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Double costs where reasonable formal offers refused

Picture this: you make a formal offer to settle, and ICBC doesn’t accept it, ultimately forcing a trial. At trial you’re awarded more than what you offered to accept. Should you be entitled to extra costs for the unnecessary litigation? What if ICBC refused to budge despite the relatively small distance between your settlement positions?

In today’s case of Litt v. Guo (2016 BCSC 295), the plaintiff  was awarded $702,435.26 by the trial judge for her injuries. Prior to the beginning of trial, she made three formal offers to settle her case. Formal offers are a special type of offer that include wording to the effect of “if you don’t accept this offer and the trial result is better than this offer, we’ll bring the offer to the attention of the court and seek double costs for the unnecessary litigation”.

The offers made were as follows:

  • October 20, $682,000. This offer did not have a time limit attached to it.
  • October 23 at 1:49 p.m., $647,000. This offer revoked all previous offers and was open until October 24 at 4:00 p.m.
  • October 4, $550,000. This offer was open until 10:00 a.m. on the first day of trial.

She sought double costs from the dates of the delivery of three separate formal offers to settle and preferred that the double costs start on the date of the first formal offer.

The parties got within $93,000.00 of each other in negotiating positions, but then the defence took a stand on their position and did not move. In awarding double costs to the plaintiff from October 26th onwards, Mr. Justice Schultes made the following remarks:

[23]         The applicable portion of Rule 9-1(5) in this case is the authority to award double costs of all or some of the steps taken in the proceeding after the date of delivery or service of the offer to settle. Pursuant to Rule 9-1(6), the factors to be considered in making such an award are:

(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 served 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.

[24]         There is no dispute that the purpose of the rules governing double costs is set out in Hartshorne v. Hartshorne, 2011 BCCA 29, at paras. 25 and 27:

An award of double costs is a punitive measure against a litigant for that party’s failure, in all of the circumstances, to have accepted an offer to settle that should have been accepted. Litigants are to be reminded that costs rules are in place “to encourage the early settlement of disputes by rewarding the party who makes a reasonable settlement offer and penalizing the party who declines to accept such an offer.”

The first factor – whether the offer to settle was one that ought reasonably to have been accepted – is not determined by reference to the award that was ultimately made. Rather, in considering that factor, the court must determine whether, at the time that the offer was open for acceptance, it would have been reasonable for it to have been accepted…

[39]         Finally, I will address a broader concern raised by Mr. McHale, relying on additional comments in Fan at para. 19:

The reintroduction of judicial discretion in costs certainly serves the ends of justice. Costs should be a penalty for unreasonable conduct in the litigation, not a penalty for failing to guess the outcome. In this regard, Courts must, I think, extend some leeway to litigants holding honest but, ultimately, mistaken views of their claims. It is generally better that such expectations be disposed of at law, rather than discouraged. The public should not be given the impression that there is no reasonable access to a legal resolution. It must be recognized that some people will only be comfortable if they “hear it from the judge.” This should be a valid option for those who seek it, not a form of deemed unreasonableness. As such, inducements to settle, and to avail oneself of alternate dispute resolution, ought to complement rather than obstruct judicial determinations.

[40]         Similar reasoning led to the exercise of the Court’s discretion to relieve the plaintiff from some of her costs consequences in Park v. Targonski, 2016 BCSC 31.

[41]         I agree with the proposition put forward in Fan, but what Rule 9‑1 addresses is unreasonable conduct as determined by an application of the factors in subrule (6), as I have engaged in here. There is always the discretion to modify what would otherwise be an order for increased costs against an honest but mistaken plaintiff in appropriate circumstances, such as in Park. And, even assuming that the language in Fan was also intended to apply to those who give settlement instructions on behalf of defendants in motor vehicle cases, which I strongly doubt, there is no evidence at all here that any intransigence on settlement was motivated by an honest but ultimately mistaken view of the claim.

[42]         The inference I draw is that this had become, as I said earlier, a question of numbers between the parties, in which the defendants elected to take a stand in the face of an offer that was well within the range that could be expected after trial. I think that qualifies as unreasonable conduct for the purposes of the Rule.

[43]         As a result I order that the plaintiff will receive double costs from a point slightly after the delivery of her formal offer to settle of October 24, 2014, to recognize a reasonable period within which it could have been considered. In all the circumstances I think that the date that should be used is October 26, 2014.