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Costs and Formal Offers

If ICBC makes a formal offer that is greater than I am awarded at trial, what are the cost consequences?  What if I cannot afford to pay their costs of running the trial?

In a decision released today by the BC Supreme Court (Barta v. DaSilva, 2017 BCSC 410) the trial to assess damages from the MVC took place in June 2014. The plaintiff had alleged a number of injuries, including a mild traumatic brain injury. He claimed that the brain injury “deprived him of the ability to make prudent financial decisions, the consequence being that he lost about $4 million in capital, as well as about $1,850,000 income to the date of trial and thereafter”. The trial finding was that he did not suffer a brain injury. He was awarded $77,750.00 in total damages.

Leading up to the trial, some offers were made. Importantly, the offers were “formal offers” meaning they are worded such that they are intended to trigger cost consequences if the opposing party fails to “beat” the offer at trial. On May 15, 2014, the defendant made a formal offer of $150,000.00 plus costs and disbursements. On May 27, 2014, the plaintiff made a formal offer of $970,000.00 plus costs and disbursements. The plaintiff clearly failed to “beat” the defendant’s offer at trial, and today’s decision was with regard to the cost consequences he should face as a result.

Relying on the wording of their offer, the defendants argued that the plaintiff should be awarded his litigation costs to the date of their offer, and that the plaintiff should pay both parties’ costs after the date of their formal offer. In the alternative, they argued that the plaintiff should have his costs to the date of the offer, and each party should bear their own costs after the offer. Of course, the plaintiff argued that he should have his costs throughout. As a side note – the costs of running a trial are significant, so these consequences were grave for the plaintiff.

Mr. Justice Affleck first summarized the relevant law, and whether the offer made by the defendant “ought reasonably to have been accepted”. He ultimately decided that the plaintiff would have his costs to the date of the offer, with each party bearing their own costs thereafter – largely because there would be no utility in ordering the plaintiff to pay the defendants’ costs after May 15, 2014, given his depleted assets:

[12]        The defendant’s offer of $150,000 plus costs and disbursements was a serious offer. The plaintiff ought to have known that the defendant’s legal advisers had a plausible basis for concluding that the plaintiff would be unable to prove a causal connection between his accident injuries and his financial losses. In my opinion the defendant’s offer ought reasonably to have been accepted.

[13]        The relative financial position of the parties is of no consequence on this application. The defence was conducted by ICBC, which obviously has much greater financial strength than the plaintiff, but unless it used that strength improperly in this litigation that is a neutral factor: See Vander Maeden v. Condon, 2014 BCSC 677.

[14]        When its offer to settle was not accepted the defendant had no serious option but to defend the action at trial. The result was an award of damages about one half the offer made by the defendant. In that circumstance the deterrent function of the costs rule would be nullified if I exercise my discretion by awarding costs to the plaintiff throughout as he submits I should. I declined to do so.

[15]        The evidence at trial indicates that the plaintiff’s assets were severely depleted by the effects of the financial downturn in 2008 and 2009. Mr. Creighton informed me that his client’s income is now meager. I can see no utility in imposing the costs of the trial on the plaintiff.

[16]        My order is that the plaintiff is entitled to his costs and disbursements to and including May 15, 2014, and that thereafter the parties will each bear their own costs and disbursements. I recognize that the usual order would be to impose the costs following the defendant’s offer on the plaintiff. The defendant, however, has proposed the disposition which I have made, which I consider to be generous to the plaintiff in the circumstances.