IN THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20110810

Docket: M053777

Registry:
Vancouver

Between:

Stewart
Wong

Plaintiff

And

Miranda
Lee, Stephen Louie, MKA Leasing Ltd. doing business as Discount Car and Truck Rentals,
Jane Doe, John Doe and Craig Hartwell

Defendants

Before:
The Honourable Madam Justice Dardi

Reasons for Judgment – Costs

Introduction

[1]            
This action arose in relation to a motor vehicle collision in which the
plaintiff sustained injuries. The collision occurred on August 29, 2003 on
the Interstate-5 in Washington State. At the time of the collision, the
defendant Miranda Lee, who is the plaintiff’s wife, was operating the vehicle
in which the plaintiff was a passenger. The defendant Stephen Louie, was one of
the lessors of the vehicle. The vehicle was owned by the defendant, MKA Leasing
Ltd. Both liability and the extent and consequences of the plaintiff’s injuries
were issues in the action.

[2]            
The trial proceeded with a jury from October 12, 2010 to October 27,
2010. On October 27, 2010, the jury returned a verdict that Ms. Lee
was not negligent. Pursuant to the instructions they were given, the jury did
not assess the plaintiff’s damages. Judgment was entered in accordance with the
jury’s verdict and the plaintiff’s claim was dismissed.

[3]            
The outstanding issue to be determined is the appropriate order as to
the costs of the proceedings.

Position of the Parties

[4]            
The defendants Ms. Lee, MKA Leasing Ltd., and Stephen Louie seek an
order for two sets of costs to May 14, 2010 and double costs thereafter. The
defendants also submit that any costs awarded to them ought to be awarded
directly to the Insurance Corporation of British Columbia (“ICBC”).

[5]            
The plaintiff submits that the defendants are entitled to one set of
costs at Scale B.

Offers to Settle

[6]            
On May 14, 2010 the defendants Ms. Lee, MKA Leasing Ltd., and
Stephen Louie issued a joint offer to settle to the plaintiff in the amount of
$60,000, “after taking into account Part 7 benefits paid or payable,
pursuant to section 25 of the Insurance (Motor Vehicle) Act,
R.S.B.C. 1996, c. 231 and any advances paid to date, in satisfaction of
this proceeding in its entirety” (“Offer to Settle”).

[7]            
As required by Rule 9-1(6), the Offer to Settle was delivered to all
parties of record and stated that “the Defendants reserve 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 the proceeding.”

[8]            
The Offer to Settle was open for acceptance until 4:00 p.m., August 16,
2010.

[9]            
The plaintiff made an offer to settle in the sum of $150,000 on May 19,
2010 but withdrew that offer on August 17, 2010, and issued a new offer to
settle in the amount of $185,000.

[10]        
The trial was originally scheduled to commence on August 25, 2010;
however, on June 29, 2010, the trial was rescheduled by consent to October 12,
2010.

Issues

[11]        
The following questions arise in determining the defendants’ entitlement
to costs:

A.    Are the
defendants entitled to two sets of costs?

B.    Are the
defendants entitled to double costs?

C.    Should any costs
be awarded to ICBC?

[12]        
I will deal with each question in turn.

A. Are the defendants entitled to two sets of costs?

[13]        
At trial, the defendants Ms. Lee and MKA Leasing Ltd. were separately
represented from the defendant, Stephen Louie. Counsel for Mr. Louie
acknowledged that in this proceeding he was aligned in interest with the
defendants Miranda Lee and MKA Leasing Ltd.

[14]        
By way of background, Mr. Louie, who had also been a passenger in
the subject vehicle, had sued Miranda Lee and MKA Leasing Ltd. in a separate
proceeding (the “Louie Action”). His action was settled on February 12,
2007. Since Mr. Grewal was counsel for Miranda Lee and MKA Leasing Ltd. in
the Louie Action, and had acted against Mr. Louie, he determined that it
would be a conflict of interest to represent Mr. Louie in this proceeding.
Accordingly, Ms. De Baie was retained to represent Mr. Louie in this
proceeding. I observe that in February 2007, as an alternative, new
counsel could have been retained to jointly represent all of the defendants in
this proceeding.

[15]        
The general principle that emerges from the authorities is that the parties
who are aligned in interest ought to join in their defence. The awarding of
more than one set of costs to parties with the same or similar interests who
are nevertheless separately represented is a matter of judicial discretion: Johnson
v. Pelkey (1998), 23 E.T.R. (2d) 137, 23 C.P.C. (4th) 277 at para. 35
(B.C.S.C.).

[16]        
Mr. Louie’s interests in this lawsuit have not been shown to be in
any way divergent from those of Miranda Lee and MKA Leasing Ltd. At trial, it
was apparent that their interests were in fact identical and they could have
been represented by one counsel. After settlement of the Louie Action, the
defendants were entitled to choose to have Mr. Grewal continue to
represent Ms. Lee and MKA Leasing Ltd. and have new counsel appointed for Mr. Louie.
However, in my view, their choice to do so and the attendant expenses
associated with that choice should not properly be borne by the plaintiff.

[17]        
In summary on this issue, I am not persuaded that, after the settlement
of the Louie Action, the circumstances of this case justify awarding separate
costs to Mr. Louie. Mr. Louie is entitled to a separate award of
costs at Scale B to 30 days after the date the Louie Action was
settled.

B. Are the defendants entitled to double costs?

[18]        
Pursuant to Rule 9-1, the defendants are seeking costs to the date of
their Offer to Settle and double costs thereafter.

[19]        
Rule 9-1(4) provides that the court may consider an offer to settle when
exercising its discretion in relation to costs. Rule 9-1(6) sets out the
factors the court may consider when assessing cost options as follows:

(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.

[20]        
It is well settled on the authorities that the objective of Rule 9-1 is
to facilitate and encourage the early settlement of disputes by rewarding the
party who made a reasonable settlement offer and penalizing the party who
declined to accept such an offer: Hartshorne v. Hartshorne, 2011 BCCA
29 at para. 25, 330 D.L.R. (4th) 503. Rule 9‑1 serves an
important deterrent function: Bailey v. Jang, 2008 BCSC 1372 at
para. 18, 90 B.C.L.R. (4th) 125.

[21]        
I turn next to consider the factors set out in Rule 9-1(6).

Rule 9-1(6)(a): Whether the offer to settle
was one that ought reasonably to have been accepted

[22]        
The reasonableness of the decision of the plaintiff not to accept the Offer
to Settle must be assessed by reference to the knowledge of the plaintiff at
the time the formal offer was open for acceptance. The authorities mandate that
such an assessment does not invite a “hindsight analysis” and that such an
assessment should be determined without reference to the ultimate judgment: Bailey
at para. 24.

[23]        
The Court of Appeal in Hartshorne at para. 27 affirmed that
the reasonableness of an offer 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”. These
considerations are not intended to be exhaustive, nor will each of the factors necessarily
be relevant in a given case: Stuart v. Hugh, 2011 BCSC 575 at para. 26.

[24]        
The defendants forcefully argue that their offer should have been
accepted by the plaintiff as it could be readily evaluated during the period of
time the offer was open for acceptance. It is uncontroversial that at the time
the offer was made, the witness statements had been made available to the
plaintiff, he had received the police report, and examinations for discovery
had been conducted. The plaintiff had the information he needed to assess the
risk of proceeding on the issue of liability. Moreover, the defendants contend
that the plaintiff was well aware that his claim for damages had weaknesses: he
had not filed tax returns for many years, thus making it difficult to support a
claim for past and future wage loss. Furthermore, they emphasize that there was
a complete lack of any corroborative evidence adduced regarding how the plaintiff’s
alleged injuries affected him in his personal life.

[25]        
While the assessment of damages turned to a large extent on the
plaintiff’s credibility, plaintiff‘s counsel points out that a medical expert
had opined that the plaintiff had sustained a brain injury in the collision.

[26]        
Insofar as liability is concerned, the plaintiff points out that he was
only required to establish that Ms. Lee’s negligence contributed to the
accident. Even if Ms. Lee’s fault was apportioned at 1%, it was common
ground at trial that the plaintiff would have been awarded 100% of his damages.
The plaintiff contends that this was a significant factor in assessing the
risks of proceeding to trial. Similar to the plaintiff in Bailey, the
plaintiff in this case was clearly prepared to take a risk to obtain a
significant award before the jury.

[27]        
The plaintiff’s overarching submission is that the inclusion of para. 6
in Appendix A of the Offer to Settle is fatal to the defendants’ application
for double costs. The Offer to Settle was subject to the conditions in Appendix
A which provides in para. 6 as follows:

Nothing in this offer detracts
from the Defendants’ right to seek special costs against the Plaintiff or his
counsel above and beyond the Defendants’ entitlement to costs under this
offer. Neither the making nor the acceptance of this offer shall be
deemed a waiver or estoppel by the Defendants in respect to any reprehensible
or improper conduct on the part of the Plaintiff and / or his counsel in
respect of this proceeding. [Emphasis added.]

[28]        
Based upon these terms, even if the plaintiff had accepted the Offer to
Settle, the defendants nonetheless would have been at liberty to pursue the
plaintiff for special costs. Thus, there was a potential risk that the
acceptance of the offer may not have ended all of the outstanding disputes
between the parties.

[29]        
The Court of Appeal, in discussing Rule 9-1(5) in Evans v. Jensen,
2011 BCCA 279, articulated at para. 35 that “the most obvious and accepted
intent of this Rule, namely to promote settlement by providing certainty to the
parties as to what to expect if they make, or refuse to accept, an offer to
settle”. The Court reasoned as follows:

[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.

[42]      This certainty in terms
of the result of either making, accepting or refusing to accept an offer is
also more conducive to the overall object of the Rules, which is “to secure the
just, speedy and inexpensive determination of every proceeding on its merits”.

[30]        
It clearly emerges from the authorities that an important objective of
offers to settle under the Rules is to bring certainty and finality to
litigation. The reservation of the defendants’ right to seek special costs from
the plaintiff after the acceptance of the offer is antithetical to this
objective. It cannot be said that the Offer to Settle provided a genuine
incentive to settle. As was stated in Giles v. Westminster Savings and
Credit Union, 2010 BCCA 282 at para. 88, “plaintiffs should not be
penalized for declining an offer that did not provide a genuine incentive to
settle in the circumstances”.

[31]        
In short, para. 6 in Appendix A of the Offer to Settle
militates against an award of double costs.

Rule 9-1(6)(b): the relationship between the terms of
settlement offered and the final judgment of the court

[32]        
As the plaintiff’s claim was dismissed, the Offer to Settle was patently
more favourable than the final judgment.

Rule
9-1(6)(c): the relative financial circumstances of the parties

[33]        
The plaintiff takes no issue with the defendants’ assertions that the
evidence does not support a finding that the plaintiff’s financial
circumstances are appreciably different from those of the defendants. This is a
neutral factor in the analysis.

Disposition

[34]        
In weighing all of the factors, the most significant being the inclusion
of para. 6 in Appendix A of the Offer to Settle, I conclude that the plaintiff
should not be required to pay double costs.

C. Should any costs be paid to ICBC?

[35]        
The defendants contend that any costs awarded to them ought to be paid directly
to ICBC, who is not a party to this proceeding. The defendants acknowledge that
there does not appear to be any authority directly on point.

[36]        
The paramount principle to be derived from the authorities is that any
discretionary exceptions to the usual costs rules must be made judicially: Bailey
v. Victory (1995) 4 B.C.L.R. (3d) 388, 57 B.C.A.C. 23 (C.A.) at para. 13.

[37]        
The defendants primarily anchor their submissions on s. 84(1) of
the Insurance (Vehicle) Act, R.S.B.C. 1996, c. 231 [formerly
s. 26 of the Insurance (Motor Vehicle) Act]. Section 84(1)
of the Insurance (Vehicle) Act provides as follows:

84  (1) On making a payment of benefits or
insurance money or assuming liability for payment of benefits or insurance
money, an insurer

(a) is subrogated to and is
deemed to be the assignee of all rights of recovery against any other person
liable in respect of the loss, damage, bodily injury or death of a person to
whom, on whose behalf or in respect of whom the payment of benefits or
insurance money is made or to be made, and

(b) may bring action in the name of the insured or in
its own name to enforce the rights referred to in paragraph (a).

[38]        
On a plain reading of s. 84(1) of the Insurance (Vehicle) Act,
the provisions pertain to the statutory subrogation issues between the insured
and the insurer, which issues were not before me in this litigation. It is
axiomatic that this subsection is not determinative of the dispute
between the plaintiff and the defendants in this case. An award of costs to
ICBC, who is not a party to this proceeding, would constitute a departure from
the usual rule that the defendants who were the successful parties in this
litigation be awarded costs. In my view, these statutory provisions do not
establish a basis for an order displacing the usual rule.

[39]        
The defendants point out that the court has previously recognized that
it has jurisdiction to make a costs award in relation to a non-party: K.C.W.
v. F.X.L., 2005 BCSC 430. While recognizing that costs will usually be
awarded against a non-party only when that non-party is found to be the “true
litigant”, they submit that it is also appropriate to order costs to a
non-party where the non-party is the only entity entitled to such an award.
They contend that since ICBC is the assignee of all rights of recovery in
respect of the loss claimed pursuant to s. 84(1), it is logical and “an
appropriate exercise of the court’s broad jurisdiction” that they be permitted
to recover those costs directly from the plaintiff. They assert that such an
order would be practical and economical because it would avoid ICBC’s
expenditure of further time and resources for the recovery of those costs from
the defendants.

[40]        
The defendants rely on Maxwell-Smith v. Drummond (1995), 61
B.C.A.C. 228, 56 A.C.W.S. (3d) 822 (C.A.), in which the court stated at para. 19:

Under s. 25(1) of the Insurance
(Motor Vehicle) Act the Corporation is subrogated to its insurer and
is entitled to recover the costs to which he would be entitled. No
reason has been advanced which would justify our departing from the ordinary
rule that costs follow the event. In the result the respondent is entitled
to its costs should it seek to recover them. [Emphasis added.]

[41]        
The Court held that despite ICBC’s involvement as a non-party insurer,
the ordinary rule of costs following the event applied and the defendant was
entitled to costs.

[42]        
I agree with the plaintiff that the reference in para. 19 of Maxwell-Smith
to “insurer” is a typographical error and should read “the Corporation is
subrogated to its insured”. In that case, ICBC was not a party and the
reference to respondent cannot refer to ICBC; it necessarily refers to the
defendant Drummond. Further, the Court did not provide any discussion or elaborate
on this point. I am therefore not persuaded that Maxwell-Smith endorses
the proposition that this court has jurisdiction to make the order that the
defendants seek in this case.

[43]        
The defendants also rely on Bauer v. Insurance Corp. of British Columbia
(1989), 38 B.C.L.R. (2d) 232, 41 C.C.L.I. 45 (S.C.). In that case, ICBC
was the statutory defendant and was held to be entitled to costs as a party.
The facts were clearly distinguishable and render the analysis inapplicable to
this case.

[44]        
While the Court of Appeal in Perez v. Galambos, 2008 BCCA 382,
recognized the jurisdiction to make a costs award in relation to a non-party,
the Court observed that such an award is unusual and exceptional, and should
only be made in “special circumstances” (at para. 17). The Court stated
that a non-party who is funding litigation can be liable for costs as the real
litigant if they have put forward an insolvent party as a “man of straw” to
avoid liability for costs or if the non-party has promoted the litigation improperly
so as to be liable for the tort of maintenance. The Court in Perez
declined to order that the insurer who defended the action pay the costs of the
successful plaintiff. Since the facts in this case are clearly distinguishable
from those in Perez, that case does not assist the defendants. Moreover,
I also note that neither counsel brought it to the Court’s attention that this
decision was reversed by the Supreme Court of Canada and the issue of costs was
left to the parties to resolve or, in the alternative, remanded back to the
Court of Appeal for further consideration. It does not appear that there has
been any further consideration by the Court of Appeal.

[45]        
In their submissions the defendants also cite Qureshi (Guardian ad
litem of) v. Nickerson (1991), 77 D.L.R. (4th) 1, 53 B.C.L.R. (2d) 379
(C.A.). However, in my view there is no principle to be derived from Qureshi
that supports the defendants’ submission that ICBC should be entitled to an
award of costs in this case. In that case, the plaintiff argued that the
defendant had not incurred any costs in his successful defence of a medical
malpractice claim because those costs had been paid on his behalf by the
Canadian Medical Protective Association. The Court of Appeal found that there
was no contract of indemnification and no right of subrogation between the
defendant and the Canadian Medical Protective Association. The Court concluded
that in the absence of a right of subrogation, and having not incurred any
liability for fees and disbursements in defending the claim, the defendant was
not entitled to a costs award against the plaintiff.

[46]        
In summary on this issue, I am not persuaded that in the circumstances
of this case, there is any principled basis upon which this Court should order
that the plaintiff pay costs to the non-party ICBC.

Conclusion

[47]        
The plaintiff will pay two sets of costs at Scale B to the
defendants only to the date which is 30 days after the Louie Action was
settled. Thereafter, the plaintiff will pay one set of costs at Scale B to
the defendants.

“Dardi
J.”