IN
THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20100505

Docket:
M042823

Registry: Vancouver

Between:

Deborah Anne Ostiguy

Plaintiff

And

Katherine Hui and Victor Hui

Defendants

Before: The Honourable Mr. Justice Williams

Ruling re: Costs Application

Introduction

[1]            
This is an application by the defendants seeking
an order for costs against the plaintiff.

[2]            
The trial of this matter proceeded before a
jury, commencing August 10, 2009 and concluding August 18, 2009. The defendants
admitted liability; the jury awarded the plaintiff the sum of $10,000
non-pecuniary damages.

Background Facts

[3]            
On December 12, 2003, the plaintiff, driving her
automobile, was involved in a collision with a vehicle owned by one of the
defendants and operated by the other. On July 7, 2004, she commenced a lawsuit
against those defendants.

[4]            
Initially, the plaintiff was represented by
counsel, Mr. Knutson. He secured the original trial dates of August 2006.

[5]            
On January 20, 2006, the plaintiff filed a
notice of change of solicitor. One month later, on February 20, 2006, she
retained new counsel, Mr. Kazimirski. Her first examination for discovery
took place on March 10, 2006.

[6]            
On July 28, 2006, the defendants delivered a
formal offer to settle the plaintiff’s claim for $30,000 plus costs in accordance
with Rule 37(22) and (37) of the Rules of Court (the “Offer”).

[7]            
In early August 2006, counsel for the plaintiff
brought an application to adjourn the August 8, 2006 trial date, and that
application was granted.

[8]            
In March 2007, a new date was secured; the trial
was scheduled to commence on September 22, 2008.

[9]            
On March 28, 2008, the date following the
scheduled continuation of the plaintiff’s examination for discovery, the
plaintiff delivered a notice of intention to act in person.

[10]        
The continuation of the plaintiff’s examination for
discovery proceeded on July 14, 2008. On or about that date, the
defendants admitted liability.

[11]        
The September 22, 2008 trial date was adjourned
on the first day of the trial on the application of the plaintiff. The plaintiff,
although she had never filed a jury notice, indicated that she wished the case
to be heard by a judge and jury.

[12]        
The trial was rescheduled to commence April 27,
2009. It did not commence on that date because the plaintiff had not paid her
jury fees in time. The trial was adjourned to August 10, 2009.

[13]        
The trial proceeded with a jury, commencing
August 10, 2009 and concluding on August 18, 2009. At the conclusion of
proceedings, the jury awarded the plaintiff the sum of $10,000 general damages.

[14]        
The matter of costs was adjourned to a later
date. The plaintiff retained counsel for the purpose of that application and
submissions were made on November 9, 2009.

Position of the Defendants

[15]        
The defendants say that they made a formal offer
to settle which they delivered to the plaintiff on July 28, 2006. The sum
offered ($30,000) substantially exceeded the award of damages at trial.

[16]        
In the submission of the defendants, the Offer
tendered was clear, unambiguous, and substantially in compliance with the
requirements of the Rules of Court. The defendants say that it should be
recognized as a valid offer within the context of Rule 37B. They submit that
the plaintiff should be entitled to recover her costs to the date of the Offer
(July 28, 2006) and that she should be ordered to pay to the defendants their
costs and disbursements from the date of that Offer forward.

[17]        
In the event that the Offer is found not to
comply with the requirements of the Rule, the defendants say that a reasonable
application of the Court’s discretion under Rule 37B, taking into account a
number of applicable considerations, should lead to that same outcome. The
considerations the defendants say are germane are these:

(a)      The Offer was one that ought reasonably to have been
accepted by the plaintiff by late July 2006;

(b)      The Offer significantly exceeded the judgment amount;

(c)      It would not be unfair, financially, or otherwise, to the
plaintiff to make the award sought by the defendants;

(d)      The Offer was made under former Rule 37, thereby giving the
plaintiff notice of the potential consequences of failing to accept it; and,

(e)      The award sought by the defendants would be consistent with
the principles established by the jurisprudence under Rule 37 and 37B.

Position of the Plaintiff

[18]        
The plaintiff says that the Offer tendered by
the defendants was defective; it was not in strict compliance with the
requirements of Rule 37, and for the purpose of Rule 37B, should not be found
to be an offer.

[19]        
In the absence of an offer, the plaintiff says
that there are good reasons for the Court to exercise its discretion to award
her her costs on Scale B throughout.

[20]        
As an alternative position, the plaintiff urges
the Court to use the date on which the defendants admitted liability, July 14,
2008, and to award the plaintiff her costs to that point in time. Beyond that
point, she contends that the defendants should be entitled to recover their
disbursements only or, as a further alternative, she submits that each side
should bear its own costs.

Issues

[21]        
There is no dispute between the parties that the
application of Rule 37B to the matter at bar must be determined.

[22]        
There are two important issues to be resolved.
The first is whether the Offer is an “offer to settle” as that term is defined
in Rule 37B(1).

[23]        
The second issue is a more general one: how the
Court should exercise its discretion with respect to costs, taking into account
the available options provided by the Rule and the various factors to be
considered.

[24]        
It should be noted that the defendants have not
raised an argument seeking to invoke Rule 57(10), namely that because the
plaintiff recovered a sum within the jurisdiction of the Provincial Court,
under the Small Claims Act, R.S.B.C. 1996, c. 430, she is not
entitled to costs other than disbursements. It should also be made clear that
the defendants do not seek an order for double costs.

Discussion

[25]        
The relevant provisions of Rule 37B are as
follows:

RULE 37B — OFFER TO SETTLE

Definition

(1) In this rule, "offer to
settle" means

(a) an offer to
settle made and delivered before July 2, 2008 under Rule 37, as that rule read
on the date of the offer to settle, and in relation to which no order was made
under that rule,

(b) an offer of
settlement made and delivered before July 2, 2008 under Rule 37A, as that rule
read on the date of the offer of settlement, and in relation to which no order
was made under that rule,

…

Offer may be considered in relation to
costs

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

Cost options

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

(a) deprive a
party, in whole or in part, of any or all of the costs, including any or all of
the disbursements, to which the party would otherwise be entitled in respect of
all or some of the steps taken in the proceeding after the date of delivery of
the offer to settle;

(b) award double
costs of all or some of the steps taken in the proceeding after the date of
delivery of the offer to settle;

(c) award to a
party, in respect of all or some of the steps taken in the proceeding after the
date of delivery or service of the offer to settle, costs to which the party
would have been entitled had the offer not been made;

(d) if the offer was
made by a defendant and the judgment awarded to the plaintiff was no greater
than the amount of the offer to settle, award to the defendant the defendant’s
costs in respect of all or some of the steps taken in the proceeding after the
date of delivery of the offer to settle.

Considerations of court

(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 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.

[26]        
The parties are at odds as to whether or not the
Offer tendered in this case is properly considered an “offer to settle” within
the meaning of the Rule. The plaintiff says it is not; the defendants say it
is.

[27]        
The parties are agreed that the Offer here was
not in full and perfect compliance with the Rule as it was in force at the
time.

[28]        
Rule 37 required that an offer to settle was to
be in Form 64 found at Appendix A of the Rules of Court.

[29]        
Up to July 1, 2006, the relevant part of Form 64
was in this format:

The _____ [party]
_____ offers to settle this proceeding [or, the following claims in this
proceeding] on the following terms [set out terms in consecutively
numbered paragraphs] and costs in accordance with Rule 37(22) and
(37).

[30]        
On July 1, 2006, there was a change to Form 64. The
change entailed “Rule 37(22) and (37)” being replaced with “Rule 37”.

[31]        
The Offer as tendered by the defendants was in
the format of the earlier Form 64; it did not incorporate the change. In
the result, it read as follows:

The Defendants offer to settle the claim of
the Plaintiff on the following terms:

1.         Payment
of the sum of Thirty Thousand Dollars ($30,000.00), after taking into
account Part 7 Benefits paid or payable, pursuant to Section 25 of the Insurance
(Motor Vehicle) Act RSBC 1996, c. 231, and advances paid to date; and

2.         Payment of
costs in accordance with Rule 37(22) and (37).

[32]        
It seems that what happened here arose from an
oversight on the part of the solicitor for the defendants, the failure to make
the necessary change after July 1, 2006.

[33]        
The plaintiff says that there is a line of
authority that should be held to govern this situation, dictating that any
deviance from precise compliance with the prescribed format is a proper basis
to disregard the Offer. Specifically, she relies upon Gosbjorn v. Krompocker
Estate, 2008 BCSC 1614, and Lau v. Rai, 2009 BCSC 696.

[34]        
The defendants take the position that the
determination of whether or not this is an offer entails a certain degree of
flexibility, focusing upon the notion of whether the Offer was effectively
communicated. They rely upon a line of authorities, principally Mackenzie v.
Brooks, 1999 BCCA 623, and Cimolai v. Hall, 2007 BCCA 225.

[35]        
In Mackenzie, the Court of Appeal dealt
with an offer which complied with Form 64, but included one additional word,
“for”, preceding “costs”. Starting from the basic proposition that, in order to
rely on the benefits of Rule 37, the offer must strictly conform to the
requirements of the Rule, the court then examined carefully the offer as it had
been presented, concluding that its meaning was clear and that there was no
ambiguity. It was found to be a valid offer.

[36]        
In Cimolai, the court was called upon to
consider an offer which did not completely comply with Form 64. There, the
offer in question proposed “to settle this proceeding for the total sum of
$9,900 in accordance with Rule 37(22) and (37) inclusive of interest pursuant
to the Court Order Interest Act, R.S.B.C. 1996, c. 79.” Conspicuously
absent was any reference to costs, and so the offer did not properly and fully
comply with Form 64. The court recognized the general rule that an offer must
be unambiguous and unconditional, citing Mackenzie as authority and also
observed that the costs consequences of the offer are stipulated by law and
follow as a matter of course. In the result, it was concluded that:

The absence of
“costs” in the offer had no effect on the outcome. The sum for damages was
plainly and unconditionally stated. Had the appellant taken the offer, Rule
37(22)(b) would have automatically entitled the appellant to costs up to the
date of the offer.

[37]        
In the result, the court found the offer as
tendered was sufficient to constitute an offer for the purpose of Rule 37.

[38]        
I turn now to the contrary line of authorities.

[39]        
In Gosbjorn, Gray J. had to deal with an
offer which included a term that the parties would bear their own costs. She
concluded, on the basis of well-established authority, that “an offer to settle
that includes the terms that the parties bear their own costs is not in Form 64
and therefore is not a valid offer under Rule 37.”

[40]        
The correctness of that decision seems
unassailable. After all, Form 64 specifically requires that costs will be part
of the offer. An offer that provides otherwise is materially at odds with the
Rule.

[41]        
Powers J. followed Gosbjorn in Lau.
There, the offer which the defendants had tendered purported to limit the
recovery of costs to disbursements only. It was a matter not unlike the
situation in Gosbjorn, and again the outcome seems entirely logical. The
court observed “… an attempt to make an offer that escapes the obligation to
pay costs is not an offer which complies with Rule 37 or Rule 37A”.

[42]        
Powers J. recognized that there was some
conflict in the authorities. He went on to deal with the issue of whether the
offer in that case should be considered nevertheless in the exercise of his
discretion under Rule 37B. In deciding that it should not, he offered this
observation:

26.       Having
considered the issue afresh, I am persuaded by the reasoning in Gosbjorn.
When the Rais made their offer Rule 37 applied. The offer did not comply with
the strict requirements of Rule 37. Mr. Lau’s counsel would have been
correct in advising Mr. Lau that he need not be concerned about the offer or
its consequences because it was non-compliant. It would be unfair for that
situation to change retroactively. The object of encouraging settlement would
not be accomplished by finding that Rule 37B operated retroactively to include
non-compliant offers. Rule 37B specifically defines what constitutes an offer.
That definition does not include a non-compliant offer made pursuant to Rule 37
or Rule 37A prior to July 1, 2008. I reach this conclusion after consideration
of the conflicting decisions and with the greatest respect for the judges who
decided each case.

[43]        
In my view, the factual circumstances in both Gosbjorn
and Lau were significantly different than those at bar. In each case,
the deficiency in the offer was material and not simply a matter of form: each
made an offer that specifically sought to deprive the offeree of something that
Rule 37, by way of Form 64, entitled them to. I consider that quite relevant to
the outcome.

[44]        
The plaintiff argues that, by not mentioning the
other subsections of Rule 37, the defendants restricted what options were open
to the plaintiff, and therefore the order is deficient. She also contends that Mackenzie
v. Brooks should not be relied upon as it has been overtaken by other
authorities.

[45]        
Specifically, the plaintiff points out that
Burnyeat J. in Reddemann v. McEachnie, 2006 BCSC 332 referred to the
decision of the Court of Appeal in Mackenzie v. Brooks being effectively
overruled by subsequent Court of Appeal decisions in Brown v. Lowe, 2002
BCCA 7, and Cridge v. Harper Grey Easton & Co., 2005 BCCA 33. She
then uses this statement to support the conclusion that by mentioning only
Rules 37(22) and 37(37), the defendants’ offer had the effect of depriving the
plaintiff of the benefit of other subrules that she was properly entitled to
have.

[46]        
In fact, the statement of Burnyeat J. in Reddemann
regarding the overruling of Mackenzie v. Brooks refers specifically to
the need for an offer to settle to be reasonable in order to be effective. Reddemann
involved a dispute where one of the defendants made a formal offer in the
amount of $1.00, and that was refused by the plaintiff. The claim against that
defendant was dismissed and he sought double costs pursuant to Rule 37. The
issue was whether an offer had to be reasonable in order to entitle a party to
double costs. In Mackenzie, the court had stated at para. 21. that
a purpose of Rule 37 was for parties to make and accept “reasonable offers”.

[47]        
This statement was relied on in subsequent cases
to conclude that an offer had to be reasonable in order to bring itself under
Rule 37 (and the consequences of not accepting such an offer). Cridge
and Brown both state that if Rule 37 applies, then a judge does not have
any discretion as to whether or not to apply the framework of the Rule. Therefore
formal offers for a dollar can bring liability to pay a party double costs
if not accepted and the claim is dismissed.

[48]        
The specific holding that I take from Mackenzie
v. Brooks (and from Cimolai) is that absolute letter-perfect
compliance with the prescribed form is not essential. It is however necessary
that the offer be clear, unambiguous and unconditional. I do not understand Reddemann
to have brought that proposition into any doubt.

[49]        
Accordingly, I do not see how these authorities
support the argument of the plaintiff. Nothing in these cases speaks to the
unavailability of specific subrules outside of what is mentioned in the formal
offer to settle.

[50]        
In many cases dealing with Rule 37, the offer
process under the Rule has been described as cost-focused (Cridge at
para. 23 and Mackenzie at para. 24). In Sangha v. Azevedo, 2004
BCSC 750, aff’d 2005 BCCA 184, the court stated that by mentioning Rule 37, the
opposite party is put on notice that double costs could be pursued if the offer
is refused. All of these cases took place when Form 64 specifically referred to
subrules 22 and 37 but no others. The matter of double costs is addressed in
subrule 24, which is not mentioned in Form 64. Nevertheless, many cases are
litigated regarding the applicability of this provision, despite there being no
mention of it in the formal offer to settle.

[51]        
Statements are found in some of the cases
suggesting that once Rule 37 is “in play”, all subsections of the Rule are
applicable. Finch C.J.B.C. in Brown dissented on the issue of whether a
formal and informal offer to settle regime operated in tandem. In his
judgement, at para. 107, he stated “If a party chooses to operate with the
Rule 37, all of its provisions must apply.” This quote has been relied on in
Pacific Hunter Resources Inc. v. Moss Management Inc., 2002 BCSC 396 at
para 14; Fulton v. Fulton, 2002 BCSC 1194 at para. 33. In addition, in Reddemann,
the court stated at para. 12, “I am also satisfied that nothing turns on the
fact that the offer to Settle was said to be made pursuant to Rule 37(22)
rather than pursuant to Rule 37(2) or Rule 37 generally.”

[52]        
Finally, I would note that Rule 1(4) states that
the Rules govern, not the offer to settle.

[53]        
In the result, I am unable to accede to the
plaintiff’s argument. The Offer does not restrict the applicability of the
subrules.

[54]        
In conclusion on this point, I am satisfied that
it is not necessary that an offer to settle comply perfectly with Form 64. However,
it must be clear, unambiguous and unconditional. It cannot purport to deprive
the offeree of rights that Rule 37 confers, such as the offers in Gosbjorn
and Lau did.

[55]        
Specifically, I find that the Offer made by the
defendants in the case at bar was a valid offer to settle for the purposes of
Rule 37B, and may be considered in the exercise of this Court’s discretion in
deciding the issue of costs.

[56]        
That discretion is to be exercised in accordance
with subrule (6). The specific criteria that may be considered have been
enumerated above at paragraph 25.

[57]        
Both the first and second enumerated factors are
based on the policy principles which underlie the rules relating to offers to settle
and costs. The concept is to promote reasonable conduct in the course of
litigation. Specifically, it is 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: Mackenzie v. Brooks.

[58]        
The first consideration is whether the Offer was
one which ought reasonably to have been accepted. That is, did the defendants
conduct themselves reasonably in making the Offer? Did the plaintiff conduct
herself reasonably in choosing not to accept it? In making this examination, it
is important to avoid a simple comparison of the award to the Offer and
mechanically deciding. Here, I have no doubt that the plaintiff was quite sure
her claim was substantial. However, by July 2008, virtually all of the
medical evidence (other than a physiotherapist report relied on by the
plaintiff) had been received and disclosed. Furthermore, the plaintiff had not
sought medical treatment from either a general practitioner or a specialist in
the three years prior to trial, and the absence of an employment-earning
history must be taken to be a real concern for her income loss claim.

[59]        
The plaintiff clearly had a sense of the worth
of her claim which was quite inflated, certainly as compared to the view of the
members of the jury. She believed it to be in the range approaching $1,000,000,
although that is not the yardstick by which this factor should be measured.
That said, on a fair reflection, it is reasonable to conclude that the Offer
was one which was within the range of results that an objective observer might
reasonably have expected to ensue, although I am not certain that it would be
fair to say that she was outrageously irresponsible in declining to accept the defendants’
Offer.

[60]        
The plaintiff has advanced a number of
submissions on this issue:

(a)      The plaintiff argues that consideration of this factor must
take into account that the plaintiff does not recall receiving the Offer
allegedly delivered to her former counsel, an offer apparently delivered when
her former counsel was applying for an adjournment of the date first set for
trial. It will be recalled that this counsel subsequently withdrew on the basis
of lack of instructions.

(b)      It is also submitted that the plaintiff suffers from an
obviously serious case of Attention Deficit Disorder, a fact that would be
“apparent to counsel for the defence” after the examination for discovery of
the plaintiff on February 20, 2006 and discovery of medical documents.

(c)      Further, it is contended that the jury, in awarding the
plaintiff only $10,000 in general damages, was likely affected by the obvious
difficulty the plaintiff had, as a self-represented litigant, in presenting her
case in accordance with the rules of evidence.

[61]        
With respect to the first of these points, there
is no evidence before me of her knowledge of the Offer or the circumstances
under which it was received. Furthermore, service of the Offer has been
established. Accordingly, I consider myself obliged to proceed on the basis
that the plaintiff was made aware of the Offer and had knowledge of it as she
took conduct of the litigation.

[62]        
As for the second point, if the thrust of the
submission is to cast a higher than ordinary duty on defence counsel in these
particular circumstances, then I must reject that. The plaintiff elected to
represent herself in this litigation, and with that role comes responsibility
for the conduct of her case.

[63]        
I would add parenthetically that, based on my
observations of the plaintiff at trial, while she may be somewhat disorganized,
she appeared to take the matter of the presentation of her case seriously and
by no means could it be concluded that deficiencies in her organizational focus
rendered her ineffective.

[64]        
Finally, with respect to the third point, I
decline the subtle invitation contained within the submission, namely to
conclude that the case was worth substantially more than the jury decided, and
that they were in error.

[65]        
The second criterion spelled out in Rule 37B
deals with a comparison between the terms of the Offer and the final judgment
of the Court.

[66]        
This is somewhat related to the first
consideration. While it can be argued that the plaintiff’s recovery was
one-third of the Offer tendered and that the monetary difference was $20,000, an
important perspective of the analysis must be with respect to the conduct of
the defendants. Here, they made an offer that quite substantially exceeded the
final outcome, whether measured in quantum or relationally. In that sense, they
acted responsibly in trying to resolve the dispute without the necessity of a
trial. That should not be ignored. Consideration of this factor weighs in
favour of the defendants.

[67]        
The third criterion is the relative financial
circumstances of the parties. In this case, there is no evidence before me,
although I am entitled to conclude from the evidence of the plaintiff at trial
that she is a person of some substance. She testified there that she has
landholdings worth a value in the multiples of millions of dollars, and that
she derives income from that property. She is not what one would call
impecunious.

[68]        
I have no knowledge as to the circumstances of
the defendants; I will proceed on the basis that they are ordinary people of
ordinary means. I should note parenthetically that, although they were
represented by an insurer, it is their circumstances and not those of the
insurer which are to be considered.

[69]        
Accordingly, I do not find this consideration to
be determinative, but I am also prepared to conclude that it does not
stand as a compelling bar to rescue the plaintiff from the responsibility of
paying an appropriate award of costs.

[70]        
Rule 37B also invites the Court to consider
other circumstances that may be relevant.

[71]        
In this case, the costs which the plaintiff is
liable to pay are substantial. That is attributable in significant part to the
fact that this litigation dragged on considerably. The plaintiff hired and
subsequently discharged two different lawyers before proceeding to act for
herself. There were a number of delays. Costs have mounted.

[72]        
The law is clear that sympathy is not a basis to
determine the outcome of matters such as this. Nevertheless, it is quite
disconcerting to see the plaintiff’s award of damages for her injury completely
obliterated and overshadowed by a costs obligation, and for the consequences in
fact to go further, to leave the plaintiff with a huge bill to pay as well.

[73]        
At the same time, the Court must be cautious
that the sound and basic principles that underlie the costs regime are not
simply disregarded because the plaintiff chose to represent herself and chose
to proceed as she did.

[74]        
In the final result, the matter requires a
balancing of a number of considerations and a significant application of
judgment to try and fashion an outcome that is fair in the circumstances.
Approaching the task in that fashion, I have decided as follows:

(a)      The effective date of the Offer will be July 14, 2008, when
the defendants advised the plaintiff that liability was being admitted.

(b)      Up to July 14, 2008, the plaintiff is entitled to recover
from the defendants her costs and disbursements.

(c)      For the time period following July 14, 2008, the defendants
are entitled to recover from the plaintiff their disbursements and 60% of their
costs.

[75]        
In her submissions, the plaintiff has asked that
the matter of costs orders for proceedings where there has been no specific
order of costs already made by the judicial officer hearing the application be
referred to a Registrar or a Master for assessment on appropriate evidence.

[76]        
On the basis of her submissions, I conclude that
is appropriate and so order.

“The
Honourable Mr. Justice Williams”