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Court Discusses Cost Consequences of Formal Offers

In the recently published decision of Ward v. Klaus, 2012 BCSC 99, Mr. Justice Goepel addresses the “broad principles of application” underlying Rule 9-1 of the Supreme Court Civil Rules, which allows the court to consider an offer to settle when exercising its discretion in relation to awarding costs and emphasises the “broad discretion” trial judges have in applying that Rule.


Motor Vehicle Accidents and the Broad Principles of Application


The defendant in this case had made two formal offers related to a motor vehicle accident that occurred in February 2002. The plaintiff was ultimately awarded $433,103.63, but fell short of matching the defendant’s offers. Consequently, the defendant sought an order depriving the plaintiff of her costs from the date of the first offer and awarding costs to the defendant from the same date.


Justice Goepel awarded the plaintiff her costs up to the date of the first offer, essentially denying her costs of the fourteen day trial and said the following respecting his decision to do so:


[51] The defendant made a significant offer of settlement. While it may have been reasonable, from the perspective of the plaintiff, to take the case to trial, the defendant’s offer was more than generous and was well in excess of what was awarded at trial.


[52] The main reason the plaintiff failed to exceed the offer was because the trial judge did not accept her evidence concerning her intentions to return to work. He determined that she was never likely to have earned more than $6,000 a year and awarded only $160,324 for past income loss and loss of future earning capacity. Prior to trial, plaintiff’s counsel had calculated awards under those heads of $475,000. A relatively modest increase in the trial judge’s award under these heads of damage would have enabled the plaintiff to best the defendant’s offers.


[53] For the reasons I have stated, it cannot be said that the plaintiff should have accepted either offer. That is, however, the beginning, not the end of the analysis. Unlike Rule 37 which mandated the outcome regardless of the circumstances, Rule 9-1 gives the court a broad discretion to determine the consequence of a successful offer to settle. While the Rule is intended to reward the party who makes a reasonable settlement offer and penalizing the party who fails to accept it, the several options set out in Rule 9-1(5) allows the court to determine with greater precision the penalty or reward appropriate in the circumstances.


[54]In this case, regardless of the merits of the plaintiff’s case, the defendant’s offers to settle cannot be ignored. To do so would undermine the purpose of the Rule. Having decided to proceed in the face of two not insignificant and ultimately successful offers to settle, the plaintiff cannot avoid some consequences. That said, in the circumstances of this case, to deprive the plaintiff of her costs and have her in addition pay the costs of the defendant would be too great a penalty. It would not be fair or just to require the plaintiff to pay the defendant’s costs after the date of the First Offer. Similarly, however, I find that the defendant should not pay the costs of the plaintiff after the delivery of the First Offer, which costs were only incurred because the plaintiff decided to proceed.


Nominal Offers in Accident Cases


In his reasons, Justice Goepel rejected the proposition that the reasonableness of an offer may be decisive in determining the nature of an award of costs and held that nominal offers can have cost repercussions. He noted the following:


[39] In that regard it is important to note that the Rule does not make any reference to the impact of “unreasonable offers”. Further, it is with respect difficult to describe an offer as being “unreasonable” when it provides a better result to the plaintiff than that which he has obtained at trial. The fact that an offer does not provide an incentive to settle cannot be determinative.
[40] In certain circumstances a nominal offer may in fact be reasonable and should be accepted to spare all parties the costs of an expensive trial.
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