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Settlement Offers and Court Costs

Settlement Offers and Court Costs

Norris v Burgess 2016 BCSC 1451 deals with settlement offers and court costs, that is how courts adjust cost upwards or downwards either in favour of one party or against the other party depending on the parties conduct and the terms of any formal offers to settle made in accordance with the rules.

Costs are increasingly being awarded against unsuccessful estate litigants on a personal basis and the amount of them has escalated over the years almost like property prices in the lower mainland.

In writing for our Court of Appeal in C.P. v. RBC Life Insurance Company, 2015 BCCA 30, leave to appeal ref’d [2015] S.C.C.A. No. 136, Justice Goepel, in considering a trial award of double costs, sets forth generally the purpose of the costs rules related to settlement offers:

[94]      The underlying purpose of the offer to settle rule was set out in Hartshorne:

[25] 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” (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). In this regard, Mr. Justice Frankel’s comments in Giles are apposite:

[74] The purposes for which costs rules exist must be kept in mind in determining whether appellate intervention is warranted. In addition to indemnifying a successful litigant, those purposes have been described as follows by this Court:

  • “[D]eterring frivolous actions or defences”: Houweling Nurseries Ltd. v. Fisons Western Corp. (1988), 37 B.C.L.R. (2d) 2 at 25 (C.A.), leave ref’d, [1988] 1 S.C.R. ix;
  • “[T]o encourage conduct that reduces the duration and expense of litigation and to discourage conduct that has the opposite effect”: Skidmore v. Blackmore (1995), 2 B.C.L.R. (3d) 201 at para. 28 (C.A.);
  • “[E]ncouraging litigants to settle whenever possible, thus freeing up judicial resources for other cases: Bedwell v. McGill, 2008 BCCA 526, 86 B.C.L.R. (4th) 343 at para. 33;
  • “[T]o have a winnowing function in the litigation process” by “requir[ing] litigants to make a careful assessment of the strength or lack thereof of their cases at the commencement and throughout the course of the litigation”, and by “discourag[ing] the continuance of doubtful cases or defences”: Catalyst Paper Corporation v. Companhia de Navegaçao Norsul, 2009 BCCA 16, 88 B.C.L.R. (4th) 17 at para. 16.

[95]      A plaintiff who rejects a reasonable offer to settle should usually face some sanction in costs. To do otherwise would undermine the importance of certainty and consequences in applying the Rule: Wafler v. Trinh, 2014 BCCA 95 at para. 81. The importance of those principles was emphasized by this Court in A.E. Appeal at para. 41:

[41] This conclusion is consistent with the importance the Legislature has placed on the role of settlement offers in encouraging the determination of disputes in a cost-efficient and expeditious manner. It has placed a premium on certainty of result as a key factor which parties consider in determining whether to make or accept an offer to settle. If the parties know in advance the consequences of their decision to make or accept an offer, whether by way of reward or punishment, they are in a better position to make a reasoned decision. If they think they may be excused from the otherwise punitive effect of a costs rule in relation to an offer to settle, they will be more inclined to take their chances in refusing to accept an offer. If they know they will have to live with the consequences set forth in the Rule, they are more likely to avoid the risk.

[40]         With respect to the first factor in R. 9-1(6), whether the offer ought reasonably to have been accepted, Goepel J.A. in C.P. states:

[97]      Whether an offer to settle is one that ought reasonably have been accepted, is assessed not by reference to the award that was ultimately made, but under the circumstances existing when an offer was open for acceptance: Bailey v. Jane, 2008 BCSC 1372 at para. 24 and Hartshorne at para. 27. This factor is considered from the perspective of the person receiving the offer. It has both a subjective and objective component. The court is entitled to take into account the reasons why a party declined to accept an offer to settle. The court must consider whether those reasons are objectively reasonable.

[41]         I emphasize that R. 9-6(1)(a) uses the word, ought. “Ought” is defined in The Oxford English Dictionary, 2d ed. as follows:

b. In present sense: = Am (is, are) bound or under obligation: you ought to do it = it is your duty to do it; it ought to be done = it is right that it should be done, it is a duty (or some one’s duty) to do it. (The most frequent use throughout. Formerly expressed by the pres. t., OWE v. 5.)

[42]         The use of the word “ought” in R. 9-6(1)(a) evinces a legislative intent that the court may consider whether the offer was one that the offeree should have accepted. Where the offeror is the plaintiff, this wording encourages an offer that falls at the low end of the range of potential trial awards the plaintiff is anticipating. Where the offeror is the defendant, it encourages an offer that falls at the high end of the range of potential trial awards the defendant is anticipating. In short, the word “ought” brings the respective positions of the parties closer, with the object of reaching an agreement and conserving judicial and other resources.

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