to the defendant from the date of the offer. In that regard, Justice Willcock noted that such an award would cause the plaintiff to be “substantially indebted to the defendant without seeing any of the proceeds of her claim and owe at least the costs of disbursements to her counsel.”After considering the factors set out in subrules 9-1(4)-(6) of the Supreme Court Civil Rules Justice Willcock decided that it would be unfair and punitive to award ICBC its legal costs and disbursements following the date of the formal offer. In the end result, the court held that the plaintiff would be entitled to her costs and disbursements only to the date of the offer and not thereafter – despite being successful at trial. In coming to his decision, Justice Willcocks confirmed that insurance can be considered in an assessment of costs:


[27] In Smith v. Tedford, 2010 BCCA 302, the Court of Appeal discussed the apparent conflict in two decisions of this court as to whether ICBC’s assumption of the defence was a relevant consideration under the costs rule. Those cases were Bailey v. Jang, and Radke v. Parry, 2008 BCSC 1397. Mr. Justice Lowry for the Court of Appeal in Smith v. Tedford concluded at paragraph 19:


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 [in the court below] 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. Clearly, with ICBC having assumed the defence, the financial ability to defend was much greater than the financial ability to prosecute, and that is of no small importance to considering whether and to what extent the financial circumstances of the parties, relative to each other, bear on an award of costs where, as here, there has been an offer of settlement made ten days before a trial for the assessment of personal injury damages which was not accepted until the seventh day of the trial.


[28] In my view, ICBC should now regard this question as settled and ought not to persist in the argument made before me that insurance cannot be considered in an assessment of costs. As Mr. Justice Burnyeat stated in Martin v. Levigne, 2010 BCSC 1610, at para. 25, the question has been settled.


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