Shoulda Woulda Coulda Settled!: The Consequences of failing to accept a reasonable offer to settle.
Under Supreme Court Civil Rule 14-1(9), unless the court awards otherwise, the cost of a trial must be awarded to the successful party. The effect of this rule in personal injury cases is that a plaintiff who is successful in proving liability and damages at trial will recover the cost of the action from the opposing party. However, under Supreme Court Civil Rules 9-1(5)(a) and (d), the court has the power to deprive a successful litigant costs that they would otherwise be entitled to in relation to any steps taken in the proceeding after the plaintiff has rejected reasonable offer to settle.
Additional tools for punishing the overly litigious party are found in Supreme Court Civil Rule 9-1(5)(d) which allows the court to not only deprive the successful plaintiff of costs that they are entitled to, but to also require the plaintiff to pay the defendant’s costs in relation to steps taken in the proceeding after service of the offer to settle.
The purpose of the rules related to costs is to encourage early settlement of disputes (A.E. v. D.W.J., 2009 BCSC 505, 91 B.C.L.R. (4th) 372). The rules work to reward the party who makes a reasonable settlement offer and penalize the party who declines to accept such an offer. By declining a reasonable settlement offer, a plaintiff runs the risk of failing to recoup the costs associated with having to proceed with trial.
An example of the consequences of failing to accept a reasonable settlement offer was most recently visited upon a personal injury litigant in Park v. Targonski, 2016 BCSC 31. A young woman was injured in a car accident on July 10, 2009. As a result, she suffered soft tissues injuries to her neck and back. After the accident, she developed chronic pain disorder and moderately severe clinical depression. Before the accident, she held the position of nurse for the Vancouver Dialysis Unit and also worked a significant number of hours through taking casual shifts for the Fraser Health Authority.
Six weeks before the start of trial ICBC made a formal offer to settle for $321, 407. At trial the woman was successful and she was awarded damages totaling $364,428.12, subject to an adjustments for Part 7 benefits paid and determination of past wage loss. After making the adjustments, ICBC was ordered to pay the woman $302,643.63. The amount recovered at trial was $18,753.37 less than what ICBC had offered six weeks before. In light of this, ICBC sought a cost order to deprive the plaintiff of her costs based on her rejection of the offer to settle.
In finding mostly in favour of ICBC, Justice Fitch conducted an analysis as to whether the plaintiff should have reasonably accepted the offer. In the opinion of Justice Fitch, the offer to settle occurred after mediation and after all medical reports had been exchanged. The main issue in dispute at trial was whether the plaintiff had regained all or most of her pre-accident capacity to earn income. In the opinion of Justice Fitch, the medical evidence in the case up to the point of the settlement offer should have led the plaintiff to conclude that her claim of ongoing functional incapacity and impairment of her future ability to earn income was not well supported by the existing medical and professional assessments. Although Justice Fitch noted that the plaintiff’s negative outlook on her ability to work in the future was partly related to her depression and chronic pain syndrome, he noted that her reasons for rejecting the offer were not objectively reasonable and that she was represented by experienced and capable lawyers at the time she received the offer. Additionally, Justice Fitch found that plaintiff ought to have been aware that her damages stood to be reduced due to her failure to continue to pursue the exercise regime set out by her doctor. In the courts opinion, the offer from ICBC to settle fell within a reasonable range of outcomes based on the information known to the plaintiff at the time the offer was made.
As a result, the court awarded the plaintiff her costs for the action up until the date of the offer to settle, but not any costs for actions taken after, including the trial. The plaintiff was denied recovery of costs and disbursements for the actions taken after the settlement offer, totaling a deduction of $56, 207. Although ICBC sought to have the plaintiff pay the defendant’s costs in relation to steps taken in the proceeding after service of the offer to settle, Justice Fitch declined to do so based on the fact that to do so would be overly punitive to the plaintiff.
Park v. Targonski is a valuable reminder that the rules surrounding costs are aimed at filtering out frivolous actions and defences by requiring litigants to make a careful assessment of the strength and weaknesses of their cases at the start of and through the litigation process, and by also encouraging litigants to settle whenever possible in order to free up judicial resources for other cases (Bedwell v. McGill, 2008 BCAA 526, 86 B.C.L.R. (4th) 343). Litigants who ignore these principles do so at their own peril.