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Formal offers and disclosure failures

If ICBC makes a formal offer, and I don’t beat it at trial, are costs guaranteed to be ordered against me?  What if ICBC withheld a surveillance video that might help my case?

In a judgment released last week by the B.C. Supreme Court (Norris v. Burgess 2016 BCSC 1451) Mr. Justice Funt was asked to decide whether the plaintiff should bear for failing to beat a formal offer, in the context of late disclosure by ICBC. He was also asked to decide whether the defendant should face cost consequences for the late disclosure. The relevant timeline is as follows:

Offers and admissions

                October 23, 2015: defendants made a formal offer to settle the case for $678,500.00;

                November 16, 2015: trial started

                Just before the trial commenced, the defendants admitted liability

                At the end of trial, the jury awarded $462,374.00.

Surveillance video

                October 23, 2015: court order that any video surveillance be disclosed by this date

                ICBC disclosed a 2015 surveillance video during the third week of trial (December 2015)

Formal offers are unique. Normally, negotiations are not disclosed to the court, as they are confidential. However, formal offers contain a notice of the consequences for failing to beat that offer at trial. The consequence is that after the trial is done, the party who made the offer can bring it to the attention of the court, and ask that the other party pay all their costs since the date of the formal offer. Essentially they are saying “I offered to settle this case for more than it was worth, and she turned down my offer. Now, we’ve wasted all this time and money, and she got less than I offered. Accordingly, she should have to pay for the costs I’ve incurred since that offer was made and this whole thing should have ended.” Using this argument, the Defendants sought that the Plaintiff pay their legal fees since the date of the offer.

The surveillance video that was disclosed late was harmful to the defendants’ case. However, the late disclosure limited its use to the Plaintiff, and hampered settlement negotiations. Accordingly, the Plaintiff sought special costs from the defendant, in the amount of her legal fees.

Mr. Justice Funt rejected the Defendant’s claim for costs relating to the offer they had made, concluding that the failure to disclose the 2015 video undermined the settlement process contemplated in the rules surrounding formal offers. Accordingly, he assessed the Plaintiff’s entitlement to costs as though the formal offer had never been made. In concluding that the Plaintiff was entitled to special costs in the amount of her legal fees ($155,340.86), Mr. Justice Funt made the following findings:

[85]         Many plaintiffs injured in a motor vehicle accident rely on contingency fee arrangements in order to fund a claim. Accordingly, the use of a contingency fee arrangement in the case at bar would have been contemplated by ICBC.

[86]         I am satisfied that the fees and taxes are “proper” and were also “reasonably necessary” within the meaning of R. 14-1(3)(a). The contingency fee agreement is representative of such agreements and is accordingly “objectively reasonable in the circumstances” and will serve to provide “an indemnity to the [plaintiff], not a windfall”: see Girchuru at para. 155.

[93]         ICBC also did not admit liability for the June 2, 2010 accident until the eve of trial.

[94]         With respect to R. 14-1(3)(b)(v), ICBC’s late disclosure of the 2015 Video required the jury to stand down for approximately one-and-a-half hours. The presentation of the surveillance video evidence was disjointed and not as efficient as it could have been with timely disclosure. Also, the timely disclosure of the 2015 Video may have facilitated a higher settlement offer, made on a fully-informed basis with counsel’s advice, which may have led to settlement, avoiding the trial altogether.

[98]         In sum, I will assess the special costs based on the contingency fee agreement. The total fees with applicable taxes are assessed at $155,340.86.

[99]         In assessing the special costs, I have considered the fact that steps in the litigation were taken before October 23, 2015, the date by which the October 20, 2015 Order required disclosure. As is well-recognized, the object of the Rules of Court “is to secure the just, speedy and inexpensive determination of every proceeding on its merits.”

[100]     As noted, if disclosure of the 2015 Video had occurred on or before October 23, 2015, the steps taken before that time would more likely have resulted in fruitful settlement discussions, consistent with the object of the Rules of Court . Without the “harmful” (to the defendants’ case) 2015 Video, the plaintiff’s steps in the litigation prior to October 23, 2015 were less valuable at that time than they otherwise should have been. For example, with the 2015 Video in hand on October 23, 2015, plaintiff’s counsel could have undertaken settlement discussions with the benefit of the prepared medical-legal expert reports and discoveries, having taken into consideration the 2015 Video and other matters resulting from the plaintiff’s steps in the litigation taken before October 23, 2015. 

[101]     In short, ICBC’s late disclosure of the 2015 Video had a retrospective effect, extending to the period before October 23, 2015. As such, special costs are justified for the period before October 23, 2015, which is, of course, also covered by the contingency fee agreement.