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Formal Offers and Double Costs

What if I make a reasonable offer to settle my case and ICBC rejects it?  Will the court consider that offer when making an award of costs?

In today’s case, Arsenovski v Bodin (2016 BCSC 649), Justice Griffin addressed costs pursuant to her recent judgment after trial in the same matter.  At trial, she found the plaintiff was entitled to punitive damages of $350,000.00, plus $30,000.00 for her emotional distress and some $7,225.34 in legal fees.  For more discussion of the trial judgment, see our recent summary here (Shayden will insert hyperlink to JB’s summary when posted on HLaw).

The parties were once again before Justice Griffin after the plaintiff made an application for double costs against the defendants.  The basis of the application was the plaintiff’s offer to settle her case for less money than what was ultimately awarded at trial.  Indeed, the plaintiff had informally offered to settled her case for a mere $15,000.00 in 2005, and formally offered to settled for $78,000.00 in 2011.  Other offers were exchanged, but the $78,000.00 offer was the highest formal offer – less than 25% of the ultimate award  The defendants, meanwhile, continued to treat the case as a nuisance – they offered $10,000.00 to settle in 2011 and offered to settle for costs alone in 2013.

In 2013, plaintiff counsel wrote to defence counsel in an effort to accept the 2011 offer of $10,000.00 – but was told the offer had been revoked.  The issue went to chambers, and the defendants were successful in proving that the offer had been revoked.  The defendants’ success in chambers is perhaps the ultimate example of ‘winning the battle, but not the war’ – the plaintiffs were willing but barred from accepting a mere $10,000.00 to settle a case that ultimately attracted an award of close to $400,00.00.  Had the defendants allowed acceptance of that $10,000.00, the case would never have gone to trial and neither the trial award nor Justice Griffin’s scathing commentary about ICBC’s behaviour would have come into existence.

The defendants continued to issue tiny offers – either for costs alone, or – in one case – $10.00.  No, that’s not a typo – ten dollars, plus a waiver of costs.  The reason all of these pre-trial offers matter comes down to Supreme Court Civil Rule 9-1(4).  The overarching goal of the Rules is the just, speedy, and fair determination of every case on its merits.  Rule 9-1(4) is meant to further that goal by encouraging settlement where reasonable offers have been made.  Specifically, it provides that the court may consider an offer to settle when exercising the court’s discretion in relation to costs.  Indeed, Rule 9-1(5)(b) dictates that the court may award double costs of all or some of the steps taken in the proceeding after the date of delivery of the offer to settle.   In making an order of double costs, the court may consider things like whether the offer ought reasonably to have been accepted, the relationship between the terms of settlement and the final judgment of the court, the relative financial circumstances of the parties, and any other factor the court considers appropriate (Rule 9-1(6)).

The defendants submitted that they were reasonable in not accepting the first formal offer of $78,000.00 because of the “lacklustre” conduct of the plaintiff’s case and subsequent declining offers led them to believe the plaintiff and her counsel believed her claim had no merit.  Justice Griffin did not accept this argument:

[23]         Given the experience of ICBC in litigation, it would not have been reasonable for the defendants to infer that the lack of aggressive pursuit of the action by the plaintiff and her willingness to settle likely meant that the plaintiff thought her case had no merit. It could mean any number of things. For example, it could mean that the plaintiff had been let down by her counsel or that the plaintiff was intimidated by the prospect of a trial, it being a foreign and very adversarial process and would be a public airing of the defendants’ assertion that she had acted fraudulently.

Justice Griffin goes on to say that many people subject to civil or even criminal wrongs do not pursue justice through the court system given the emotional price of a public adversarial trial, and writes at para. 27 that it will “usually be a mistake to draw inferences as to what was unexpressed and in the minds of a party when making or refusing a settlement offer.”  She further dismissed the defendants’ argument that the plaintiff’s rationale as laid out in the first formal offer had not been adopted by the court.  While it hadn’t been precisely adopted, the offer did highlight elements of the plaintiff’s case that did create real risks for the defendants.  This was not, writes Justice Griffin, a case in which important information was undisclosed.  The defendants had all of the information they needed to assess the “very real” risks of trial, and moreover the defendant ICBC was “a sophisticated litigant well able to perform its own analysis of the merits of the plaintiff’s claim.”  She concluded that the defendant’s refusal to accept the first formal offer was unreasonable.

She does address the defendant’s argument that the award of punitive damages made at trial already addressed any blameworthy conduct – and therefore that conduct should not feature in an award for double costs.  While she generally agrees that blameworthy conduct was addressed by punitive damages, she also writes that the mere fact of an award of punitive damages doesn’t bar a plaintiff from recovering the costs benefits of having made a reasonable offer.  Thinking more broadly than this one particular case, Justice Griffin holds that refusing to award double costs where punitive damages have been awarded would simply encourage unreasonableness in all cases where punitive damages might be awarded.  She notes that ICBC itself has sought and been awarded double costs in a case where it also sought and obtained punitive damages.

Accordingly, Justice Griffin concludes simply:

[51] The First Formal Offer was open for acceptance until June 15, 2011. I have concluded that the defendants were unreasonable in rejecting that offer.

[52] I consider it appropriate to award the plaintiff ordinary costs at Scale B up to and including June 15, 2011; and to award the plaintiff double costs after this, that is from June 16, 2011 and forward.

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