In personal injury cases, the successful party often recovers costs from the unsuccessful party. However, offers to settle can dramatically influence these cost awards. If the losing party made a reasonable offer to settle before the trial but rejected it, the court may reduce or even deny the winning party’s costs.
Conversely, if the winning party made a generous offer to settle that the losing party rejected, the court might award the winning party double costs.
This blog explores the factors courts consider when determining cost awards in personal injury cases involving settlement offers.
A Tale of Two Offers to Settle
To illustrate the various impacts that may be made by an offer to settle on the costs associated with a personal injury action, we will consider two personal injury actions, each of which involved a pre- or mid-trial offer to settle the matter on terms that ended up being better than what was achieved at trial, and in each of which case double costs were sought.
In Reaume v Rossetto, the plaintiff had rejected the defendant’s pre-trial offer to settle the matter for $146,998.42; similarly, the defendant had rejected the plaintiff’s pre-trial offer to settle the matter for $362,968 plus costs and disbursements. As a result, the plaintiff was awarded more than $1 million in damages for the injuries suffered in a motor vehicle accident. Consequently, she sought double costs from the defendant due to their unreasonable rejection of her very reasonable settlement offer.
Double costs were also sought in Makara v Peter; only on this occasion were they sought by the defendant against the plaintiff. The plaintiff in that case, who alleged injury due to his involvement in a motor vehicle accident with the defendant, had rejected the defendant’s offer to settle the pre-trial matter for $175,000. As a result, the plaintiff’s case was dismissed, and he was awarded no damages whatsoever. As such, the defendant felt that his pre-trial offer had been very generous and should have been accepted by the plaintiff, as a result of which the defendant sought to have the plaintiff pay double his costs of the action.
The Legal Principles Applicable to Double Costs Awards in Personal Injury Actions
As noted by the court in the Reaume decision, British Columbia’s Supreme Court Civil Rules govern how matters before the Supreme Court are to be determined. Rule 9-1 thereof, which relates to settlement offers, dictates that “[t]he court may consider an offer to settle when exercising the court’s discretion in relation to costs” and also “sets out that it is within the court’s discretion to award double costs of some or all of a proceeding.” Moreover, Rule 9-1(6) provides a list of factors to be considered by the court in deciding whether or not to award double costs:
“(a) whether the offer to settle 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.”
The court in Reaume further noted that “an award of double costs is a punitive measure where a party failed to accept an offer to settle that should have been accepted – that is a reasonable offer” and that “the issue is not whether an offer is reasonable but whether it was unreasonable for a party to refuse it.”
However, as the court noted in Makara, refusal to accept a settlement offer should not be punished by overly harsh measures, as the court must strike a balance between punitive measures and encouraging resolution, pre-trial, via settlement:
“[12] The principles that emerge from the authorities are that the determination of whether double costs are warranted is fact-specific and the context of the litigation and the nature of the offer are crucially important to properly evaluate if the offer made was one that ought reasonably to have been accepted. Further and importantly, the refusal to accept the offer should not penalize a party by applying an overly harsh, retrospective analysis on the final outcome of the litigation. In other words, double costs should not be a penalty for an inaccurate prediction or assessment of the outcome: Fryer at para. 17. Courts must attempt to strike the balance between encouraging the acceptance of reasonable offers to settle on the one hand, while not penalizing or chilling a litigant from pursuing meritorious claims on the other. Further, it is within the court’s discretion, exercised in a just and principled manner, ‘to consider a broad range of factors and there is no mandatory or prescriptive list that necessarily informs the assessment of double costs’: Fryer at para. 18.”
Application of the Legal Principles Results in One Award of Double Costs, One of No Costs
In respect of the Reaume decision, the court noted that “[t]he key consideration in this case is whether it was unreasonable for the defendants to reject Ms. Reaume’s offer to settle for $362,968, either on the date that the offer to settle was delivered or served or on any later date.” It was very clear that the award achieved by the plaintiff in that case “significantly exceeded” the offer to settle made by the defendants. There was no evidence to suggest “that the relevant financial circumstances of the parties are a factor in this case.”
The court reflected upon the fact that the “bulk of the award was for future loss of income earning capacity” as a result of the plaintiff’s assertion that the motor vehicle accident in which she was involved had caused her to become permanently partially disabled. The plaintiff had provided expert evidence to substantiate this claim and had made the defendant aware of this evidence before trial, despite which the defendant failed to “put forward any expert evidence challenging that of [the plaintiff]”. In these circumstances, the court was satisfied that the “defendants should have considered the realistic possibility that the Court would award Ms. Reaume significant award for loss of future income earning capacity to reflect her loss of capacity.” As such, the defendant had acted imprudently, to its own detriment, and double costs were ordered as sought against the defendants.
With respect to the Makara case, which the court dismissed, the court noted that litigation had been both reasonable and necessary, given that the “parties had different, and not unreasonable, perspectives on [the defendant’s] liability.” Furthermore, although there was “a discrepancy between the amount of the offer and the complete dismissal of the claim, in my view, it would be unfair to punish the plaintiff for pursuing his claim, even if there was a risk that he would not succeed,” as “the double cost rule ‘should only be a penalty for unreasonable litigation and not simply a penalty for an inaccurate prediction or assessment of the outcome.’”
In the result, the court was satisfied that “despite the eventual dismissal of the plaintiff’s claim at trial […] the offer to settle ought not reasonably to have been accepted, given the low amount of the offer relative to the plaintiff’s claimed damages, and because the issues [sic] of liability was a genuine issue disputed by the parties”. The court was further satisfied that the offer made by the defendants “was not genuine, as it was made with a reasonable expectation that it would not be accepted. In such cases, these strategies have been considered a ‘no-risk’ litigation strategy or tactic for the sole purpose of attracting double costs sanctions,” which, in the court’s view, “misses the purpose of the double costs rule: to encourage parties to carefully assess their cases before trial and accept reasonable offers to settle.” Given these findings, in addition to the fact that the plaintiff had been found impecunious, the court concluded that this was not an appropriate circumstance to award double costs.
Vancouver Personal Injury Lawyers Assisting You With Your Personal Injury Claim
If you have suffered personal injury as a result of a slip and fall, animal attack or motor vehicle accident, regardless of whether your injuries are severe or minor, you need excellent legal advice to guide you through the legal process. Fortunately, Meridian Law Group is here to help. Meridian Law Group is proud to provide capable, knowledgeable, expert legal advice to British Columbians from all over the province from our downtown Vancouver, British Columbia offices. Contact us online or by telephone at (604) 687-2277, and one of our friendly staff will be pleased to schedule a confidential consultation.
