Rule 9-1 Cost Consequences and Formal Offers

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In Granja v. Jozsef, 2017 BCSC 1087 the Court reviews Rule 9-1 of the BC Supreme Court Civil Rules which offers a provision in which a party may be exposed to cost consequences in the event a formal offer to settle is made, but rejected.

Legal Framework

[10]         Rule 9-1 of the Rules provides a procedure by which a party may be subject to costs consequences in the event that a formal offer to settle is made but not accepted.  The relevant provisions of the Rule is as follows:

Rule 9-1 — Offers to Settle

(1) In this rule, “offer to settle” means

…

(c) an offer to settle … made under this rule, that

(i)          is made in writing by a party to a proceeding,

(ii)          has been served on all parties of record, and

(iii)          contains the following sentence: “The ………[party(ies)]………, ………[name(s) of party(ies)]………, reserve(s) the right to bring this offer to the attention of the court for consideration in relation to costs after the court has pronounced judgment on all other issues in this proceeding.”

…

(4) The court may consider an offer to settle when exercising the court’s discretion in relation to costs.

(5) In a proceeding in which an offer to settle has been made, the court may do one or more of the following:

…

(b) 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;

…

(6) In making an order under subrule (5), the court may consider the following:

(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.

The decision in Hartshorne v. Hartshorne, 2011 BCCA 29 [Hartshorne] at para. 25 is referenced:

[a]n 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” (A.E. v. D.W.J., 2009 BCSC 505, 91 B.C.L.R. (4th) 372 at para. 61, citing MacKenzie v. Brooks, 1999 BCCA 623, Skidmore v. Blackmore (1995), 2 B.C.L.R. (3d) 201 (C.A.), Radke v. Parry, 2008 BCSC 1397)…

The facts of the subject case:

  • After 22 days of trial, the plaintiff was awarded damages of $290,350;
  • Settlement Offers:
  • June 11, 2013 ICBC offered to settle for $15,000;
  • August 16, 2013 the plaintiff makes the first offer of $246,884.82 and sends it to ICBC, but not the defendant.  This Offer was not drafted pursuant to the provisions of Rule 9-1(1)(c)(iii) of the Supreme Court Civil Rules. The offer did not contain the required wording reserving the right to present the offer to the court for consideration in relation to costs.
  • October 2, 2013 ICBC offered to settle for $34,000.
  • November 15, 2013 the second offer was made in the sum of $70,000 to ICBC. Once again, the offer was not sent to the Defendant. This offer did contain the wording required by R. 9-1(1)(c)(iii).
  • February 14, 2014, ICBC offered to settle for $40,000.
  • September 3, 2014, counsel for the plaintiff sent a letter to ICBC advising that the plaintiff was withdrawing the second offer. There was no explanation provided for the withdrawal.
  • April 16, 2015 ICBC offered to settle for $55,000.
  • April 22, 2015 ICBC offered to settle for $120,000.

 

Positions of the Parties

[7]             The plaintiff’s position is that he should be awarded double costs after the date of the first offer, or alternatively after the date of the second offer.  Although the plaintiff argues both offers ought reasonably to have been accepted, he does acknowledge that the first offer did not contain the wording required by R. 9-1(1)(c)(iii).  However, he argues that double costs may be awarded from the date of that offer despite this non-compliance with the Rule. In addition, the plaintiff takes the position that he was not required to serve the defendant with either offer, as the defendant had filed but failed to serve his Response to Civil Claim (the “Response”), and in any event the third party ICBC was essentially responsible for conducting the defence of the claim and thus there was no practical need to serve the offers on the defendant.

[8]             ICBC opposes the application for double costs in relation to both offers. It argues that the first offer was not an “offer to settle” as defined in R. 9-1(1) because it did not contain the language in R. 9-1(1)(c)(iii), and that the second offer also fails to qualify under the Rule because it was not served on the defendant as required by R. 9-1(1)(c)(ii).  Further, ICBC disputes that the second offer ought reasonably to have been accepted. 

[9]             The defendant advised he regards this application as irrelevant because he is unable to pay any costs regardless of the amount.

The Court’s analysis of the issues:

Issue 1:  Whether the First or Second Offer Complied with the Requirements of R. 9-1(1)?

  • “The plaintiff’s failure to comply with the requirement of the Rule 9-1(1)(c)(iii) renders the first offer invalid for the purposes of R. 9-1: see P.H. v. Canada (Attorney General), 2016 BCSC 173 at para. 33, citing Roach v. Dutra, 2010 BCCA 264 at para. 52.” 
  • The issue is whether the plaintiff’s failure to serve this offer on the defendant was in breach of Rule 9-1(1)(c)(ii), which requires that an “offer to settle” be “served on all parties of the record.” 
  • “Party of record” is defined in R. 1-1(1) as “a person who has filed a pleading, petition or response to petition in the proceeding,” unless the context otherwise requires.  In this case the defendant filed a pleading, the Response, but did not serve it on the plaintiff.
  • This case does not detract from the clear requirement in R. 9-1(1)(c)(ii) that an “offer to settle” under the Rule must be served on all parties of record.
  • Therefore required to serve him in order to make an “offer to settle” within the meaning of R. 9-1(1)(c).
  • I am guided by the following comments of Goepel J. (as he then was) in Bronson v. Hewitt, 2011 BCSC 482 at para. 18: 

 

    • … Rule 9-1(c)(ii) mandates that offers to settle be served on all parties of record. [The defendant’s] offer was not so served. While service on Mr. Tompkins [a party of record who was no longer an active participant in the litigation and who had no involvement in the portions of the case involving the defendant who made the offer] may or may not have had any practical effect on the settlement of this particular action, Rule 9-1 does not contemplate the Court embarking on a case by case investigation as to the impact of non-compliance. The authors of the rules chose the language of the rule. It is not for the Court to rewrite the rule or otherwise interpret it. I find the failure to deliver either the Trial Offer or the Costs offer to all parties of record is fatal to [the defendant’s] application. The offers are not offers to settle as defined in Rule 9-1 and the provisions of Rule 9-1 are not engaged
  • Similarly, I find that the plaintiff’s failure to serve the second offer on the defendant is fatal to his application for double costs. The second offer was not an “offer to settle” within the meaning of R. 9-1(1) and therefore the provisions of R. 9-1 are not engaged.

 

Issue 2: Considerations in Deciding Whether to Award Double Costs

The factors outlined in Rule 9-1(6) of the Rules lists certain relevant factors to consider in deciding whether to make an award for double costs.  They are listed below:

(a) Whether the offer to settle was one that ought reasonably to have been accepted, either on the date that the offer was delivered or served or on any later date?

As set out in Hartshorne at para. 27, in considering this 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 [citations omitted].”  It would be improper for this Court to factor the award made at trial into this analysis; the question is what was reasonable at the time, assessed by “considering such factors as the timing of the offer, whether it had some relationship to the claim (as opposed to simply being a “nuisance offer”), whether it could be easily evaluated, and whether some rationale for the offer was provided”: Hartshorne at para. 27.  

One of the key issues in this case was the extent to which the plaintiff’s injuries were caused by the multiple collisions as opposed to the defendant’s assault on the plaintiff. At his examination for discovery, the plaintiff testified that he was “punched with a lot of force,” and that he could feel the punches. The second offer did not differentiate between the collisions and the assault and simply set out a lump sum without providing any rationale.  In addition, the expert medical evidence suggested there would be some improvement in the plaintiff’s condition and there was little mention of the impact of the plaintiff’s pre-existing wrist injury on his prognosis.  Although the comments attributed to the ICBC adjuster in Ms. Baily’s affidavit that the plaintiff was a liar and not credible are troubling, I am not prepared to base my analysis solely on the summary provided by Ms. Baily.  Under the circumstances as they presented themselves prior to trial, it was not unreasonable for the third party to maintain their position. In my view, given all of these uncertainties this factor weighs against taking the second offer into account in deciding whether to make an award under R. 9-1(5).

 (b) The relationship between the terms of settlement offered and the final judgment of the court

As stated earlier, the second offer was for $70,000, or $220,350 less than was awarded after trial. This factor weighs in favour of taking the second offer into account.

(c) The relative financial circumstances of the parties

As stated earlier, the plaintiff argues that the defendant’s position was irrelevant as it was ICBC who was ultimately responsible for the payment of any settlement.  He relies on the decision of J.D. v. Chandra, 2014 BCSC 1272 to support his position.  However, that decision does not stand for the proposition that when the third party is a well-financed corporation like ICBC the financial circumstances of the defendant need not be considered. Indeed, in Gonzales v. Voskakis, 2013 BCSC 675 at para. 39, Fitzpatrick J. rejected the notion that “ICBC’s greater financial clout” is necessarily a significant factor, and cautioned that it “must be remembered that although ICBC is well-funded, its resources largely come from the premiums of many individual insurers, who expect that these funds will be managed for the benefit of the insurance system as a whole.” While I accept that the plaintiff was in difficult financial circumstances as a result of the collision I am also cognizant of the fact that the defendant was also in a difficult financial situation – retired, elderly, and living on a pension.  In my view the plaintiff’s situation relative to that of the defendant is so similar that, given the fact that ICBC was a third party, this factor does not weigh in favour of either party.

Conclusion

After considering all of the relevant factors in this case I find that even if the second offer had qualified as an offer to settle under R. 9-1(1), I would decline to award double costs from the date it was served, or from any other date during which the offer was open, under R. 9-1(5). The plaintiff’s application for double costs is dismissed.  The plaintiff is entitled to his costs of the proceedings to the end trial, on Scale B. 

The defendant and third party shall have costs, on Scale B, of this application.

 

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