IN THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20110126

Docket: M93397

Registry:
New Westminster

Between:

Raghbir Sahota

Plaintiff

And

Edgar Michael
Sandulo

Defendant

Before:
The Honourable Mr. Justice Armstrong

Reasons for Judgment

[1]            
This is an application by the defendant for an order for costs following
the defendant’s acceptance of the plaintiff’s offer to settle.

[2]            
The defendant seeks an order that:

1.       the
plaintiff is only entitled to taxable disbursements up to the defendant’s offer
to settle, dated March 14, 2006; and

2.       the
defendant is entitled to costs and disbursements after March 14, 2006.

[3]            
The plaintiff commenced an action against the defendant for damages
arising from a motor vehicle accident on or about September 12, 2004 in Surrey,
British Columbia. The action was commenced pursuant to the former Rule 66 and
included claims for general damages, special damages, pre-judgment interest,
and costs.

[4]            
The plaintiff alleges that he suffered injuries as a result of the accident,
including:

(a)        injury to the neck;

(b)        injury to the lower back;

(c)        injury to disc in lower back;

(d)        pain radiating down the back of both legs;

(e)        difficulty standing for long periods of time; and

(f)         difficulty bending.

[5]            
The plaintiff also claimed to be suffering from a loss of enjoyment of
life, loss of mental and emotional health, permanent or permanent partial
disability, loss of housekeeping capacity, both past and prospective loss of
opportunity to earn income and impairment of earning capacity, and that he will
continue to undergo medical care and treatment.

[6]            
The statement of defence, filed September 28, 2005, admitted liability
for the accident but disputed causation and the extent of the plaintiff’s
injuries. The notice of trial was filed October 25, 2005 and, under Rule 66, a
trial was scheduled for September 21 – 22, 2006.

[7]            
On March 14, 2006 the defendant offered to settle the claim for the sum
of $20,000, after taking into account Part 7 benefits paid or payable, any
advances paid to date, and costs in accordance with Rule 37(22) and (37).

[8]            
On July 21, 2006 the plaintiff was ordered to attend an independent
medical examination. The plaintiff appealed this decision on August 24, 2006.
The plaintiff’s appeal was dismissed on September 14, 2006.

[9]            
The matter was reset for trial on May 1 – 2, 2008.

[10]        
On March 27, 2008 the parties agreed that the matter be removed from
Rule 66. On May 2, 2008 the trial was scheduled for eight days, commencing
November 16, 2009. Both parties filed jury notices.

[11]        
On September 25, 2009 the plaintiff delivered a notice of motion to have
the action transferred to Rule 68. This application was dismissed on October 6,
2009.

[12]        
On October 13, 2009 the plaintiff delivered an offer to settle to the
defendant. The offer stated:

The plaintiff, RAGHBIR SAHOTA, offers to settle Action No.
M93397 in the New Westminster Registry (Sahota v. Sandulo) on the basis of a
payment by the defendant of $3,000 (THREE THOUSAND DOLLARS) after taking into
account Part 7 Benefits paid or payable pursuant to Section 83 of the Insurance
(Vehicle) Act, R.S.B.C. 1996 c. 231 and any advances paid to date, plus
court costs and disbursements as may be assessed or agreed upon.

This offer is open for acceptance until 4 p.m. on November
13, 2009. Acceptance of this offer is to be in writing.

The plaintiff, Raghbir Sahota reserves
the right to bring this offer to the attention of the court for consideration
in relation to costs after the court has rendered judgment on all other issues
in this proceeding.

[13]        
The plaintiff’s offer to settle was accepted by letter dated October 13,
2009. The letter stated:

The defendant accepts the
plaintiff’s offer made under cover of his counsel’s letter dated October 13,
2009 in the amount of $3,000 plus costs and disbursements as assessed or agreed
upon. Kindly acknowledge receipt of same by endorsing the enclosed copy of this
letter and returning same to the writer.

The Defendant’s Position

[14]        
The defendant submits that the conduct of the plaintiff’s case was
unreasonable and that the defendant should be entitled to an award of costs and
disbursements after the making of the offer on March 14, 2006. He argued that
the plaintiff should receive only his disbursements up to March 14, 2006 and
not after.

[15]        
The defendant says that the object of the rules can be achieved only by
visiting cost consequences on the plaintiff where the plaintiff “recovers, by
way of judgment or settlement” an amount that is lower than the offer. The
defendant argues that the disparity between the defendant’s early offer and the
plaintiff’s later offer should have consequences to the plaintiff.

[16]        
The defendant says that the plaintiff unreasonably contributed to
increased costs by unnecessarily prolonging the litigation and obtaining numerous
medical opinions. The defendant argues that the most significant factor in this
application is that the fact gathering mission with respect to the plaintiff’s
injuries did not reveal any significant differences from the early reports.

[17]        
The defendant referred to the medical evidence that had been exchanged
in preparation for the trial. It included the following medical reports
relating to the plaintiff and his injuries:

(a)        Dr. J. S. Jaworsky dated January 20, 2005;

(b)        Dr. W. Gittens dated June 12, 2006;

(c)        Dr. M. Boyle dated June 19, 2006;

(d)        Dr. I. Turnbull dated July 11, 2006;

(e)        Dr. R. Sandhu dated July 19, 2006;

(f)         Dr. S. Malloon dated July 24, 2006;

(g)        Dr. W. Gittens dated December 4, 2006;

(h)        Dr. A. Chu dated December 18, 2007; and

(i)         Dr. A. Chu dated
April 28, 2009;

[18]        
The defendant argues that the plaintiff knew or ought to have known that
the severity of his lower back injury was minimal at the time the action was
commenced, and that there were insufficient reasons for bringing the proceeding
in Supreme Court. He says that the plaintiff is irresponsible for not having
accepted the defendant’s March 14, 2006 offer to settle for $20,000, prolonging
the resolution of the case over a three year period at unnecessary expense.

[19]        
The defendant argues that to achieve a just result between the parties
the plaintiff’s entitlement to costs should be limited to disbursements while
the defendant recovers assessable costs and disbursements.

[20]        
The defendant says that the plaintiff’s offer to settle put the defendant
in a difficult position. It did not make practical sense to reject the offer
and proceed with a jury trial, in part because the defendant would have been
exposed to increased risks and expense.

[21]        
The plaintiff’s offer was somewhat unique, in that it was designed with
the purpose of recovering substantial costs and disbursements associated with
the experts’ reports incurred in the period following the defendant’s offer to
settle.

[22]        
The plaintiff’s offer to settle was accepted. The terms of the offer
left open the formal assessment of costs and disbursements.

[23]        
The defendant also invoked Rule 57(14), alleging that the plaintiff
committed an improper act and/or omitted to act properly by failing to
reasonably accept the defendant’s offer.

The Plaintiff’s Position

[24]        
The plaintiff submits that he entered into an agreement to settle the
case on the basis of a payment by the defendant of $3,000, plus court costs and
disbursements. The defendant accepted this offer and specifically agreed to pay
“costs and disbursements” to the plaintiff. This represents the agreement
between the parties. The offer did not incorporate, refer to, or include any
payment of costs to the defendant.

[25]        
The plaintiff argues that the claim, had it proceeded to trial, may have
exceeded the amounts offered by both parties and would not have been within the
jurisdiction of the Provincial Court; however, the plaintiff was unable to take
the risk of an unfavourable result following an eight day jury trial. The financial
risk of proceeding to trial was in excess of $45,000. For strategic reasons,
including his expectation of recovering all of his costs and disbursements
incurred to the date the offer was made, the plaintiff made the formal offer to
settle of $3,000, plus costs and disbursements.

[26]        
The plaintiff argues that the Court has no discretion to interfere with the
bargain made by the parties. There is no basis on which the Court can order
costs to the defendant or deprive the plaintiff of his “assessable costs and
disbursements.”

Analysis

[27]        
This application engages Rule 9(1) of the Supreme Court Civil Rules,
B.C. Reg. 168/2009:

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

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

(c) an offer to settle made after
July 1, 2008 under Rule 37B of the former Supreme Court Rules, as that rule
read on the date of the offer to settle, or 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."

Offer not to be disclosed

(2) The fact that an offer to settle has been made must not
be disclosed to the court or jury, or set out in any document used in the
proceeding, until all issues in the proceeding, other than costs, have been
determined.

Offer not an admission

(3) An offer to settle is not an admission.

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 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 or service 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 or service
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 or service of the offer to settle.

[am. B.C. Reg. 119/2010, Sch. A, s. 21.]

Considerations of court

(6) In making an order under sub rule (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.

Costs for settlement in cases within small claims
jurisdiction

(7) A plaintiff who accepts an offer to settle for a sum
within the jurisdiction of the Provincial Court under the Small Claims Act
is not entitled to costs, other than disbursements, unless the court finds that
there was sufficient reason for bringing the proceeding in the Supreme Court
and so orders.

Counter offer

(8) An offer to settle does not
expire by reason that a counter offer is made.

Rule 9-1 and an offer to settle addressing costs

[28]        
Generally, the Court has discretion in relation to costs; however, where
an offer to settle with specific terms as to costs has been accepted, to which
Rule 9-1  applies, the Court does not have discretion to vary the terms of that
agreement as they relate to costs.

[29]        
In Buttar v. Di Spirito, 2009 BCSC 72, Gerow J. held:

[11]      Both parties advanced
arguments that the court has discretion under Rule 37B to make an order
regarding costs. However, it is my opinion that the court has no discretion to
make an order regarding costs in this matter. Mr. Buttar accepted the offer put
forth by the defendants, including the offer regarding costs, without
reservation. It is my view that Rule 37B does not confer discretion on the
court to set aside an agreement that has been entered into between the parties
regarding costs.

[30]        
In Hambrook v. Sandhu, 2010 BCSC 475, Verhoeven J. provided a
substantive summary of principles and law in this area:

[26]      It has been held that the Rule applies to
settlements; i.e., where the court has not rendered judgement: Radke v.
Parry, 2008 BCSC 1397; Brewster v. Rominn Laboratories Inc., 2008
BCSC 1463.

…

[28]      But it has also been held that a settlement
agreement containing terms as to payment of costs leaves the court with no room
for the exercise of discretion pursuant to Rule 37B: Buttar v. Di Spirito,
2009 BCSC 72 at para. 17. The defendants here rely on the Buttar
decision, which they argue is on all fours with the case at bar.

…

[31]      On this basis, where a party has specified the costs
consequences of acceptance of its offer to settle, within an offer to settle to
which Rule 37B applies, and a settlement agreement results in accordance with
the offer, the court does not retain discretion to depart from the terms of the
agreement.

[32]      Put another way, it remains open to litigating
parties to make an offer to settle within the meaning of Rule 37B and to
specify the costs consequences of acceptance of the offer. In my view this is a
positive result. It allows the parties to create their own bargain. It provides
for certainty, and avoids the need for applications to court where a settlement
agreement is reached, while preserving the court’s discretion in cases where no
settlement occurs.

[33]      This case provides a good example. If the argument
of the plaintiff is accepted, a costly and time consuming application to court
is required in order to determine the costs consequences of the plaintiff’s
acceptance of the offer.

[34]      The plaintiff relies
on the earlier decision of Madam Justice Garson in Goertz v. Calin,  2008
BCSC 1716. Goertz was not referred to in Buttar. In Goertz,
Garson J. decided that an offer and acceptance concluded in 2007 was governed
by Rule 37B, not the former Rule 37. The decision appears to be based strictly
upon the wording of Rule 37B(1)(a). It does not appear that Garson J. was asked
to decide the issue on the basis of a binding settlement agreement between the
parties, which is the reasoning accepted in Buttar, and upon which the
defendants argue in the case before me. In my view Buttar is the more
pertinent authority in this case.

[31]        
In Nazmdeh v. Ursel, 2010 BCSC 136, Pearlman J., following Buttar,
held:

99]       Further, where, as in
this case, an offer to settle has been accepted and the parties have made a
binding agreement regarding costs, Rule 37B does not confer a discretion on the
court to set aside that agreement: Buttar v. Di Spiritu, 2009 BCSC 72 at
paras. 11-17.

[32]        
In Bamani-Moghaddam v. Mojdehie, 2010 BCSC 191, Registrar Sainty
followed Buttar in relation to an assessment of costs:

[33]      In my view, one cannot
get much plainer than that – the plaintiff expected to be paid her settlement
funds ($15,000) plus her disbursements and to pay the defendants’ costs, not to
receive anything for her tariff costs. On the basis of that agreement, I (or
any other registrar) am given the jurisdiction to assess the plaintiff’s costs
(disbursements only) and those of the defendant and I ought to proceed. Further,
as the evidence is unequivocal – the offer was accepted and an agreement made
as to costs – the provisions of Rule 37B, including subrule (7) thereof, have
no application in this matter and any application by Mr. Harbut is bound, in
any event, to fail: see Buttar v. Di Spirito, 2009
BCSC 72, at paragraph 11.

[33]        
The rule in Buttar has been consistently applied in this Court
and appears determinative of this issue.

[34]        
Buttar and cases following it did not address Rule 9-1(4) as it
relates to an accepted settlement that addresses costs. Rule 9-1(4) states:

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

[35]        
Buttar held that the Court does not possess discretion to vary
costs where a formal offer to settle, specifically addressing costs, has been accepted.
If, in such circumstances, the Court is not in a position to exercise
discretion in relation to costs, Rule 9-1(4) is of no application.

[36]        
The rule in Buttar is applicable to the defendant’s application
in this case. The plaintiff’s offer to settle, accepted by the defendant,
created an agreement between the parties. This agreement is not subject to the Court’s
discretion as to costs. In my view, the purpose of the rules would be
frustrated if a party was free to accept an offer, clear and unambiguous on its
face, and then move to invoke the Court’s discretion to add or vary terms to substantially
rewrite the agreement reached by the parties.

[37]        
The strategy of both parties was focused on the risks, costs, and
expense that would flow from a trial. The plaintiff could have proceeded with
an eight day trial in the hopes of obtaining judgment and recovering costs
through that mechanism. The defendant could have rejected the plaintiff’s offer
and proceeded to trial with the cost consequences flowing from his offer to
settle.

[38]        
In this case, the plaintiff had a deliberate and reasoned strategy for
conducting further investigations of the claim, notwithstanding the offer to
settle from the defendant. In the end, both parties were aware of the
consequences of the settlement strategy at work. If the defendant wished to
attach conditions to his acceptance or make a counter offer he could have done
so. He chose not to. He accepted the settlement offer on the terms advanced by
the plaintiff, namely, “the defendant will pay $3,000 and pay court costs and
disbursements.” The defendant accepted this offer and agreed to pay costs and
disbursements without qualification.

[39]        
To allow the defendant to resile from his acceptance of the plaintiff’s
offer to settle, and invoke the Court’s discretion to deprive the plaintiff of
costs and compel the plaintiff to pay the defendant’s costs, would turn
settlement negotiations into an adventure into uncertainty. I do not believe that
the intended purpose of Rule 9-1 is to allow for a discretionary review of the
parties’ conduct prior to making a settlement offer accepted by the other.

Rule 9-1 and discretion generally

[40]        
In Hambrook, Verhoeven J. identified a secondary issue, whether
the Court possesses discretion in relation to costs outside of the specific
terms of what is now Rule 9-1(5). Verhoeven J. followed an earlier decision of
Goepel J. in A.E. v. D.W.J., 2009 BCSC 505, and held that the Court is
limited by the express scope of the rule:

[46]      The defendants also argue that they should receive
costs for the steps taken after the delivery of the offer. There is no express
provision in Rule 37B that provides the court with this power. The defendants
argue that Rule 37B(5)(d) applies. That subrule refers to an offer made by a
defendant where the subsequent “judgment awarded” is not greater than the
amount of the offer. The subrule does not refer to an acceptance of the offer.
I was provided with no authority that interprets the subrule as broadly as the
defendants contend.

[47]      The authorities are divided as to whether the court
has discretionary powers beyond those specifically set out in Rule 37B(5). In A.E.
v. D.W.J., 2009 BCSC 505, Goepel J. held that it does not. In that decision
Mr. Justice Goepel chose not to follow Arnold v. Cartwright Estate, 2008
BCSC 1575, in which Mr. Justice Butler held that the court could award a
defendant costs although at that time Rule 37B did not expressly provide for
such a power. It was noted in Robyrts v. Roberts,  2009
BCCA 574 at para. 9, that there are appeals pending which will address the
debate. In the meantime I consider myself bound to follow A.E. v. D.W.J., based
upon the principles of Re Hansard Spruce Mills, [1954] B.C.J. No. 136,
[1954] 4 D.L.R. 590 (S.C.).

[48] Arnold was decided November 18, 2008, just a
few days after the plaintiff settled this case. Rule 37B(5)(d), which in any
event refers to judgments, not settlements, did not come into effect until July
1, 2009, long after the settlement in this case.

[49]      On the authority of A.E.
v. D.W.J., I do not have the power to make an order granting the defendants
costs following delivery of their offer to settle, where a settlement results,
because Rule 37B(5) does not provide for such a power.

[41]        
In Arnold v. Cartwright Estate, 2008 BCSC 1575, Butler J. was
dealing with a case in which the plaintiff had recovered damages at trial in an
amount less the defendant’s offer to settle, rather than an offer to settle accepted
by a defendant. As such, it has no application to the present case.

Rule 14-1(14)

[42]        
The defendant also relies on Rule 57 (now Rule 14-1(14)), but did not
argue this point separately from submissions under Rule 9-1. On the argument before
me I am not satisfied that the plaintiff did anything improperly or unnecessarily
by continuing the litigation after receipt of the defendant’s settlement offer.
The acceptance of the plaintiffs offer is a bar to any claim by the defendant
under Rule 14-1(4) except in an assessment by the Registrar as contemplated by
the settlement agreement.

Conclusion

[43]        
On the authority of Buttar the Court does not have the discretion,
under Rule 9-1, to vary the terms of the settlement agreement.

[44]        
Rule 9-1(4) does not apply to the defendant’s application.

[45]        
The plaintiff’s conduct in continuing the litigation after the
defendant’s offer of settlement did not warrant a remedy to the defendant under
Rule 14-1(14).

[46]        
The defendant’s application is dismissed with costs to the plaintiff.

“Armstrong
J.”