IN THE SUPREME
COURT OF BRITISH COLUMBIA

Date: 20110908

Docket: M083559

Registry: Vancouver

Between:

Rupinder Kaur Khunkhun

Plaintiff

And:

Eugene Donald Titus

Defendant

Before: The Honourable Mr. Justice
Willcock

Oral Reasons for
Judgment – Costs

In Chambers

[1]            
THE COURT: The trial of this matter was heard
by me sitting with a jury from April 18 to May 4, 2011.  Liability was
admitted.  The nature and extent of the plaintiff’s injuries and the quantum of
damages were in issue.  The plaintiff advanced a claim described in her trial
brief as having a value of $961,000.  In argument, the plaintiff claimed, in
addition to unspecified non-pecuniary damages, gross income loss to trial in
excess of $100,000 and future pecuniary losses in the range of 265,000 to
$663,000.

[2]            
On May 4, the jury
assessed damages at the global sum of $45,500 consisting of non-pecuniary
damages of $9,000, gross past income loss of $25,000, and loss of income
earning capacity of $11,000.  The issue to determine on this application is the
appropriate order as to costs of the proceedings. 

BACKGROUND

[3]            
The plaintiff
sought general damages for pain and suffering and the loss of enjoyment of life
resulting from what she claimed to be a significant and disabling vestibular
injury as a result of a September 17, 2006 motor vehicle accident.  The injury
was documented by an eminently qualified specialist in ear, nose and throat
diseases, Dr. Longridge.

[4]            
The plaintiff
complained of dizziness, headaches, sleep disturbance, driving limitations, and
concern about her ability to do her job, all of those problems continuing
intermittently from the date of the accident to trial.  While most mild
traumatic vestibular injuries resolve the plaintiff sought to establish at
trial that symptoms of her vestibular injury had continued and worsened.  She
argued that she was the exception to the rule of uneventful recovery, a recognized
exception described by Dr. Longridge, and indeed the defendant’s expert in
this field.

[5]            
The plaintiff
sought to establish, based on evidence of her personality and long work
history, that she would always work if she could do so.  She had evidence that
she tried an early return to work but could not tolerate the demands of her
job.  When she later returned, she laboured under what she says was a strain. 
That strain was noted by co‑workers who testified at trial.

[6]            
Due to her
optimism, her private nature and her desire not to be affected by her injury,
she testified that she said nothing about her ongoing symptoms to colleagues. 
She thought that her problems would resolve over time and, for that reason,
sought no further treatment after she noted improvement in 2007.  She said she
was patient, and although she was describing symptoms to her doctors in 2007 and
2008, she sought no treatment for headaches or dizziness.  Plaintiff’s
counsel attributed the lack of complaints at work, plaintiff’s positive work
evaluations, and the absence of complaints in the medical records through much
of 2007 and 2008 to the plaintiff’s hope that she would recover, like most people
that suffer from vestibular injuries uneventfully.

[7]            
Defendant’s
counsel argued that is, in fact, what happened: that Ms. Khunkhun
recovered uneventfully in accordance with the rule rather than the exception. 
The defendant put before the jury a substantial evidentiary record of
improvement over the six months following the accident, including a report to Dr. Travelos
in January 2008 and the first report drafted by Dr. Robinson in September
2008.  These reports, coupled with the discontinuance of medication prescribed
to Ms. Khunkhun and the discontinuance of vestibular exercises, the
absence of reported complaints to physicians, her return to work and the return
to some activities such as biking, were all relied upon as evidence of
substantial recovery.  The defence theory required the jury to reject the
evidence of Ms. Khunkhun that her symptoms improved but continued to be
significant throughout, and had worsened at times, to trial to the point where
at trial she had some fear or concern with respect to her future. 

[8]            
It was the
position of Ms. Khunkhun that she suffered a total loss of income for four
and a half months and when she later took an unpaid leave of absence.  She
claimed a partial loss of income during a period of graduated return to work.

[9]            
The defendant argued
that Ms. Khunkhun suffered only four and a half months lost income and
perhaps some loss during the graduated return to work as she was over her
injuries by mid 2007 and thereafter her post-accident income was consistent
with her pre-accident income.  The defendant said the unpaid leave of absence
in 2009 and 2011 was not causally related to the motor vehicle accident of
2006.

[10]        
The plaintiff
sought an award for loss of income earning capacity.  She led evidence that her
injuries had not completely resolved.  She expressed fear that if her symptoms
did not improve, she would be unable to continue in her employment.  Dr. Robinson
and Dr. Segal testified that she was still suffering from and might
continue to suffer from headaches and dizziness for an indeterminate period.

[11]        
Ms. Khunkhun
testified that her condition made it difficult for her to concentrate and to
perform to her own high expectations.  She said she had been prevented from
seeking advancement, as a result, and that she feared that she might be
prevented from working at all in the future as a lab technician.

[12]        
There were
significant credibility issues at trial.  The defendant took the position that
the claim was wholly dependent upon the weight given by the jury to the
plaintiff’s accounts of her subjective symptoms, particularly headaches and
dizziness.

[13]        
On March 30, 2011,
about three weeks before trial, counsel for the defendants wrote to the
plaintiff’s counsel offering to pay the plaintiff the sum of $70,000
"after taking into account part 7 benefits paid or payable pursuant to
section 25 of the Insurance Motor Vehicle Act" and "after taking into
account any advances paid to date."  The amount offered was stated to
include prejudgment interest but to exclude disbursements incurred by the
plaintiff up to the date of delivery of the offer.

[14]        
The offer stated,
among other things, strangely, that the defendant reserved the right to bring
it to the attention of the Court of Appeal or the Supreme Court of Canada for
consideration in relation to costs.  The plaintiff recognizes that this was an
apparent error and it was the defendant’s intention to bring the offer to the
attention of this court in the event the plaintiff recovered less than the
amount of the offer.

[15]        
The defendant now
seeks an order that the plaintiff receive only her disbursements to the date of
delivery of the offer and that she be liable to pay the defendant costs and
disbursements for March 30, 2011 to date.

APPLICABLE LAW

[16]        
Rule 4-1 sets out
the general rule that costs of a proceeding must be awarded to the successful
party unless the court otherwise orders.  Rule 9-1 sets out the cost
implications of offers to settle.  It provides as follows in s. (4)-(6):

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

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

(d) If an 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.

(6) In
making an order under (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; and

(d)        any
other factor that the court considers appropriate.

[17]        
The cost
provisions of the rules of court are intended to serve a compensatory purpose,
to permit successful litigants to cover their costs.  They are also intended to
further the objectives summarized in Sartori v. Gates, 2011 BCSC 419, as
follows:

(a)      deterring frivolous actions
or defences;

(b)      encouraging conduct that
reduces the duration and expense of litigation and discouraging conduct that
has the opposite effect;

(c)      encouraging litigants to
settle wherever possible, thus freeing up judicial resources for other cases;
and

(d)      winnowing
litigation, by requiring 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 discouraging the continuance of doubtful cases or
defences.

ANALYSIS

[18]        
Where successful party fails to accept a pre-trial settlement offer that
exceeds her ultimate recovery, that failure should have some cost consequences.

[19]        
The Rules give the
court unfettered discretion with respect of costs: see Bailey v. Jang,
2008 BCSC 1372.  The question before me in this case is the extent of the cost
consequences that should flow from Ms. Khunkhun’s decision to take this
case to trial rather than to accept the offer of March 30, 2011.  This is
clearly not a case where there should be no consequences of that refusal.  The
order for costs should not be that which would otherwise be made had there been
no offer to settle.  The plaintiff is therefore not entitled to her costs
throughout on the usual scale.  On the other hand, the defendant does not seek
double costs from the date of the offer onward.  It is conceded that the
consequences of the failure to accept the offer should not be as punitive as
possible.

[20]        
The parties have
argued for orders in the mid range of the possible spectrum, from an order that
the plaintiff recover costs to the date of the offer and the defendant recover
costs thereafter, to an order that there be costs to the plaintiff to the date
of the offer and no costs thereafter.  The effect of the former order, given
the parties proposed bill of costs, would be that after payment of costs and
disbursements the plaintiff would be substantially indebted to the defendant
without seeing any of the proceeds of her claim and owe at least the costs of
disbursements to her counsel.

[21]        
Defence costs as
set out in a draft bill before me are estimated to amount to $47,800 and
disbursements to $15,982, a total in excess of $63,000.  A significant portion
of costs and disbursements were likely incurred after the settlement offer. 

[22]        
The effect of the
latter order would be that the plaintiff would recover her judgment less her
own post-offer disbursements, most of her disbursements, which amounted to $26,651
in total.  Her net recovery would amount to marginally more than $20,000.

[23]        
Where on the
spectrum of outcomes should this case sit?  The answer should depend upon my
assessment of the criteria set out in the rules. 

4-1(6)(a): Was the offer one that ought reasonably to have been accepted?

[24]        
The reasonableness
of the plaintiff’s decision not to accept the defendant’s offer to settle is
not to be assessed in hindsight.  The jury’s verdict is not to be considered. 
This is set out in Bailey v. Jang, and also Cairns v. Gill, 2011
BCSC 420.

[25]        
Bearing in mind
all of the evidence before me now and the evidence that I heard at trial, I am
of the view that it was reasonable on the part of the plaintiff to reject the
settlement offer of March 30, 2011.  No aspect of the claim advanced was
frivolous.  The plaintiff did not unnecessarily lengthen the expense or
duration of the litigation.  To use one test, I do not consider that reasonable
counsel aware of all of the evidence in this case but unaware of the jury award
ought to have encouraged the plaintiff to accept the offer at the time it was
made or up to the date of the rendering of the jury’s award.  I do not regard
this as a case where the plaintiff should have freed up the judicial resources
used to assess her claim.  I am of the view that the plaintiff might have made
a careful assessment of the strengths and weaknesses of her case at the
commencement and throughout the course of this litigation and not accepted the
settlement offer that was made to her.  In summary, I find that it was entirely
reasonable on the evidence for the plaintiff to prefer taking this case to the
jury to accepting the offer that was made to her before trial.  I adopt here
what was said in Sartori v. Gates at para. 67.

The
plaintiff had the right to test to the extent of the range of damages by trial
adjudication.

4-1(6)(b): the relationship between the terms of settlement offered and the
final judgment of the court

[26]        
The award of the
jury amounted to about 70% of the offer to settle.  Disparities of 20% have, in
other cases, been held to be substantial.  This disparity is a factor to
consider but here, I find as did Mr. Justice Kelleher in Smagh v.
Bumbrah, 2009 BCSC 623, at paras. 13-14, this factor is not in itself
determinative:

I
agree with counsel for the plaintiff that the court should be cautious in
placing too much weight on this factor.

4-1(6)(c): the relative financial circumstances of the parties

[27]        
In Smith v. Tedford,
2010 BCCA 302, the Court of Appeal discussed the apparent conflict in two
decisions of this court as to whether ICBC’s assumption of the defence was a
relevant consideration under the costs rule.  Those cases were Bailey v.
Jang, and Radke v. Parry, 2008 BCSC 1397.  Mr. Justice Lowry
for the Court of Appeal in Smith v. Tedford concluded at paragraph 19:

While
I recognize arguments over the implications of a defendant’s insurance coverage
being considered in relation to an award of costs may go back and forth, like
the judge [in the court below] I consider precluding such from consideration
renders an assessment of the parties’ relative financial circumstances, at
least in a case of this kind, very artificial indeed.  Clearly, with ICBC
having assumed the defence, the financial ability to defend was much greater
than the financial ability to prosecute, and that is of no small importance to
considering whether and to what extent the financial circumstances of the
parties, relative to each other, bear on an award of costs where, as here,
there has been an offer of settlement made ten days before a trial for the
assessment of personal injury damages which was not accepted until the seventh
day of the trial.

[28]        
In my view, ICBC
should now regard this question as settled and ought not to persist in the
argument made before me that insurance cannot be considered in an assessment of
costs.  As Mr. Justice Burnyeat stated in Martin v. Levigne, 2010
BCSC 1610, at para. 25, the question has been settled.

[29]        
The plaintiff
earns an income of $60,000 per annum.  Her husband is also employed.  She will
not be impoverished by an award on the scale being considered.  The personal
defendant, on the other hand, will not feel the effects of the judgment as to
costs.  Effect on his insurer will not be felt in the large scheme of things
unless this judgment is regarded as a precedent applicable wherever a jury
award exceeds an offer to settle in a motor vehicle case.  It is not intended
to be such a precedent.  This case is specific to its facts.

4-1(6)(d): any other factors that the court considers appropriate

[30]        
The plaintiff, in
the course of submissions before me on costs, spoke to the conduct of the
defence and the nature of the argument advanced at trial by the defence as
factors that ought to be considered under this head.  I reject that submission
and the submission that the conduct of either party was such as to warrant consideration
in relation to costs.

[31]        
Having considered
these factors, I adopt the reasoning of Madam Justice Humphries in Lumanlan
v. Sadler, 2009 BCSC 142 (although double costs are not being sought in the
case at bar), where she said at para. 53:

There
should be some consequence in costs as a result, but in my view, it would be
unfair and excessively penal to award double costs against the plaintiff,
especially where these costs would not have been available under the rule in
place when the offer was presented.  Given the significant injury to the
plaintiff, which was caused by the defendant’s foolish and reckless behaviour,
and the effect on the award of a further reduction for costs, even if not
doubled, and taking into account all of the above considerations, in my view it
would not be fair or just to require the plaintiff to pay ICBC’s costs after
the date of the offer.

[32]        
I find that the
plaintiff is entitled to her costs and disbursements to the date of the offer. 
Each party will bear their own costs after the date of the offer, up to and
including trial.

“P. Willcock J.”

The
Honourable Mr. Justice P. Willcock