COURT OF APPEAL FOR BRITISH COLUMBIA
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Citation: |
Bedwell v. McGill, |
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2008 BCCA 526 |
Date: 20081217
Docket: CA033885
Between:
Janice Marie Bedwell
Appellant
(Plaintiff)
And:
Thomas W. McGill
Respondent
(Defendant)
And:
Maureen P. Currie
Respondent
(Third Party)
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Before: |
The Honourable Madam Justice Newbury |
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The Honourable Mr. Justice Hall |
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The Honourable Mr. Justice Low |
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The Honourable Mr. Justice Tysoe |
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The Honourable Mr. Justice Groberman |
| F.E. Hayman |
Counsel for the Appellant |
| A. Gunn |
Counsel for the Respondent |
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Place and Date of Hearing: |
Vancouver, British Columbia |
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November 13, 2008 |
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Written Submissions Received: |
November 24, December 4 & 5, 2008 |
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Place and Date of Judgment: |
Vancouver, British Columbia |
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December 17, 2008 |
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Written Reasons by: |
| The Honourable Madam Justice Newbury |
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Concurred in by: |
| The Honourable Mr. Justice Hall The Honourable Mr. Justice Low The Honourable Mr. Justice Tysoe The Honourable Mr. Justice Groberman |
Reasons for Judgment of the Honourable Madam Justice Newbury:
[1] The plaintiff appeals a costs award made in this personal injury action following the trial judge’s finding that she was entitled to damages, subject to the apportionment to her of 50% of the liability for her injuries. Prior to trial, the plaintiff had declined to accept an offer from the defendant to settle her claims for an amount in excess of the damages she was found to have suffered, even before the apportionment of liability. Thus when awarding costs, the trial judge applied Smith v. Knudsen 2004 BCCA 613, (2004) 33 B.C.L.R. (4th) 76, and ordered that she receive 50% of her costs assessed to the date of the offer, and that she pay the defendant’s costs after that date. Later, the plaintiff’s contributory fault was reduced to 25% on appeal.
[2] The plaintiff anticipates that notwithstanding this reduction, she will be left at the end of the day with a substantial net liability to the defendant – even though it was he who was 75% at fault for the accident in which she was injured. She argues that this result is unjust; that contrary to this court’s conclusion in Smith v. Knudsen, s. 3 of the Negligence Act and R. 37(24) of the Supreme Court Rules are in conflict; and that this court should “read down” R. 37(24) such that she should recover 75% of all her costs, both before and after the date of the defendant’s offer, to be set off against the defendant’s costs incurred from that date.
Factual Background
[3] Ms. Bedwell was injured on April 12, 2001 as she travelled northbound on Coast Meridian Road in Port Coquitlam. She was intending to turn left at the intersection onto Prairie Avenue. The traffic light at the intersection has an advance green signal for vehicles making a left turn. The defendant Mr. McGill was exiting from a mall parking lot south-east of the intersection and intended to turn left to travel southbound on Coast Meridian. He crossed the northbound lane at about the same time as the plaintiff was entering her left-turn lane. The two vehicles collided at the passenger-side front bumper of the defendant’s car and the rear passenger door of the plaintiff’s car. As noted in Mr. Justice Tysoe’s reasons in this court, Ms. Bedwell’s vehicle spun 180 degrees and came to rest pointing south in the southbound lane of Coast Meridian.
[4] Following a 17-day trial, Mr. Justice Warren found that each of the parties was equally liable for the accident. (See 2006 BCSC 369.) He assessed Ms. Bedwell’s non-pecuniary damages at $85,000, past income loss at $9,610.13, costs of future care at $15,551, and special damages at $4,635, for a total of $114,796.13. He made no award in respect of loss of income-earning capacity, for which the plaintiff had sought about $200,000. Halved, the damages awarded came to $56,039.78, after taking into account Part 7 benefits already paid.
[5] The defendant had made a formal offer to settle in the amount of $150,000 on January 14, 2005, about one month before trial. This fact was brought to the attention of Warren J., who directed that counsel were at liberty to make submissions on the matter of costs. Evidently, the plaintiff took the position that R. 37(24) and the apportionment provisions of the Negligence Act, R.S.B.C. 1996, c. 333 (the “Act”) were inconsistent, and that the latter, being substantive legislation, must prevail. She sought 50% of her costs, including those incurred after the date of the defendant’s offer to settle.
[6] Warren J. found the plaintiff’s argument ‘almost persuasive’, but concluded that he was bound by Jamieson v. Duteil 2001 BCCA 516, 92 B.C.L.R. (3d) 208 and Smith v. Knudsen. He ordered that the plaintiff recover 50% of her costs only to the date of the offer to settle and that the defendant recover all his costs from that date.
[7] The plaintiff appealed the trial judge’s apportionment of fault, the amount of his award for costs of future care, his refusal to award damages for loss of income-earning capacity, and his application of R. 37(24) to the costs award. On appeal, this court found that the trial judge had failed to take into account the plaintiff’s dominant position at the time of the accident, and reduced her fault to 25%. The trial judge’s assessment of damages was upheld. (See 2008 BCCA 6.)
[8] The Court reconvened as a panel of five justices to hear the plaintiff’s appeal regarding costs. On that issue, the defendant took the position that the trial judge’s order should be amended simply by requiring him to pay the plaintiff 75%, rather than 50%, of her costs to the date of the offer, and that the costs appeal should otherwise be dismissed.
Smith v. Knudsen and Previous Authorities
[9] This court has dealt directly with the interaction of R. 37(24) and s. 3 of the Negligence Act (or their respective antecedents) only in Smith v. Knudsen, but another decision of this court, Flatley v. Denike (1997) 32 B.C.L.R. (3d) 97, 144 D.L.R. (4th) 450, (also a decision of five justices), and the decision it overruled, Lutes v. Leonard (1966) 60 D.L.R. (2d) 459, [1967] 58 W.W.R. 321 (B.C.C.A), must also be mentioned. In Flatley, liability had been divided equally and the defendant had made a pre-trial offer. The trial judge ordered each party to pay half the other’s pre-offer costs, and ordered the plaintiff to pay all the defendant’s costs from the date of the offer by set-off. At the time, R. 37(24) provided:
37(24) If the defendant has made an offer to settle a claim for money, and it has not expired or been withdrawn or been accepted, and if the plaintiff obtains judgment for the amount of money specified in the offer or a lesser amount, the plaintiff is entitled to costs assessed to the date the offer was delivered, and the defendant is entitled to costs assessed from that date.
and ss. 2 and 3 of the Negligence Act, R.S.B.C. 1979, c. 298 provided:
2. The awarding of damage or loss in every action to which section 1 applies is governed by the following provisions:
(a) the damage or loss, if any, sustained by each person shall be ascertained and expressed in dollars;
(b) the degree to which each person was at fault shall be ascertained and expressed as a percentage of the total fault;
(c) as between each person who has sustained damage or loss and each other person who is liable to make good the damage or loss, the person sustaining the damage or loss shall be entitled to recover from that other person the percentage of the damage or loss sustained as corresponds to the degree of fault of that other person;
(d) as between 2 persons each of whom has sustained damage or loss and is entitled to recover a percentage of it from the other, the amounts to which they are respectively entitled shall be set off one against the other, and if either person is entitled to a greater amount than the other, he shall have judgment against that other for the excess.
3. Unless the court otherwise directs, the liability for costs of the parties to every action shall be in the same proportion as their respective liability to make good the damage or loss. The provisions of section 2 governing the awarding of damage or loss apply, with the necessary changes and so far as applicable, to the awarding of costs, with the further provision that where, as between 2 persons, one is entitled to a judgment for an excess of damage or loss and the other to a judgment for an excess of costs there shall be a further set off of the respective amounts and judgment shall be given accordingly.
[10] Chief Justice McEachern described the “narrow question” before the Court in Flatley thus:
… whether a defendant who does not suffer damage or loss is entitled to recover costs in the same proportion as the plaintiff's negligence contributed to the cause of the plaintiff's loss and damage.
To put the matter more specifically in the context of this case, the plaintiff sued the defendant for damages caused in a motor vehicle accident. Liability was divided equally. The plaintiff, clearly, was entitled to fifty percent of her costs from the defendants. Were the defendants entitled to recover or set off fifty percent of their costs from or against the plaintiff?
The matter is made complicated by the fact that there was an offer of settlement and a payment into court shortly before the trial. The plaintiff recovered less than the amount of the offer and payment. The trial judge accordingly ordered the defendants entitled to costs incurred subsequent to the offer in payment. The issue on the appeal is the entitlement of the parties to costs arising prior to the offer. [At paras. 2-4; emphasis added.]
[11] He noted that historically, there had been two views regarding the proper interpretation of ss. 2 and 3 of the Negligence Act (which were virtually unchanged since amendments made in 1936), the “usual” order being that “whenever there has been a division of liability … each party taxes his or her own costs and recovers from the other side whatever proportion of liability … has been assigned to that party”. (Para. 9.) A different view had been advanced, but rejected, in Lutes v. Leonard, a case (like the one at bar) in which the plaintiff was found to be 25% at fault for his injuries. Bull J.A. set out the arguments made at that time:
The learned trial Judge, in ordering the appellant to bear 25% of the respondent's taxed costs to be set off against his own recovery of 75% of his taxed costs from the respondent, agreed with and followed three long-standing decisions of the Supreme Court precisely on point, viz., Musgrave v. Schutz, [1942] 3 D.L.R. 703, 58 B.C.R. 78, 9 I.L.R. 422, [1942] 2 W.W.R. 391; Bell v. Hinksman, [1948] 1 W.W.R. 166 and Stevens and Bain v. Turner (1952), 6 W.W.R. (N.S.) 688. Counsel for the appellant, in his submission, frankly admitted that if the proper interpretation of the above statutory provisions respecting costs was as decided in those authorities, he would fail on his appeal. He argued most persuasively, however, that these cases had been wrongly decided, and prompted us to overrule them. In support of this view, counsel argues that because s. 4 requires that the provisions of s. 3, “governing the awarding of damage or loss apply, mutatis mutandis, to the awarding of costs”, the words “of his costs” should replace the words “the damage or loss sustained” only where those words appear in s. 3(c). The appellant claims that any other notional replacement or change in s. 3 of the words “loss or damage” to “costs” under the mutatis mutandis principle would lead to absurd results. I cannot agree that absurdity necessarily would so result. On the contrary, s. 4 clearly provides the liability for costs of the parties to every action shall be in the same proportion as their respective liability to make good the damage or loss, and s. 2 provides that the liability to make good damage or loss is in accordance with degree of fault. It follows that it is a possible and reasonable interpretation (as was adopted by the learned trial Judge on the settlement of the judgment following the authority of the above recited decisions) that once the liability for costs has been ascertained in the terms of degree of fault, the words mutatis mutandis require s. 3 to be read as if it were dealing with costs alone instead of loss or damage. In my view, both interpretations are possible, and accordingly we must consider the fundamental rule of construction, to which all others are subordinate, that a statute must be expounded “according to the intent of them that made it”: see Maxwell on Interpretation of Statutes, 11th ed., p. 2. [At 461-2.]
[12] Speaking for the majority in Lutes, Bull J.A. concluded that the “longstanding” interpretation adopted by judges of the Supreme Court in cases such as Musgrave v. Schultz [1942] 3 D.L.R. 703, [1942] 2 W.W.R. 391, 58 B.C.R. 78, was not absurd, and that having stood for many years without being amended, it must have had the approval of the Legislature. The plaintiff received 75% of his costs and the defendant 25% of his costs as a set-off. (No offer of settlement figured in the case.)
[13] McFarlane, J.A. dissented, reasoning that the words “who is liable to make good the damage or loss” in what was then s. 4 of the Contributory Negligence Act, R.S.B.C. 1960, c. 74 (now s. 3 of the Act) were not apt to describe a person who bears his own damage or loss. He concluded that liability for costs under s. 4 was “governed by and dependent upon a liability to make good damage or loss and not upon the existence of a degree of fault.” Thus, he said, “where there is no liability to another person to make good damage or loss, there is no liability to that other person for costs.” (At 467.) He would have varied the trial judge’s order by deleting the requirement that the plaintiff pay any of the defendant’s costs.
[14] The Court in Flatley preferred McFarlane J.A.’s view (and that of Southin J.A. in dissent in Samograd v. Collision (1995) 17 B.C.L.R. (3d) 51) on the construction of the Act, especially in light of the fact that the Interpretation Act had by then been amended by the addition of what is now s. 37(3). The Chief Justice noted that where a defendant has not suffered damage or loss, he or she is “obviously not entitled to recover anything from the plaintiff” under s. 2(c) of the Negligence Act. With respect to costs, since s. 3 specified that the parties’ liability was to be in the same proportions as their respective liability to make good the damage or loss, the plaintiff was under no liability for the defendant’s costs. In the words of McEachern C.J.B.C.:
In cases where the defendant has not suffered damage, the plaintiff is under no liability for costs because the plaintiff’s liability, if any, would only be in the same proportion as his or her liability to make good the defendant’s damage or loss, of which there is none.
As a result I would hold that in cases such as this, where the defendant suffers no damage or loss, but liability is divided, the defendant must pay the plaintiff the same proportion of the plaintiff’s costs as the defendant is liable for the plaintiff’s damages, but the plaintiff is not liable to pay any portion of the defendant’s costs. [At paras 21-2; emphasis added.]
[15] It bears emphasizing that the Chief Justice here was referring only to costs incurred prior to the date of the offer. His Lordship noted, only in passing, that the plaintiff had also argued that the trial judge should have “exercised a discretion to ameliorate against the harshness of the order made against the plaintiff for all costs incurred subsequent to the date of payment into court”, since she had been largely successful on the issue of damages and her recovery had fallen only slightly short of the payment into court. The Court nevertheless declined to interfere with what it described as the “discretionary” ruling of the trial judge on this point. The appeal was allowed only to the extent of deleting the term of the trial judge’s order that the plaintiff pay by set-off any part of the defendant’s costs prior to the date of the payment into court pursuant to his unsuccessful offer.
[16] The interaction between s. 3 of the Act and Rule 37(24) was raised squarely in Smith v. Knudsen. By the time it was decided, the material provisions of the Act, s. 2(c) and 3, read (and still read):
2(c) as between each person who has sustained damage or loss and each other person who is liable to make good the damage or loss, the person sustaining the damage or loss is entitled to recover from that other person the percentage of the damage or loss sustained that corresponds to the degree of fault of that other person;
3(1) Unless the court otherwise directs, the liability for costs of the parties to every action is in the same proportion as their respective liability to make good the damage or loss.
(2) Section 2 applies to the awarding of costs under this section.
(3) If, as between 2 persons, one is entitled to a judgment for an excess of damage or loss and the other to a judgment for an excess of costs there is a further set off of the respective amounts and judgment must be given accordingly.
and R. 37(24) read:
37(24) If the defendant has made an offer to settle a claim for money, and it has not expired or been withdrawn or been accepted,
(a) if the plaintiff obtains judgment for the amount of money specified in the offer or a lesser amount, the plaintiff is entitled to costs assessed to the date the offer was delivered, and the defendant is entitled to costs assessed from that date.
(b) if the plaintiff’s claim is dismissed, the defendant is entitled to costs assessed to the date the offer was delivered and to double costs assessed from that date.
(Rule 37 has since been repealed and replaced by R. 37B, a more discretionary provision, but counsel are agreed that the new rule is not applicable to the case at bar.)
[17] In Smith, as in Flatley, the defendant had not suffered any loss or damage, and the plaintiff was found to be 50% at fault. A jury assessed his damages at $100,000, so that the defendant was liable to pay $50,000. The defendant had made three pre-trial offers, the last for $50,000. The trial judge, Mr. Justice Bouck, found that the offer had been unconditional, but that there was a conflict between R. 37(24)(a) and s. 3 of the Negligence Act. (See 2002 BCSC 383.) In his analysis:
Rule 37 and the Negligence Act conflict when it comes to the issue of costs. For example, assuming there was no Negligence Act and the court did not rule otherwise under Rule 57(9), Rule 37 would entitle Mr. Smith to all of his costs to 4 December 2001 and Mr. Knudsen to all of his costs thereafter.
On the other hand, if there were no Rule 37 then, under the Negligence Act, Mr. Smith would recover 50% of his costs throughout the action. Mr. Knudsen would not recover any costs since he did not suffer any damages. [Paras. 30-1]
He noted that the Rules of Court are subordinate legislation in comparison to statutes such as the Negligence Act, which must therefore prevail in the event of an inconsistency, and that R. 1(4) “seems to make the Rules subject to other provincial statutes such as the Negligence Act.” (Rule 1(4) states that the Rules govern every proceeding “except where an enactment otherwise provides”.)
[18] Bouck J. was of the view that the Act and the Rule could not be harmonized or reconciled, since in his words, “The Negligence Act provisions give Mr. Smith 50% of his costs throughout the action and Mr. Knudson no costs at all. Rule 37 gives Mr. Smith his costs up to the time of the offer to settle and Mr. Knudson his costs thereafter.” He ruled that the Negligence Act must prevail such that the plaintiff should recover 50% of his costs throughout the action and the defendant “should get none”. (Para. 37; my emphasis.)
[19] Bouck J. also took the view that the Court still retained a discretion in awarding costs under the Act, citing Bailey v. Victory (1995) 4 B.C.L.R. (3d) 389 (C.A.). In view of the defendant’s offer, he ultimately ordered that the plaintiff recover 50% of his costs and disbursements up to the date of trial and for three days of trial, and any post-trial costs and disbursements, but no costs or disbursements for four days of trial he had spent in attempting to prove a claim for losses suffered by a company described as his “alter ego”.
[20] The plaintiff appealed on both damages and costs. The Court of Appeal found that the trial judge had erred in his instructions to the jury concerning the standard of proof required for pecuniary losses. The case was remitted for retrial. On the costs issue, the Court also disagreed with the trial judge that ss. 2 and 3 of the Negligence Act conflicted with R. 37(24). Rowles J.A. for the Court reasoned as follows:
With deference, I am unable to agree with the trial judge on this point. In my opinion, sections 2 and 3 of the Negligence Act and Rule 37(24) can be read harmoniously: the provisions arise from and serve different purposes and both can play a role in determining an award of costs without being in conflict.
The purpose of the provisions in the Negligence Act is to apportion both damages and costs in the same proportion as the defendant is found to be responsible for the loss or damage of the plaintiff. Section 3(1) of the Negligence Act clearly leaves scope for discretion in the awarding of costs, for it provides “unless the court otherwise directs”, and there is no underlying principle embodied in the Act that would necessarily preclude the discretion being exercised in the defendant's favour taking into account, for example, the conduct of the proceedings.
Rule 37(24) provides a principled basis for a defendant to recover his costs. The public interest in encouraging settlements before trial underlies the awarding of post-offer costs to a defendant who has made an offer to settle that meets or is greater than the judgment ultimately obtained by the plaintiff at trial.
I am also of the view that the limiting aspect of Rule 1(4) of the Rules of Court is not engaged. Rule 1(4) provides that the “rules govern every proceeding in the Supreme Court except where an enactment otherwise provides.” The Negligence Act does not purport to govern the entire proceedings with regard to costs, nor does it “otherwise provide” with regard to awarding defendants post-offer costs. It provides only for other, particular aspects of the awarding of costs. [Paras. 46-9; emphasis added.]
[21] The Court gave Flatley a fairly restricted interpretation: Rowles J.A. stated that the Court of Appeal in that case had simply declined to interfere with the discretionary order of a trial judge. The basis Bouck J. had given for refusing to take this aspect of Flatley into account – i.e., that the Court of Appeal had not been referred to the principle that subordinate legislation cannot prevail over a statutory provision where the two conflict – was seen as “inconsequential”. (Para. 50.) In the result, the Court set aside the order as to costs and directed that the costs of both the trial and retrial on the question of pecuniary loss be determined by the judge hearing the retrial.
[22] Although the Court of Appeal did not specify that the defendant should recover all his costs after the date of his offer, that was certainly the interpretation put on Smith v. Knudson by the trial judge in the case at bar, who as already noted, ordered that the defendant recover 100% of his costs from the date of the settlement offer.
The Case at Bar
[23] On appeal, Ms. Hayman on behalf of the plaintiff submits that the Court erred in Smith v. Knudsen and that there is indeed a conflict between s. 3(1) of Act and R. 37(24) in the sense that Smith v. Knudsen “overrides” the express objective of R. 1(5) and trumps the Negligence Act. Surely, she says, “there is a conflict where one enactment directs the court to award costs to a plaintiff (in proportion to a defendant’s liability) and the other provision prohibits this.” Given this conflict, the subordinate legislation – in this case, R. 37(24) – must yield to the statute.
[24] This is in keeping, Ms. Bedwell states in her factum, with the fact that the overriding goal of the law relating to costs is to further judicial “norms of reason and justice”. (R. Sullivan, Sullivan and Driedger on the Construction of Statutes, (4th ed., 2002), at 243.) She points out that if R. 37 did not exist (or if Mr. McGill had not made an offer) Ms. Bedwell would have been entitled to her damages of $86,000 plus 75% of her party and party costs (estimated at $70,000 for purposes of illustration). Seventy-five percent of that amount is $52,500, so Ms. Bedwell would have recovered approximately $138,500 in total. On the other hand, a “severe inequity” arises if the Rule, as interpreted in Smith v Knudsen, is applied in this case. The defendant’s offer to settle, for $150,000, was made on January 14, 2005. As noted earlier, the plaintiff’s damages were assessed, prior to allocation of fault, at $114,796.13, 75% of which comes to $86,097.10. We are told that after January 14, Ms. Bedwell incurred disbursements of some $66,000 and that her own counsel’s fees and taxes (generated after the date of the offer) are likely to come to about $28,700, for a total solicitor and client liability of $94,700. Assuming the defendant’s party and party costs were roughly equivalent to those of the plaintiff, or $70,000, Ms. Bedwell must pay those costs and all of Mr. McGill’s post-offer costs of $70,000, resulting in a total liability of $164,700. Having sustained significant injuries in a car accident for which she was only 25% at fault, she is likely to be left in debt to the tune of some $78,700.
[25] Ms. Hayman argues that this result turns the law of costs “on its head” and creates a significant deterrent for the hearing of meritorious claims. She notes that in fact, based on the examples set forth in Appendix A to these reasons, there is an inverse relationship between the defendant’s liability and the benefit the defendant stands to obtain by making an offer to settle: the greater the fault allocated to of the defendant, the more severe the penalty suffered by a plaintiff for failing to accept the defendant’s offer to settle. Counsel describes R. 37(24) as a “bull in a china shop” that penalizes a plaintiff excessively for failing to predict exactly the outcome of her trial, and benefits the defendant disproportionately, depending on the degree of his or her fault.
[26] The plaintiff asks us to carry out what she calls a “consequential” analysis that takes account of the inequity of applying R. 37(24) in this instance. Counsel urges us to find either that there is a conflict between the Rule and s. 3(1) of the Act or that the application of Smith v. Knudsen would produce an absurdity for any of the reasons described in Sullivan and Driedger, supra, at 243-251 – that the purpose of the law would be defeated; that it would result in “persons receiving different treatment for inadequate reasons or for no reason at all”; that it leads to “an outcome in which persons deserving of better treatment receive worse treatment or vice versa”; that the application of the Rule would be contradictory or internally inconsistent; that it would result in “disproportionate hardship” or interfere with the efficient administration of justice; or finally, that the consequences of applying the Rule are “self-evidently irrational or unjust.” To remedy the conflict or absurdity, Ms. Hayman asks us to “read down” R. 37(24) by permitting the plaintiff to recover 75% of her costs throughout the proceedings, including the period after the defendant’s offer was served on her – effectively, to read R. 37(24)(a) as if the words “assessed to the date the offer was delivered” were not there.
[27] In response, Mr. Gunn on behalf of the defendant submits that there is no conflict between R. 37(24) and s. 3(1) of the Negligence Act; that the Rule is consistent with the objective, expressed in R. 1(5), of achieving a “just, speedy and inexpensive determination of every proceeding on its merits”; and that encouraging settlements is now a legitimate policy objective of Rules relating to costs. (See in particular Mackenzie v. Brooks 1999 BCCA 623, at para. 21, and Skidmore v. Blackmore (1995) 2 B.C.L.R. (3d) 201 (B.C.C.A), at para 28). Further, R. 37 is a complete code that leaves no discretion in the Court to second-guess its wisdom or the result of its operation in any particular case. As Lowry J.A. stated for this court in Cridge v. DeVooght 2005 BCCA 33, 37 B.C.L.R. (4th) 62:
While, subject to abiding by established principles, a Supreme Court judge has a broad discretion in awarding costs, it remains open to the Lieutenant Governor in Council in promulgating the Rules of Court to restrict the exercise of that discretion as may be appropriate where it is thought that to do so will achieve a desired objective. The purpose of Rule 37 is to encourage the settlement of litigation through prescribed consequences in costs as in sub-rule (24). Given that the sub-rule provides for the litigant’s entitlement to costs while affording no discretionary alternative, I consider it clear that there is no room for judicial discretion where sub-rule (24) applies.
Rule 37 is, as stated in Brown v. Lowe, a complete code. It is important that the Rule be uniformly applied to give effect to its purpose. Litigants must be able to make offers of settlement under the Rule with confidence that the Rule will be applied when costs are awarded. [At paras. 23-4.]
Accordingly, even if the operation of R. 37(24) was seen as excessively harsh, it is not for the court to read into it a discretion that was not given by the Lieutenant-Governor in Council.
[28] Counsel draws a distinction between a defendant’s “costs liability” which is “proportioned” by s. 3(1) of the Act, and on the other hand, a law establishing a plaintiff’s “costs entitlement”. On this approach, the Act “does not address the costs issue of concern to the Plaintiff in this appeal – namely what her prima facie costs entitlement would have been before being proportioned”. That issue, Mr. Gunn submits, is addressed by the Supreme Court Rules. As the defendant states in his factum:
Once the plaintiff’s prima facie costs entitlement has been determined under the Rules of Court, the Negligence Act directs how the Defendant’s liability for those costs is to be proportioned and entitles the Plaintiff to recover the indicated portion from the Defendant. Nothing in Rule 37 purported to alter that apportionment of the Defendant’s costs liability or the Plaintiff’s costs entitlement. There is therefore no conflict between Rule 37 and the Negligence Act. [Para. 30.]
[29] I do not find this analysis altogether persuasive. I would have thought that the Act, as superior legislation to the Rules, would be looked to first to determine each parties’ liability for costs in a situation to which s. 2 of the Act applies, and that R. 37, as an item of subordinate legislation, would then be applied if possible. Applying the classic definition of “conflict” – whether the two laws can “stand together and … operate without either interfering with the other” (see Tabernacle Permanent Building Society v. Knight [1892] A.C. 298 (H.L.) at 302, and the leading Canadian case, Friends of the Oldman River Society v. Canada (Minister of Transport) [1992] 1 S.C.R. 3, 88 D.L.R. (4th) 1 at para. 42) – however, I agree with the Court’s conclusion in Smith v. Knudsen that s. 3 of the Negligence Act and R. 37(24) do not conflict. I reach this conclusion not only on the basis of the opening phrase of s. 3, but also on a close construction of the Act. As was held in Flatley, the phrase “person sustaining the damage or loss” in s. 2(c) is apt to refer only to the plaintiff in any case in which the defendant sustained no injury or damage. Section 3 states that each party’s liability for costs shall be in the same proportion as his or her liability to make good the damage or loss. Having sustained no damage or loss, the defendant has no ‘entitlement’ to recovery under s. 2(c) and thus his or her liability for costs does not “track” under s. 3. As McFarlane J.A. stated in Lutes, s. 2(c) “does not provide for the awarding of damages as between persons who are at fault. This sub-section cannot apply to entitle [a defendant] to recover anything because he has sustained no damage or loss.” (Supra, at 466.)
[30] If this is correct, s. 3 is simply not apt to apply to the costs liability of a plaintiff, since the plaintiff has no “liability to make good the damage or loss”. It follows in my view that it cannot be said that the requirement established by R. 37(24) that the plaintiff pay the defendant’s costs incurred subsequent to the making of an offer, conflicts with s. 3 of the Act. The two provisions do not deal with the same subject-matter and can stand together.
[31] As for the argument based on absurdity, this seems to me dangerously close to an invitation simply to disregard a clear and unambiguous rule because its operation is harsh. Although it appears that Professor Sullivan is of the view that “in certain circumstances”, courts may “reject the apparent clear meaning of a text” in order to give effect to what the legislature most likely intended (see Sullivan and Driedger, supra, at 243), I know of no judicial authority that would support our disregarding the clear terms of an enactment on the basis of absurdity. On this point, Mr. Gunn referred us to R. v. McIntosh [1995] 1 S.C.R. 686, 95 C.C.C. (3d) 481, where the majority of the Court declined to adopt an “absurdity approach” in order to avoid an interpretation that Parliament could not have intended. Chief Justice Lamer reasoned as follows:
I am of the view that the Crown's argument linking absurdity to ambiguity cannot succeed. I would adopt the following proposition: where, by the use of clear and unequivocal language capable of only one meaning, anything is enacted by the legislature, it must be enforced however harsh or absurd or contrary to common sense the result may be (Maxwell on the Interpretation of Statutes, supra, at p. 29). The fact that a provision gives rise to absurd results is not, in my opinion, sufficient to declare it ambiguous and then embark upon a broad-ranging interpretive analysis.
In Altrincham Electric Supply Ltd. v. Sale Urban District Council (1936), 154 L.T. 379 (H.L.), Lord Macmillan criticized the view that absurdity alone would justify the rejection of a literal interpretation of a statutory provision. He emphasized that an “absurdity approach” is generally unworkable because of the difficulty of developing criteria by which “to judge whether a particular enactment, if literally read, is so absurd that Parliament cannot have intended it to be so read ...” (p. 388). He then proceeded, at p. 388, to outline what I believe to be the correct approach to statutory interpretation where absurdity is alleged:
… if the language of an enactment is ambiguous and susceptible of two meanings, one of which is consonant with justice and good sense while the other would lead to extravagant results, a court of law will incline to adopt the former and to reject the latter, even although the latter may correspond more closely with the literal reading of the words employed.
Thus, only where a statutory provision is ambiguous, and therefore reasonably open to two interpretations, will the absurd results flowing from one of the available interpretations justify rejecting it in favour of the other. Absurdity is a factor to consider in the interpretation of ambiguous statutory provisions, but there is no distinct “absurdity approach”. [At paras. 34-6; emphasis added.]
There was no suggestion in the case at bar that an ambiguity exists in R. 37(24). We must therefore give effect to it. As Professor Driedger stated in the 1983 version of his text, Construction of Statutes, (2nd ed.):
It is clear … that “absurdity” means “disharmony” and that the only kind of an absurdity that permits a court to depart from the plain meaning of a statute is disharmony within the statute under consideration, between statutes or between a statute and the common law. Conversely, no departure is permissible if there is no such disharmony, no matter what the court may think of the consequences. (At 54; emphasis added.)
[32] Finally, I turn to the argument on which we requested and received written submissions – whether the defendant’s entitlement under the Rule to “costs” assessed from the date of his offer is to be interpreted to mean 25% of his costs, in the same way that the plaintiff’s entitlement to “costs” assessed to the date of the offer is interpreted to refer to 75% of her costs. Again, I believe this question is answered by the construction of the apportionment provisions of the Negligence Act adopted by this court in Flatley. The phrase “person sustaining the damage or loss” in s. 2(c) is apt to describe the plaintiff, but not to describe a defendant who suffered no damage or loss. Thus s. 3 does not “track” to refer to the costs liability of a plaintiff to a defendant, since the plaintiff has no “liability to make good the damage or loss”. The Rule operates unaffected by, and harmoniously with, the Act.
[33] I acknowledge that the practical consequences to the parties in this case are certainly not symmetrical and that the plaintiff may well regard the result as unfair. Perhaps fortunately, the Rule has now been replaced by one that gives the court some discretion to ensure that unfair results are avoided. However, R. 37(24) was aimed at encouraging litigants to settle wherever possible, thus freeing up judicial resources for other cases. In this instance, the plaintiff appears to have overestimated her chances of success in pursuing a claim for $400,000, half of which was for loss of income-earning capacity, a head of damages the trial judge rejected in its entirety. Ms. Bedwell elected to proceed with a 17-day trial that turned out not to have been necessary from her point of view. She also incurred substantial disbursements and costs after the date of the defendant’s offer was made and rejected. The defendant on the other hand made a reasonable offer within a reasonable time, and was obliged to defend against a claim that he viewed, correctly, as overly optimistic. The Rule was intended to alleviate his costs in these circumstances, and did so in fact.
[34] In other circumstances, where the proportions of fault are different or the proportion of costs incurred before and after the offer are different, the Rule will operate differently. With all due respect to the plaintiff’s submission, however, unfairness in a particular instance is not a basis on which this court may disregard the clear and mandatory terms of the Rule.
[35] With thanks to counsel for their helpful submissions, I would decline to overrule Smith v. Knudsen and would allow the appeal only to the extent of substituting “75%” for “50%” in para. 3 of the trial judge’s order dated March 6, 2006. I would also order that the parties bear their own costs of this costs appeal.
“The Honourable Madam Justice Newbury”
I agree:
“The Honourable Mr. Justice Hall”
I agree:
“The Honourable Mr. Justice Low”
I agree:
“The Honourable Mr. Justice Tysoe”
I agree:
“The Honourable Mr. Justice Groberman”
