IN THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20120528

Docket: M033899

Registry:
Vancouver

Between:

Shane Allen Byer

Plaintiff

And

Kenneth Mills,
deceased, Jesse John Way and

S-304 Holdings
Ltd. doing business as Jonker Nissan

Defendants

And

Insurance
Corporation of British Columbia

Third
Party

Before:
The Honourable Mr. Justice Harris

Reasons for Judgment

[1]            
This is an application for double costs brought by successful defendants
after trial. The defendants submit that they are entitled to double costs after
November 29, 2006, the date on which they served a formal offer to settle under
the then existing Rule. The formal offer was made under old Rule 37 and did not
include an expiry date. It was an offer to settle this proceeding for the sum
of $5,000 and costs.

[2]            
On February 8, 2011, I dismissed the plaintiff’s case. Reasons for
judgment are indexed at 2011 BCSC 158.

[3]            
The question whether the defendants are entitled to double costs is
governed by the current Rule 9-1. In brief, the defendants submit that the
plaintiff’s case was always a long shot and viewed in the light of its remote
prospects of success, the offer was one that the plaintiff ought reasonably to
have accepted. By the time the offer was served, a police file containing
sufficient evidence to allow the plaintiff adequately to assess the prospects
of success had been produced. Alternatively, it must have been apparent to the
plaintiff that his prospect of succeeding at trial was remote, by no later than
September 30, 2010, when critical deposition evidence was taken that would
prove decisive in the outcome of the trial that started shortly thereafter.

[4]            
For the reasons that follow, I have concluded that this is not an
appropriate case in which to exercise my discretion to award double costs. I
consider the critical and for practical purposes dispositive issue to be
whether the plaintiff ought reasonably to have accepted the offer at the time
it was made or at some subsequent time, given that the offer remained open for
acceptance through trial. In my view, given the inherent uncertainties
surrounding the outcome of the litigation, up to and including the trial, I
cannot conclude that this particular offer ought reasonably to have been
accepted by the plaintiff. Moreover, it would not accord with the policy
purposes underlying the discretion to award double costs to order them in the
circumstances of this case.

[5]            
It is unnecessary to rehearse the law surrounding awarding double costs
at any great length. The governing principles have been canvassed in detail in
cases such as Ward v. Klaus, 2012 BCSC 99 from which I take the
following summary on which I cannot improve:

Rule 9-1

[29]      Rule 37B came into effect on July 1, 2008. It is
now Rule 9-1. The relevant provisions of the Rule are:

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

(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.

(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.

[30]      Rule 9-1(5) sets out the various cost options open
to the court in a proceeding in which an offer to settle has been made. The
court is limited to those options: A.E. Appeal at paras. 35-40.

[31]      In BCSPCA v. Baker, 2008 BCSC 947, Justice
Preston, at para. 15, concluded that Rule 9-1(5) was permissive and
empowered the court to make any of the orders mentioned therein. He noted that
by necessary implication, the Rule contemplated that the court may deny any of
the forms of relief.

[32]      Since its inception in 2008, much ink has been
spilled explaining the Rule. LexisNexis Quicklaw presently
references some 231 decisions in which the Rule has been discussed. From the
decisions, some broad principles of general application have emerged concerning
how the Rule should be applied.

[33]      It is now generally recognized that the Rule
provides for the exercise of a broad discretion by trial judges and provides
principles to guide in the exercise of that discretion: Roach v. Dutra,
2010 BCCA 264, 5 B.C.L.R. (5th) 95.

[34]      In Hartshorne v. Hartshorne, 2011 BCCA 29,
14 B.C.L.R. (5th) 33 at para. 25 (“Hartshorne”), the Court
discussed the guiding principles:

[25]      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.

[35]      In A.E. Appeal the court discussed at para. 41
the importance of certainty and consequences in applying the Rule:

[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.

C.        Rule 9-1(6) Guiding
Principles

i.    Should
the Offer Have Been Accepted

[36]      There is now general agreement that in determining
whether the offer to settle should reasonably have been accepted the court does
not consider the final result. The reasonableness of a decision not to accept
an offer to settle must be assessed not by reference to the award that was
ultimately made, but rather the circumstances existing when the offer was this
is a open to acceptance: Bailey v. Jang, 2008 BCSC 1372, 90 B.C.L.R.
(4th) 125 at para. 24 (“Bailey”); and Hartshorne at para. 27.
It is important to note that this factor is considered from the perspective of
the person receiving the offer.

[37]      In Giles v. Westminster Savings & Credit
Union, 2010 BCCA 282, 5 B.C.L.R. (5th) 252 (“Giles”), the Court
appears to suggest that the reasonableness of an offer may be decisive in
determining the nature of an award of costs that should be made. At para. 88
it says:

[88]      I appreciate there are no
mandatory factors under Rule 37B(6) and that trial judges have discretion to
take into account whatever factors they consider appropriate in a given case.
However, the ultimate discretion as to double costs must be exercised in a
just, principled, and consistent way. One of the goals of Rule 37B is to
promote settlement by imposing consequences on parties who have refused to
accept an offer that ought reasonably to have been accepted. While it may not
invariably be the case, I consider that it would be generally antithetical to
that goal to penalize an unsuccessful plaintiff with double costs for
proceeding to trial in the face of an unreasonable offer. Virtually all
litigation comes with a degree of risk. When faced with settlement offers,
plaintiffs must carefully consider their positions. However, they should not to
be cowed into accepting an unreasonable offer out of fear of being penalized
with double costs if they are unable to "beat" that offer. Put
somewhat differently, plaintiffs should not be penalized for declining an offer
that did not provide a genuine incentive to settle in the circumstances. In
this case, the Credit Union and Mr. Thomas have not pointed to anything
that would support a finding that the plaintiffs’ decision to refuse their
offer was, at the time of the refusal, an unreasonable one.

[38]      I have some difficulty with that analysis. It
appears to suggest that plaintiffs who decline an offer that did not provide a
genuine incentive to settle should not be subject to costs sanctions regardless
of the outcome of the trial. That proposition would appear to be counter to the
guiding principles set out in the subsequent decision in Hartshorne.

[39]      In that regard it is important to note that the
Rule does not make any reference to the impact of “unreasonable offers”.
Further, it is with respect difficult to describe an offer as being
“unreasonable” when it provides a better result to the plaintiff than that
which he has obtained at trial. The fact that an offer does not provide an
incentive to settle cannot be determinative. As Savage J. noted in MacKinlay
v. MacKinlay Estate, 2008 BCSC 1570, 44 E.T.R. (3d) 48 at para. 34, in
comments echoing Southin J.A. in Kurylo:

[34]      While a nominal offer
might be described as strategic, it was a strategy aimed at persuading the
Plaintiffs to discontinue the proceeding, an outcome that is favourable as
compared to the outcome the Plaintiffs obtained at trial. Such an offer is one
of the few tools in the arsenal of a defendant of relatively modest means which
might exert pressure on a plaintiff pursuing an unmeritorious claim.

[40]      In certain circumstances a nominal offer may in
fact be reasonable and should be accepted to spare all parties the costs of an
expensive trial.

ii.     Relationship
Between Offer and Judgment

[41]      In Giles, at para. 89, it is suggested
that the fact that an action is ultimately dismissed in its entirety is not a
consideration with respect to double costs:

[89]      I am also of the view
that when an offer made by a defendant for the purpose of achieving a pre-trial
settlement is reasonably refused, the mere fact that the action is ultimately
dismissed in its entirety is not a consideration with respect to double costs.
To take the disposition of the action into account would result in the
"hindsight analysis" that Mr. Justice Hinkson, as he then was,
cautioned against in Bailey v. Jang, 2008 BCSC 1372, 90 B.C.L.R. (4th)
125 at para. 24. See also: Dodge v. Shaw Cablesystems Ltd., 2009
BCSC 1765 at para. 17. While I acknowledge that the relationship between
the offer and the result at trial is specifically mentioned in subrule 37B(6)(b),
I consider it to have no relevance in circumstances such as the present.

[42]      That comment appears contrary to the Rule which
mandates that the court consider the relationship between the terms of
settlement and the final judgment. I note in Hartshorne, the Court
appears to have resiled from that position at para. 30 where it notes that
the relationship of the offer to the court’s order is “an independent factor to
be considered in deciding whether a double costs order should be made”.

iii.      Relative
Financial Circumstances of the Parties

[43]      In the first cases decided under Rule 37B, most
judges concluded that the fact that an insurer was involved should not be taken
into account: Bailey at paras. 32-34; and Arnold v. Cartwright
Estate, 2008 BCSC 1575, 86 B.C.L.R. (4th) 99 at para. 23. In Smith
v. Tedford, 2010 BCCA 302, 7 B.C.L.R. (5th) 246 at para. 19, the Court
of Appeal held otherwise. In that decision the court recognizes that in certain
circumstances the existence of an insurer can be taken into account. As I read
the case, that is not the inevitable result. In this regard I adopt the
analysis of Humphries J. in Mazur v. Lucas, 2011 BCSC 1685 at paras. 48-53
in which she concluded at para. 53 “insurance coverage is not
automatically a factor to be considered… the facts of a particular case will
govern whether it should be considered, and if so, what weight should be given
to it”.

iv.     Other
Factors the Court Considers Appropriate

[44]      This part of the Rule
gives the court wide latitude to consider case specific matters in determining
how its discretion should be exercised. For example, a case that fails on a
difficult causation issue may lead to a different exercise of discretion than
one that is lost because of credibility: A.E. at para. 59. In my
opinion, this is the appropriate place in the analysis to consider whether an
offer was intended to encourage a settlement.

[6]            
This action involved a motor vehicle accident in which the plaintiff was
injured. At trial, the parties settled quantum at $120,000. This settlement was
a compromise. No doubt the plaintiff valued his case higher than the settlement
value and may well have had reasonable grounds to do so. I raise this matter
here to observe simply that it may be generous to treat the offer as one to
settle a $120,000 case for $5,000.

[7]            
The accident involved a collision between a vehicle driven by Mr. Way
and a vehicle in which the plaintiff was travelling with a friend. I described
the accident in the following way in my reasons for judgment:

[1]        At about 10:42 p.m. on the evening of September
10, 2001, a collision occurred between two vehicles at the intersection of
Pinnacles Road and the Nazko Highway some 10-12 kms northwest of Quesnel. The
Nazko Highway is the through road with the right-of-way over traffic joining it
from Pinnacles Road. There is a stop sign at the intersection on Pinnacles
Road. The Nazko Highway runs broadly east to west. Pinnacles Road joins it from
the south.

[2]        It was dark at the time of the accident. The
intersection is not lit by artificial lights. The road surface was dry.

[3]        The collision involved
a Ford F350 truck, driven by the defendant Mr. Way, and a Chevrolet Blazer
occupied by the defendant, Mr. Mills, and the plaintiff, Mr. Byer. Mr. Way
was driving in an easterly direction along Nazko Highway. The Blazer was
driving down Pinnacles Road towards the Nazko Highway. It did not stop at the
stop sign. It drove into the path of the F350 truck which despite swerving to the
left was unable to avoid it.

[8]            
At the conclusion of trial, the plaintiff abandoned his case that Mr. Way
had contributed to the accident. Accordingly, whoever was driving the
plaintiff’s vehicle was solely responsible for the accident. The critical
question. therefore, became whether the plaintiff was the driver or the
passenger in the vehicle.

[9]            
I found as a fact that the vehicle was being driven by the plaintiff and
not by his friend, Mr. Mills. That conclusion was based on two other
findings. First, I accepted the evidence of a Ms. Burton, who testified
that she found Mr. Mills in the vehicle with his feet pinned under the
dashboard on the passenger side of the vehicle. Second, I accepted the opinion
of the plaintiff’s expert who agreed that if Mr. Mills’ feet were pinned
in that position, he could not have been the driver. These findings were
sufficient to dismiss the action.

[10]        
In assessing whether the plaintiff ought reasonably to have accepted the
defendant’s offer it is important not to engage in "hindsight". It is
by no means inevitable that certain findings of fact will be made by a trial
judge and it is often challenging to assess the likely outcome of the trial in
advance.

[11]        
I accept the plaintiff’s submission that assessing the likely outcome of
this trial was challenging. First, the plaintiff had no memory of the accident.
Second, Mr. Mills died as a result of his injuries shortly after the
accident. Although he had made statements to those attending the scene and
shortly thereafter denying that he was the driver, it could not have been clear
whether those hearsay statements would be admitted at trial. In fact, the case
was dealt with without ruling on their admissibility. Third, there were no
eyewitnesses who could testify who was driving the vehicle.

[12]        
The evidence about who was driving was circumstantial. Several witnesses
who attended the accident scene shortly after it occurred gave statements that
tended to suggest that Mr. Mills may well have been driving the vehicle.
These statements, and evidence subsequently given in criminal proceedings
involving the plaintiff, indicated that Mr. Mills was found with his
buttocks in the driver’s seat and that he was possibly pinned in that seat by
the steering wheel. It is fair to say, in my view, that the lay evidence, as
revealed by the police file and emerging from criminal proceedings, left the
question of who was the driver unresolved.

[13]        
It is also telling, in my view, that the defendants did not treat this
case as one that was obviously capable of being resolved simply by the evidence
of Ms. Burton that she found Mr. Mills in the vehicle with his feet
pinned under the dashboard on the passenger side. The defendants led expert
evidence of occupant dynamics intended to demonstrate that the plaintiff was
driving and Mr. Mills was his passenger. The plaintiff countered with his
own expert evidence intended to demonstrate that the only conclusion consistent
with objective physical evidence was that Mr. Mills was driving the
vehicle.

[14]        
Indeed, part of the analysis that I had to undertake in reaching my
findings of fact was whether Ms. Burton’s evidence of her observations at
the scene were reliable given that objective physical evidence was arguably
inconsistent with them. I refer the reader to the reasons for judgment for a
full appreciation of the analysis that had to be undertaken to make the
critical findings of fact.

[15]        
Finally, it would have been reasonable for the plaintiff to be
encouraged by the reasons given in his criminal trial which acquitted him of
the offences of which he was charged. The trial judge found that the case
against the plaintiff fell far short of discharging the burden of proof beyond
a reasonable doubt, but went on to comment about the weakness of the case in
terms that would reasonably have encouraged him to believe that the trial judge
thought it unlikely that he in fact was the driver.

[16]        
I am satisfied that at the time the offer was made the prospects of
success for the plaintiff would be difficult to assess. The lay evidence was
inconclusive about critical facts. At that time, the expert evidence was at
best equivocal. The then existing report of Mr. West that had been used at
the criminal trial in support of the proposition that the plaintiff was the
driver, was at best conclusionary, contained virtually no analysis and clearly
had not been found to be compelling by the provincial trial judge.

[17]        
Moreover, I do not think that at any time, even through trial, it should
have become obvious to the plaintiff that his case was "a long shot".
His case was supported by a rigorous and sophisticated expert opinion
supporting the proposition that he was the passenger and that that conclusion
was supported by and consistent with the physical evidence. Indeed, the battle
of the experts unfolded at trial, with opinions on occupant dynamics and the
consistency of those dynamics with the physical evidence emerging at trial,
rather than having been exchanged before.

[18]        
Similarly, the conclusions to be drawn from the lay evidence were not
obvious. The evidence about Mr. Mill’s position within the vehicle was not
consistent or uniform. In final submissions, the plaintiff was able to advance
an argument that I ought not to accept Ms. Burton’s evidence that,
although I did not ultimately find it persuasive, was not devoid of merit. To
the contrary, it was an argument deserving of respect and which required
careful analysis on my part before I was satisfied it should be rejected. Again
I refer the reader to the reasons for judgment for the details of the analysis.

[19]        
The defendants submit that at the latest the plaintiff should have
realised that his case had no realistic prospect of success when Ms. Burton’s
deposition was taken at the end of September 2010, a few days before trial
started. At that point, the plaintiff should have realised that he could only
succeed if he were able to persuade Ms. Burton through cross-examination to
resile from her statements.

[20]        
I do not accept that characterisation of the position that the plaintiff
found himself in. Certainly, the plaintiff’s case would have been advanced if Ms. Burton
had recanted her evidence about the location of Mr. Mills’ feet, but his
case did not stand or fall on that issue alone. While damaging to his case, the
plaintiff was nevertheless able to argue that there were reasons to reject her
evidence, including the fact that it was inconsistent with the conclusions to
be drawn from the physical evidence. It is not accurate, therefore, to say that
the plaintiff could succeed only if Ms. Burton recanted her evidence in
cross-examination.

[21]        
It is in these circumstances that one must assess whether the offer of
$5,000 plus costs was one that ought reasonably to have been accepted by the
plaintiff. Although the prospect of the plaintiff succeeding was always highly
uncertain and difficult realistically to assess, I cannot see that it can
fairly be characterised as a case that was lacking in some substantial merit.
In my view, the offer does not rise above a nuisance offer. The merits of the
case, on both sides, and the uncertainties facing all parties, called for a
more substantial offer if the offer were to serve the purposes of the Rule.
Accordingly, I cannot conclude that the offer was one that ought reasonably to
have been accepted by the plaintiff while it was open for acceptance.

[22]        
In reaching this conclusion, I have approached the question whether the
offer was one that ought reasonably to have been accepted by the plaintiff from
the plaintiff’s perspective. It will be apparent, however, from my general
comments about the inherent uncertainties affecting predicting the merits of
the case, that I do not view the offer that was made as objectively reasonable.
In that sense, I cannot conclude that it provided a genuine incentive to settle
the case. The offer does not possess those characteristics that would justify
rewarding the party who was successful at trial with an award of double costs.

[23]        
I turn to consider the other considerations that may justify an award of
special costs, even though the offer is not one that ought reasonably to have
been accepted. I approach these factors recognising that the Rule is intended
to penalise a party for failing to accept an offer and reward a party who makes
a reasonable settlement offer. In brief, I do not find that any of those
considerations justify an award of double costs.

[24]        
Although the plaintiff would clearly have been substantially better off
to have accepted the offer, this consideration standing alone is not
determinative.

[25]        
I cannot conclude that the relative financial circumstances of the
parties lend support to the conclusion that, nonetheless, an award of double
costs is justified.

[26]        
I am not persuaded that there are any other considerations that would
justify an award of double costs. The defendants criticised the
cross-examination of their expert, which they characterised as suggesting guilt
by association. I did not view the cross-examination as overstepping reasonable
professional boundaries.

[27]        
The application for double costs is dismissed. There will be one set of
costs.

“Harris
J.”