IN THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20121212

Docket: M053548

Registry:
Vancouver

Between:

Douglas William
Sauer

Plaintiff

And

Kathleen Elizabeth
Scales

Defendant

Before:
The Honourable Mr. Justice Cohen

Ruling on Double Costs

Introduction

[1]            
On November 1, 2004, the plaintiff was injured in a motor vehicle
accident involving the defendant.  At trial, the defendant was found fully
liable and ordered to pay $334,796.87 in damages (an amount later adjusted to
$286,176.37).  The facts are set out in my reasons for judgement indexed at Sauer
v. Scales, 2009 BCSC 1250.  Subsequent applications concerning the
calculation of damages are indexed as follows: 2009 BCSC 1311; 2009 BCSC 1705;
2010 BCSC 983; and 2011 BCSC 1261.

[2]            
To date, the parties have been embroiled in litigation for more than
seven years.  The plaintiff now seeks double and increased costs, arguing that
the defendant should not have refused two offers to settle made prior to trial.

[3]            
As discussed below, I find the defendant liable for double costs.

Double Costs

[4]            
The plaintiff seeks double costs on the basis of two offers to settle
made prior to trial, both of which the defendant declined to accept.

[5]            
The action was commenced on August 10, 2005.  The plaintiff’s first offer
to settle was made on December 20, 2007, in the amount of $200,000.  The offer
remained open approximately three and a half months until April 10, 2008, when
a second offer was made by the plaintiff in the amount of $300,000.  The trial
commenced approximately one month after the second offer on May 12, 2008.  The
initial judgement in favour of the plaintiff was $334,796.87.  However, after
various corrections and deductions, the amount of damages was reduced to
$286,176.37.

[6]            
Under Rule 9-1(4), the court may consider an offer to settle when
exercising its discretion in relation to costs.  Rule 9-1(5) sets out the
various costs orders available to the court in such a context, including an
award for double costs of all or some of the steps taken in the proceeding
after an offer to settle has been made. Rule 9-1(6)
lists four factors that a court may consider in making an order for double
costs:

(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.

[7]            
The leading case on the application of the double costs rule is Hartshorne
v. Hartshorne, 2011 BCCA 29 (Hartshorne).  The Court of Appeal, at
para. 25, discussed the rule’s guiding principles:

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 Navegação Norsul, 2009 BCCA 16, 88
B.C.L.R. (4th) 17 at para. 16.

[8]            
In ICBC v. Patko, 2009 BCSC 578 at paras. 34-36, the court held
that, where an initial offer to settle is withdrawn and a second offer is made
in its place, the initial offer may still be considered for the purposes of
Rule 9-1 (then Rule 37B).

[9]            
I now turn to consider whether the decision of the defendant to decline
the first offer to settle made by the plaintiff on December 20, 2007, warrants
an award of double costs.  Given my conclusion on this matter below, I find it
unnecessary to consider the second offer made by the plaintiff on May 12, 2008.

Was the offer one that ought reasonably to have been accepted?

[10]        
The Court of Appeal explained the proper issues for consideration under
the first factor in Hartshorne, supra, at para. 27:

The first factor – whether the
offer to settle was one that ought reasonably to have been accepted – is not
determined by reference to the award that was ultimately made. Rather, in
considering that 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: Bailey v. Jang, 2008 BCSC 1372, 90 B.C.L.R.
(4th) 125 at para. 24; A.E. v. D.W.J. at para. 55. As
was said in A.E. v. D.W.J., “The reasonableness of the plaintiff’s
decision not to accept the offer to settle must be assessed without reference
to the court’s decision” (para. 55). Instead, the reasonableness is to be
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. We do not intend this to be a comprehensive list, nor do we
suggest that each of these factors will necessarily be relevant in a given
case.

[11]        
In this case, the first offer was made well in advance of trial and was
open for acceptance for approximately three and a half months, providing the
defendant with ample time to consider its implications.  Moreover, the
pre-trial process had already progressed significantly; I understand that the
expert reports had been exchanged, the defendant’s examination for discovery of
the plaintiff had been completed, and the parties had been through a mediation.
The defendant therefore had access to substantial information with which to
weigh the merits of her case and evaluate the fairness of the offer.

[12]        
The defendant asserts that, before the commencement of the trial,
liability was in serious dispute and the assessment of damages was uncertain
due to a claim for loss of opportunity and complex medical evidentiary issues.  As
I acknowledged in my reasons for judgement, at para. 309, the plaintiff’s claim
for damages was, indeed, complex.  That being said, the disputed claims
involved potential amounts that, when taken together, far surpassed the value
of the first offer to settle.  The plaintiff’s loss of opportunity claim alone
was $425,000.  Viewed in this light, the offer of $200,000 was quite
reasonable, effectively representing the plaintiff’s concession or, at the very
least, significant compromise on many of the most complex issues concerning
damages.

[13]        
In regards to liability, I note that at trial the defendant’s position
was that liability should be shared equally.  Thus, it was plain to the
defendant that she was going to be held at least partially liable for the
accident.

[14]        
Therefore, on balance, I am persuaded that the first offer to settle
should reasonably have been accepted by the defendant.

The relationship between the terms of the offer and the final judgement

[15]        
The final judgment amount is nearly 50% greater than the initial offer
to settle.  Even discounting the additional award for future cost of care,
which resulted from a change of circumstances that could not have reasonably
been foreseen by the parties, the final judgment amount is still approximately
25% greater than this offer to settle.  This factor clearly supports the
plaintiff’s argument.

The relative financial circumstances of the parties

[16]        
Early decisions by this court under the old Rule 37B held that the
availability of insurance is not relevant to the financial circumstances of the
parties: Bailey v. Jang, 2008 BCSC 1372 (Bailey) at
para. 33; Abma v. Paul, 2009 BCSC 60 at para. 32; Lumanlan
v. Sadler, 2009 BCSC 142 at para. 41.  However, this position was
overturned in Smith v. Tedford, 2010 BCCA 302 (Smith).  The
defendant in that case, who was represented by ICBC, resisted an offer to
settle until the 7^th day of trial, prompting the plaintiff to request
an order for double costs.  In making the order, the trial judge rejected the Bailey
line of cases, choosing instead to follow the conflicting trial court decision
in Radke v. Parry, 2008 BCSC 1397, holding that insurance coverage
is a relevant consideration. The Court of Appeal upheld the decision,
concluding, at para. 19:

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.

[17]        
Subsequent decisions applying the law as set out in Smith have
held that legal representation by an insurer will not count against a party in
every case: Mazur v. Lucas, 2011 BCSC 1685 (Mazur) at para. 53; Ward
v. Klaus, 2012 BCSC 99 at para. 43.  In the words of Humphries J. in Mazur,
at para. 53, “[w]hile insurance coverage is not automatically a factor to
be considered against the insured party, the facts of the particular case will
govern whether it should be considered, and if so, what weight should be given
to it.”

[18]        
In Hunter v. Anderson, 2010 BCSC 1591 at para. 22, Cullen J. (as
he then was) held that insurance coverage may be considered where it “creates
an unfair advantage leading to unnecessary costs through testing the
plaintiff’s case”, citing Smith and Radke for support.  While
consideration of insurance coverage would certainly be justified where an
insured party exploits a financial disparity to test the other party’s case
unnecessarily, I do not think that such circumstances must always be present.  As
Humphries J. stated in Mazur, at paras. 50-53, Smith stands for
the general principle that insurance coverage is a valid consideration for the
factor of relative financial circumstances, and it does not limit the
application of that principle to its specific facts.  The issue of whether
insurance coverage merits consideration will turn on the circumstances of each
individual case.

[19]        
The plaintiff suffers from serious medical conditions that forced him to
retire from his law practice in 1998.  His ability to earn an income to support
himself and his family has been significantly compromised ever since.  The
injuries he suffered from the accident and the many treatments that were
required as a result brought on further financial difficulties.  In this
context, the fact that the defendant is represented by ICBC merits
consideration, as it places the plaintiff at a financial disadvantage.  Nonetheless,
the plaintiff was still able to obtain legal representation and advance his
case effectively.  I find that this disparity in financial circumstances,
although not so extreme as to weigh heavily in the analysis, is at least
minimally relevant to the issue of whether the defendant should be ordered to
pay double costs.

Other considerations

[20]        
The blameworthy conduct of a party may validly be considered as a factor
supporting an award of double costs: Hartshorne at para. 35.  Accordingly,
the plaintiff urges me to consider the allegedly blameworthy conduct of the
defendant, citing many of the same examples in relation to his submissions on
special costs.  Specifically, the alleged conduct includes: (a) putting
liability into issue without any evidentiary basis; (b) minimizing and
unreasonably disputing the causes of the plaintiff’s injuries; (c) advancing
the reports of unqualified experts; (d) unnecessarily delaying the trial
process; and (e) making unreasonable and contradictory claims and defences in
the post-trial applications.

[21]        
I note that most of these arguments were previously considered in my
reasons for judgment, at paras. 308-312, and held to be without merit in my
consideration of the plaintiff’s submissions on special costs.  The only novel
argument tendered by the plaintiff relates to the defendant’s conduct
post-trial.  However, I do not agree with the plaintiff’s characterization of
that conduct.  The defendant’s post-trial conduct, like the defendant’s conduct
during trial, was neither reprehensible nor deserving of rebuke.  The
applications made by both parties were not unreasonable, and success in them
was mixed.

[22]        
As a result, I do not agree with the plaintiff’s assessment of the
defendant’s conduct and give it no weight here.

Conclusion

[23]        
Viewing all of the factors together, I am satisfied that the plaintiff
should be awarded double costs.  The order shall apply from the time the offer
was made on December 20, 2007.  Further, I have considered the plaintiff’s
submissions on increased costs and find that notwithstanding his arguments on
this point, the award of costs should be assessed at Scale B.

“B.I. Cohen J.”
The Honourable Mr. Justice B.I. Cohen