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Formal offer and costs consequences

If the defence makes a formal offer that is not accepted, what happens if the judge awards less than the formal offer?

In today’s case of Ben-Yosef v. Dasanjh (2016 BCSC 1945), the defence made a formal offer of $70,000.00 plus costs. The offer was made 10 days before the start of trial. At trial, Mr. Justice Bowden awarded the plaintiff $32,548.52 plus costs, which is less than half of what the defence had offered.

While most settlement negotiations are confidential between the parties, a formal offer includes wording that allows it to be brought to the attention of the judge – noting that if the offer is not “beaten” at trial, the defence will seek costs from the date that the offer was made. Typically, the successful party has their “costs” paid by the unsuccessful party through to the end of trial, but a formal offer that is not beaten can change that. Here the judge awarded much less than the offer, and the judge considered whether the plaintiff should suffer the consequences of the formal offer.

In concluding that the offer ought to have been accepted and there was sufficient time for it’s consideration, Mr. Justice Bowden ordered that the plaintiff should be deprived of his costs from the date of the formal offer, and that the plaintiff should pay the defence for their costs from that date onward:

[8]             The rules on costs are intended 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. (Hartshorne v. Hartshorne, (2011 BCCA 29)

[9]             In considering whether the offer to settle was one that ought reasonably to have been accepted the circumstances that existed at the time the offer was made should be considered rather than the award that was made using hindsight.

[10]         At the time the offer was made there is no suggestion that the plaintiff was not ready for trial. By that time examinations for discovery would have been completed and documents exchanged along with expert medical reports. In my view, the parties were in as good as a position as they would ever be to assess the relative strengths and weaknesses of the case. (See the comments of Fleming J. in White v. Wang, 2015 BCSC 1080 at para. 10)

[11]         The plaintiff had four business days and a weekend to consider the offer of the defendants and presumably discussed the merits of accepting the offer with his counsel. The defendants’ offer was rejected and no counter-offer was made.

[12]         Fleming J. referred to comments by Griffin J. in Bevacqua v. Yaworski, 2013 BCSC 29, regarding the process at para. 8:

In personal injury claims, in which liability has been admitted, there is in most cases a somewhat predictable range of possible awards. It is to be expected that counsel taking a case to trial will have discussed with their clients the possible range of damages, the evidentiary issues and the risks of and expense of proceeding to trial. It is to be expected therefore that as the trial approaches, counsel and their client have in mind a possible range of recovery and the risks of litigating. Naturally, a plaintiff hopes for an award in the high end of the range and the defendant for an award at the low end.

[13]         In that case the plaintiff was deprived of costs when the defendant delivered an offer to settle on the eve of trial.

[14]         While I understand that the plaintiff attended his daughter’s wedding on the weekend following the making of the offer, there is no suggestion that the plaintiff and his counsel had any difficulty discussing the offer before it expired.

[15]         The offer by the defendants was more than twice the amount that was awarded to the plaintiff.

[16]         As to the relative financial circumstances of the parties other than understanding that the plaintiff has not been employed for some period of time there was no evidence upon which to determine what the financial impact of the cost award sought by the defendants would be on the plaintiff.

[17]         Having considered the factors mentioned and the circumstances of this case, I have concluded that the plaintiff should be deprived of costs from the date of the offer to settle by the defendants until the end of the trial and costs shall be awarded to the defendants for that period.