2008 BCSC 1397 Radke v. Parry

Before: The Honourable Justice Boyd

Reasons for Judgment

Counsel for the Plaintiff:	J.E. Murphy, Q.C. J.S. Stanley
Counsel for the Defendants:	A.D.C. Ross
Date and Place of Hearing:	September 25, 2008
	Vancouver, BC
Further Written Submissions:	September 29 and October 1, 2008

[1] The plaintiff’s action concerns a claim for damages for injuries suffered in a motor vehicle accident. The matter proceeded to trial for a period of two weeks in September 2008 and was settled on the 11th day of trial. On that day the plaintiff accepted the defendant’s offer to pay the sum of $1 million, less prior advances and material damage liability payments totalling $24,981.36, for a net offer of $975,018.64 to settle the tort claim. In addition the plaintiff accepted the defendant’s offer to pay “the Plaintiff’s assessable costs and disbursements and any applicable Court Order Interest”.

[2] The defence offer accepted by the plaintiff clearly exceeded her own August 12, 2008 Offer to Settle the proceeding for the sum of $500,000 plus costs in accordance with Rule 37B of the Rules of Court.

[3] The plaintiff now submits that the appropriate scale of costs to be awarded is Scale C and that she is also entitled to increased costs of the action as well as double costs from date of her offer of settlement until the day the action was settled.

[4] The defence position is that while the plaintiff is entitled to ordinary costs under Scale B, the circumstances here do not justify an order for costs under Scale C, nor increased costs, nor double costs.

What is the appropriate scale of costs?

[5] The plaintiff seeks an order that costs be set at Scale C, the scale reserved for matters that are of “more than ordinary difficulty”. For the reasons outlined below in relation to the claim for increased costs, I have found that this case was not of “more than ordinary difficulty”. Thus I order Scale B to be the applicable scale of costs for the action as a whole.

Claim for Increased costs:

[6] The plaintiff seeks an order pursuant to Section 2(4.1) of Appendix B that the unit values be increased by 50%.

[7] I will set out the relevant provisions of Appendix B:

s.2(4) If, after December 31, 2006, a settlement is reached under which payment of assessed costs is agreed to or an order for costs is made, and if no scale is fixed or agreed to in that settlement or order, the costs must be assessed under Scale B, unless a party, on application, obtains an order of the court that the costs be assessed under another scale.

s.2(4.1) If, after it fixes the scale of costs applicable to a proceeding under subsection (1) or (4), the court finds that, as a result of unusual circumstances, an award of costs on that scale would be grossly inadequate or unjust, the court may order that the value of each unit allowed for that proceeding or for any step in that proceeding, be 1.5 times the value that would otherwise apply to a unit in that scale under section 3(1).

s.2(4.2) For the purposes of subsection (4.1), an award of costs is not grossly inadequate or unjust merely because there is a difference between the actual legal expenses of a party and the costs to which that party would be entitled under the scale of costs fixed under subsection (1) or (4).

[8] Sections 2(4.1) and (4.2) came into force on January 1, 2007, pursuant to amendments to Appendix B. These provisions replaced s. 7 which had dealt with the matter of increased costs until repealed in a 2002 amendment. As a result, while there are a limited number of case authorities which deal specifically with the new statutory provisions, there is a larger body of jurisprudence concerning the interpretation of the predecessor section, s. 7.

[9] In McIvor v. Canada (Registrar of Indian and Northern Affairs), 2007 BCSC 1732, Ross J. rejected the plaintiff’s claim for increased costs under s. 2(4.1) since, although there was an obvious disparity between ordinary costs and the legal fees incurred, there were no unusual circumstances. The plaintiff claimed that the reduction in the length of the trial was an unusual circumstance which resulted in a reduction in the units which could be claimed under the tariff, thus producing the greater disparity. The Court rejected the notion that a reduction in the length of trial was an unusual circumstance justifying an order under s. 2(4.1). To the contrary, the Court noted that the reduction in the number of days at trial ought to have narrowed rather than increased the disparity between the actual legal expenses and the costs under the tariff.

[10] In Gary Young Agencies Ltd. v. McComber, 2008 BCSC 143, Chamberlist J. held that earlier decisions of the Court of Appeal dealing with the previous s. 7 of Appendix B provided some guidance on what might be considered “unusual circumstances” or “grossly inadequate or unjust” in the application of s. 2(4.1).

[11] In Bajwa v. Veterinary Medical Association, 2008 BCSC 905, Davies J. also accepted that jurisprudence concerning the interpretation of s. 7 provided some useful guidance regarding the application of s. 2(4.1) of Appendix B. As he noted at ¶ 71, the rationale for an award of increased costs was not substantively different under either statutory provision, since in both cases “the intent is to allow the party who is entitled to costs to be compensated to a greater extent than would occur by application of the usual principles of costs assessment if the application of those usual principles would be ‘unjust’ in the circumstances”.

[12] However, at ¶ 72, he noted the two crucial differences between the predecessor statute (s. 7) and the new s. 2(4.1):

…under s. 2(4.1), the concept of ‘unjustness’ is linked to the concept of ‘gross inadequacy’ of the application of the usual principles. In my view, that linkage, coupled with the new requirement for a finding of ‘unusual circumstances’ means that the fact that a cost award will not afford reasonable compensation for the costs actually incurred will not, without some unusual circumstance, be sufficient to ground an order for increased costs. (my emphasis)

As he notes as ¶ 73:

What constitutes ‘unusual circumstances’ or an award that is ‘unjust or grossly inadequate’ will of necessity remain a fact-based inquiry driven by the nature of the litigation and the conduct of the parties, and remains a determination in respect of which decisions under the old s. 7 will continue to offer assistance.

[13] Ultimately, in Bajwa, increased costs were ordered as a result of serious misconduct by the plaintiffs who: commenced a multiplicity of proceedings which caused unnecessary expense to the defendants and the court; filed pleadings that were “abysmally deficient”; refused to provide particulars; and refused to follow the Rules generally.

[14] In the case at bar, the plaintiff’s counsel notes that the first leg of the test is easily met—that is there is an obvious disparity between the legal fees the plaintiff will incur and the costs which would otherwise be available under the tariff. Applying the agreed upon contingency fee of 1/3 of the amount recovered, plaintiff’s counsel will receive legal fees of approximately $330,000 plus taxes. Even assuming an award of costs had been made under Scale C, or increased costs or even double costs, the discrepancy between the actual legal fees and the amount of costs available under the tariff would be in the order of $202,000 to $296,000.

[15] While I acknowledge this significant discrepancy, the law is clear that the discrepancy alone cannot ground an order for increased costs. Indeed, s. 2(4.2) of Appendix B reflects the Legislature’s expectation that “for the purposes of s. 2(4.1), an award of costs is not grossly inadequate or unjust merely because there is a difference between the actual legal expenses of a party and the costs to which that party would be entitled under the scale of costs fixed under subsection (1) or (4)”.

[16] Thus, I must turn to the other circumstances relied upon by the plaintiff.

[17] She points to a variety of circumstances, which when considered together, she submits make this case an unusual one. This was a claim for damages arising from an injury in which the plaintiff suffered a closed head injury, in particular a mild traumatic brain injury (MTBI). For some time the plaintiff’s own medical and psychological caregivers did not recognize the injury nor provide such a diagnosis. There were conflicting reports from three different neurophysiologists.

[18] The plaintiff changed counsel in late 2006 in preparation for trial in early 2007. Mr. Murphy ultimately sought an adjournment, since the plaintiff’s injuries were not fully understood. The adjournment was obtained and the matter re-assessed by a new neurologist and neuropsychologists.

[19] Ultimately the MTBI diagnosis was made, based on the understanding that an MTBI could be suffered even in the absence of any loss of consciousness, it being sufficient that the plaintiff was momentarily dazed or confused following the impact.

[20] Although the diagnosis was finally made by her own medical consultants, the diagnosis was hotly disputed by the defence experts who dismissed the notion that an MTBI could possibly result from a relatively insignificant rear end impact, with no evidence of any loss of consciousness on the plaintiff’s part.

[21] Given the controversy in the medical community concerning MTBI’s, the plaintiff counsel submits that he was required to adduce evidence concerning the nature of such an injury, whether an MTBI could be suffered in an relatively minor motor vehicle accident, and the impact of the plaintiff’s prior history of head injuries. The controversy amongst the neuropsychologists had to be addressed. A large number of collateral witnesses were interviewed and prepared to provide evidence concerning the plaintiff’s pre and post accident functioning at work.

[22] I acknowledge that there are other cases in which the prosecution of a civil claim for damages arising from an MTBI has been characterized by the Court as being one of “more than ordinary difficulty” justifying an award of costs under Scale 4 (now Scale C). In Roeske v. Grady, 2008 BCSC 247, the trial last 32 days—30 days of evidence and two days of oral submissions supported by lengthy written submissions. The plaintiff and 21 other witnesses testified, including nine experts. Five defence experts testified. However in that case, the issue was not merely whether the plaintiff had suffered an MTBI. Rather the issue was whether the plaintiff’s symptoms (and in particular her apparent cognitive difficulties) resulted from her multiple sclerosis rather than any brain injury and further, whether the multiple sclerosis was caused by or aggravated by the motor vehicle accident.

[23] In Lewis v. Abel, 2008 BCSC 140, Baker J. assessed costs on Scale C in favour of the defendants. The plaintiff doctor had claimed damages for defamation by virtue of a number of doctors whom he alleged had impugned his professional competence. Given the nature of the allegations, thousands of pages of documents were reviewed at trial, including many hospital charts and patient care records. Baker J. held that quite apart from the complexity of the litigation itself, the action was of some significance to others in health care, since it involved issues relating to the application of the defence of qualified privilege in the context of a multi-disciplinary team working in a hospital setting.

[24] In the case at bar, while I accept the plaintiff’s counsel faced various challenges in terms of adducing the necessary medical and collateral evidence to prove the plaintiff’s claims, this is not sufficient in my view to characterize the case as one of “unusual difficulty” or “more than ordinary difficulty”.

[25] The trial was set for 17 to 18 days and was settled on the 11th day, after a further 3½ hours of deposition evidence taken outside the courtroom in the course of trial. There were but two applications before trial—both contested applications to adjourn the trial made in early 2007. Liability was conceded from the outset and damages alone remained in dispute. The examinations for discovery lasted some 2 – 2½ days only. The plaintiff relied on a neurologist, a psychiatrist, two neuropsychologists, and an economist. The defence likewise relied upon a neurologist, a neuropsychologist and an economist. There were a few binders of documents but the number and size of the binders was not in any way out of the ordinary in such a personal injury action.

[26] The one circumstance which I agree made this case somewhat unusual was the fact that the defendant apparently took a very heavy interest in this case, to the point of following her neighbour (the plaintiff) about and gathering evidence to challenge her claims of disability. In response the plaintiff’s counsel apparently conducted an in- depth investigation of the defendant, including her history of unusual behaviour in the neighbourhood, so as to challenge her own credibility and reliability. The trial was settled before that evidence was heard.

[27] While I acknowledge the extra challenges posed by this individual, there are of course many cases in which extra investigation or background work is done in preparation for an effective cross examination of a witness. Taken alone, or even in combination with the other factors here, this does not, in my view, elevate this action to a case of “more than ordinary difficulty”.

Claim for double costs:

[28] Even accepting that the plaintiff is entitled to costs at Scale B, she still pursues a claim for double costs on the ground that the settlement amount ($1,000,000) far exceeded her Offer to Settle the action for $500,000 on August 12, 2008.

[29] The plaintiff submits that pursuant to the provisions of Rule 37B(5)(b), she is entitled to claim double costs from August 12, 2008 forward. Relying on the factors set out in Rule 37B(6), she notes that each of the factors which govern the Court’s discretion weigh in her favour.

[30] The defence submits that despite the differences between the amount of the plaintiff’s initial offer to settle and the defence offer accepted by the plaintiff, the Court simply has no jurisdiction to award double costs since its authority to award double costs is purely a “creature of statute”.

[31] The defence submits that Rule 37B(1)(c)(iii) contemplates that costs consequences of double costs will arise only “after the court has rendered judgment on all other issues in this proceeding”. Accordingly, since this action was settled before any judgment was rendered, the defence submits that the provisions of Rule 37B and any entitlement to double costs, are not triggered.

[32] Further the defence submits that the defendant’s agreement accepted by the plaintiff to pay “the Plaintiff’s assessable costs and disbursements and any applicable Court Order Interest” does not call for the payment of double costs. While the agreement admits to an implicit right to have either party apply to the Court to determine what is meant by the agreement and to have an assessment of costs and disbursements, the defendant submits that nothing in the agreement itself calls for double costs.

[33] Thus in the absence of a statutory authority to award double costs and in the absence of a clear meeting of the minds on the subject of the extraordinary remedy of double costs, the defence submits the agreement is best interpreted as meaning “ordinary” party and party costs, without implying any entitlement to the extraordinary remedy of double costs.

[34] I am unable to accept the defence submission in this matter. While Rule 37B specifies the language which must be included in an Offer to Settle which will trigger the operation of the rule (ie. “the (party making the offer) …reserves 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 this proceeding”), it does not specifically state that liability for double costs will only arise after judgment has been rendered.

[35] Further, in considering what order to make under Rule 37B(5), while Rule 37B(6)(b) states the court “may consider….the relationship between the terms of settlement offered and the final judgment of the court”, Rule 37B(6)(d) also allows the Court to consider “any other factor the court considers appropriate”.

[36] Significantly, Rules 37B(2), (4) and (5) do not mention any pre-condition for judgment to be rendered. Rather subrule (2) refers to the offer to settle not being disclosed “until all issues in the proceeding, other than costs, have been determined”. Subrule (4) refers simply to the Court considering “an offer to settle when exercising the court’s discretion in relation to costs”. Finally, subrule (5)(b) provides the court with authority to either award double costs “of all or some of the steps taken in the proceeding after the date of delivery of the offer to settle”.

[37] On a review of the Rule as a whole, I find that Rule 37B is permissive in nature and provides the Court with a broad discretion to award double costs.

[38] As I have already noted, there are important differences between Rule 37B and the predecessor rules, Rule 37 and 37A. Notwithstanding the differences, I am confident the underlying legislative policy remains the same. The goal has been and remains to encourage the early settlement of disputes “…by rewarding the party who makes an early and reasonable settlement offer, and by penalizing the party who declines to accept such an offer” (See Mackenzie v. Brooks, 1999 BCCA 623, 130 B.C.A.C. 95, and Skidmore v. Blackmore (1995), 2 B.C.L.R (3d) 201, 55 B.C.A.C. 191). As Finch J.A observed in Brown v. Lowe, 2002 BCCA 7, 97 B.C.L.R. (3d) 246, ¶ 119, even under the predecessor Rule 37:

The court’s discretion with respect to costs is an important means of controlling the conduct of parties in court….it can be used to reward responsible and reasonable behaviour that is conducive to the better administration of justice, including good faith efforts to achieve amicable settlements, and to punish irresponsible and unreasonable conduct which has the opposite effect.

[39] While there are only two decisions to this point which set out any judicial consideration of Rule 37B, I am satisfied that in both cases, the Court has confirmed its broad discretion.

[40] In Hix v. Ewachniuk Estate, 2008 BCSC 1258, Hinkson J. confirmed the broad discretion afforded to the Court under the new rule. As he noted at ¶ 19: “The question is whether the circumstances of this case warrant the exercise of judicial discretion to award double costs for the activities following the offer to settle”. On the particular facts of the case, he declined to award double costs, finding it was more appropriate to deal with the costs issue “by other means”.

[41] In British Columbia Society for the Prevention of Cruelty to Animals v. Baker, 2008 BCSC 947, the defendant made an offer to settle for only $1, which offer was rejected by the plaintiffs. The application was ultimately dismissed and the defendant claimed double costs. Preston J. declined to award such costs, noting that the offer was not one which could reasonably have been accepted. He observed at ¶ 34:

An offer that would confer a significant benefit, aside from costs, on a party who failed to accept the offer would be more likely to attract double costs under Rule 37B than an offer of the type made by Mr. Baker.

[42] In the case at bar, on a review of the Rule and the authorities, I conclude that the plaintiff is indeed entitled to double costs from the date of the August 12th offer of settlement forward. Since the defendants ultimately settled for an amount which was double the plaintiff’s original pre-trial offer, it is clear in my view that her original offer to settle “…was one that ought reasonably to have been accepted”. Certainly the terms offered in August were far more advantageous to the defendants than the ultimate amount represented by the settlement agreement. It is also clear that there is a substantial disparity in financial circumstances between the parties. The defendants, represented by ICBC, had substantially greater resources to finance a trial than the individual plaintiff. Had the defendants accepted the plaintiff’s initial reasonable offer, the plaintiff would not have had to incur the significant costs associated with nearly two weeks of trial.

Stay of proceedings:

[43] In the course of submissions, it came to light that the defence was refusing to pay the settlement funds to the plaintiff’s counsel, until a number of issues between the parties had been resolved. These issues included: (a) resolution of the issue of Court Order interest (Note it has since been agreed no COI is payable on the settlement); (b) resolution of the issues of scale of costs, increased costs and double costs as addressed in the subject application on September 25, 2008; and finally (c) resolution of the plaintiff’s assessable costs and disbursements at taxation, scheduled for October 30-31, 2008.

[44] The defence submits that nothing in the settlement agreement required the defendants to perform their part of the bargain in a piecemeal fashion. Mr. Ross notes that initially plaintiff’s counsel sought immediate payment of the insurance limits as a condition of accepting the September 15th settlement agreement, a proposition rejected by the defence. The defence says the plaintiff accepted the settlement agreement knowing this to be the defendants’ position.

[45] Since the issue of payment out of the settlement funds remains a matter of contention, the defence now seeks an order for a stay of proceedings. The defence says that upon the court being satisfied there is a binding settlement, the appropriate remedy is to enter a stay of proceedings in the action, save for carrying out the terms of settlement (see McKenzie v. McKenzie (1975), 55 D.L.R. (3d) 373 (B.C.S.C.), and Wadsworth v. Joe, [1998] B.C.J. No. 2421).

[46] While the plaintiff does not dispute the tenor of the authorities relied upon, she rejects the submission that the settlement agreement forecloses any execution or enforcement of the agreement, pending the resolution of all the issues listed.

[47] I entirely agree with the plaintiff that there is no justification for any delay in a payment out of the settlement funds. There is nothing in the defendants’ offer to settle which suggests that the defendants are entitled to delay payment of any and all amounts, pending the resolution or assessment of costs. The payment of the agreed settlement amount at this point will have no bearing whatsoever on the ultimate determination of the costs order. Thus there is no reason why the defendants should be permitted to withhold payment any longer.

[48] I reject the application for a stay of proceedings.

“The Honourable Madam Justice Boyd”

Citation:	*Radke v. Parry,*
	2008 BCSC 1397