2008 BCSC 1575 Arnold v. Cartwright Estate

Before: The Honourable Mr. Justice Butler

Reasons for Judgment

Counsel for the Plaintiff	Richard ter Borg
Counsel for the Defendant	Peter Unruh
Date and Place of Hearing:	August 27, 2008
	Vancouver, B.C.

[1] In this action, the plaintiff, Nicholas Arnold, claimed damages for nervous shock as a result of witnessing a serious motor vehicle accident on the Pattulo Bridge. Following the trial of the matter, I awarded damages in the amount of $11,100. I also ordered that Mr. Arnold was entitled to costs at Scale B. The reasons for judgment were handed down on November 2, 2007.

[2] In May 2007, the defendant delivered a formal offer to settle under Rule 37 in the amount of $50,000. The parties were unable to agree as to the terms of the costs order, so they appeared before me on August 27, 2008 to make submissions on costs.

[3] Mr. Arnold argues that the November 2, 2007 costs order was made pursuant to Rule 57(9) of the Rules of Court, B.C. Reg. 221/90, not pursuant to Rule 37. Rule 57(9) provides that “costs of and incidental to a proceeding shall follow the event unless the court otherwise orders”. Mr. Arnold says that if the order was made pursuant to Rule 57(9), then the new costs rule, Rule 37B, applies. He further argues that I should exercise my discretion under Rule 37B to deny the defendant its costs after delivery of its offer to settle.

[4] The defendant argues that the order of November 2, 2007 was made pursuant to Rule 37. The defendant says that the only reason the offer to settle was not brought before the Court was because the Court reserved its judgment. According to the defendant, had the issue of costs been addressed at the conclusion of the trial on June 25, 2007, the effect of the offer to settle would have been raised and the Court would have made an order under Rule 37. The defendant argues that where, as here, delay has been brought about by the court, the defendant should not be prejudiced by the action of the court in delaying release of the reasons for judgment. If Rule 37 applies, there is no question that the defendant is entitled to its costs after delivery of the offer to settle.

[5] The defendant argues, in the alternative, that if Rule 37B governs the award of costs, then the plaintiff should be deprived of any costs after the date of the offer to settle and the defendant should be entitled to its costs after that date.

Issues

[6] The issues are:

1. Was the order of November 2, 2007 made pursuant to Rule 37 or Rule 57(9)?

2. What costs order should be made in this case?

Issue 1. Was the order of November 2, 2007 made pursuant to Rule 37 or Rule 57(9)?

[7] The transition provision in Rule 37B that applies to this case is Rule 37B(1)(a):

(1) In this rule, “offer to settle” means

(a) an offer to settle made and delivered before July 2, 2008 under Rule 37, as that rule read on the date of the offer to settle, and in relation to which no order was made under that rule[.]

[8] The defendant relies upon the decision in Lankenau v. Dutton (1988), 27 B.C.L.R. (2d) 234 at 236, [1988] 6 W.W.R. 337, for the proposition that:

...[W]here a trial is concluded but judgment is reserved and where the plaintiff dies before reasons for judgment are published, the claim does not abate but judgment may be entered nunc pro tunc, as of the date when the trial was concluded. The common rationale behind those authorities is that the parties should not be prejudiced by any act of the court, including the court’s delay in delivering its reasons for judgment. ... Those, and other cases cited to me by the plaintiff, all adopt the same principle that where the court is responsible for a delay the parties should not suffer from it.

[9] The defendant says that an order was not made pursuant to Rule 37 at the conclusion of the trial only because of the Court’s delay in issuing reasons for judgment from June 25, 2007 to November 2, 2007. Further, the defendant says it should not be prejudiced by that delay. Rather, the judgment, including an order for costs pursuant to Rule 37, should be entered nunc pro tunc as of the date when the trial was concluded.

[10] There are two reasons why the defendant’s argument cannot be accepted. First, there was no prejudice to the defendant caused by the Court’s delay in delivering its reasons for judgment. The defendant had eight full months between the time the decision was released and the effective date of the rule change. No order was made pursuant to Rule 37 because the defendant did not press the matter forward and settle the order for costs.

[11] Second, and more importantly, the transition rule clearly contemplates that Rule 37B applies to an offer to settle delivered under Rule 37 in the present circumstances. When the reasons for judgment were delivered and I ordered that the plaintiff was entitled to costs on Scale B, I was unaware of the delivery of the offer to settle by the defendant. Accordingly, no order was made under Rule 37, so Rule 37B applies.

Issue 2. What costs order should be made in this case?

[12] The defendant argues that the consequence of Mr. Arnold’s failure to accept its offer to settle should be as set out in Rule 37(24)(a), which read as follows at the time the offer was delivered:

(24) If the defendant has made an offer to settle a claim for money and the offer has not expired or been withdrawn or been accepted,

(a) if the plaintiff obtains a 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[.]

[13] Mr. Arnold argues that I should exercise my discretion to award him costs throughout. Alternatively, he says that he should receive costs up to the date that the offer to settle was delivered to him and that neither party should receive costs after that date.

[14] Rule 37B(5) sets out the options available to the court when an offer to settle has been delivered:

(5) In a proceeding in which an offer to settle has been made, the court may do one or both of the following:

(a) deprive a party, in whole or in part, of costs to which the party would otherwise be entitled in respect of the steps taken in the proceeding after the date of delivery 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 of the offer to settle.

[15] Subrule (5) is permissive: British Columbia Society for the Prevention of Cruelty to Animals v. Baker, 2008 BCSC 947. It does not specifically state that it is possible for the court to order costs to a defendant where an offer to settle was in an amount greater than the judgment. Nevertheless, that is implied in the rule. If the court can deprive a party of costs or order double costs, it must also be able to order costs, the intermediate step between those two extremes.

[16] One of the goals of Rule 37B, like the former Rule 37, is to promote settlements by providing that there will be consequences in the amount of costs payable when a party fails to accept an offer that ought reasonably to have been accepted. That goal would be frustrated if Rule 37B(5) did not permit the court the option of awarding costs of all or some of the steps taken in a proceeding after the date of delivery of an offer to settle.

[17] The considerations that a court may take into account in deciding how to exercise its discretion are set out in Rule 37B(6):

(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 on any later date;

(b) the relationship between the terms of settlement offered and the final judgment of the court;

(d) any other factor the court considers appropriate.

[18] Mr. Arnold relies upon two of the considerations specified in Rule 37B(6) to advance his argument that I should exercise my discretion to deny costs to the defendant after delivery of the offer to settle. First, he says that this was not a case where the offer to settle was one that ought reasonably to have been accepted. Second, he says that if the defendant is awarded costs he will receive nothing from the judgment; Mr. Arnold argues that this would be an inequitable result given his relative financial circumstances as compared to those of the defendant’s insurer.

[19] Mr. Arnold’s argument, based on Rule 37B(6)(a), emphasizes the novel nature of the claim. Mr. Arnold claimed damages for nervous shock as a result of witnessing the serious motor vehicle accident involving two fatalities. Unlike other nervous shock cases that have been heard by British Columbia courts, Mr. Arnold had no family connection with the victims of the motor vehicle accident and, in fact, did not know them at all. Thus, the case raised issues of foreseeability, proximity and public policy.

[20] While the case was novel for the reason noted above, it was not particularly complex. The foreseeability, proximity and public policy questions have been the subject of other decisions of both this court and the Court of Appeal. Ultimately, my decision rested upon the evidence of the three psychiatrists regarding causation. This should not have surprised the parties, as all three psychiatrists concluded that Mr. Arnold suffered Post Traumatic Stress Disorder (“PTSD”) as a result of the nervous shock he experienced at the scene of the motor vehicle accident. The real issue was whether the psychiatric difficulties he encountered approximately a year after the accident were caused by the motor vehicle accident induced PTSD.

[21] Mr. Arnold received supportive medical legal opinions from two treating psychiatrists. However, the report of Dr. Smith concluded that Mr. Arnold’s subsequent disability was not related to the PTSD or the motor vehicle accident. Once Mr. Arnold was in receipt of that report, he had all of the information he required to properly consider the offer to settle. Within a reasonable period after receipt of the report and the offer to settle, the offer to settle was one that ought reasonably to have been accepted. This is the most significant consideration for me in deciding how to exercise my discretion in this case.

[22] A reasonable period of time to consider an offer to settle is seven days: Bailey v. Jang, 2008 BCSC 1372. I do not know when Dr. Smith’s medical legal report was delivered to Mr. Arnold. If it was delivered prior to the delivery of the offer to settle, then the offer to settle is one that ought reasonably to have been accepted seven days after the date it was delivered. However, if Dr. Smith’s report was not delivered until some later date, I conclude that the offer to settle was one that ought reasonably to have been accepted seven days after delivery of the report.

[23] Mr. Arnold has asked that I take into account the relative financial circumstances of the parties when exercising my discretion. I find that I am unable to do so. First, Mr. Arnold has provided no evidence regarding his financial circumstances other than the assertion that the likely result of a costs award in favour of the defendant will leave him with no recovery from the action. Rule 37B gives this Court greater discretion than it had under the old Rule 37. It specifically allows the Court to consider the relative financial circumstances of the parties. However, there will always be a substantial difference between the relative financial circumstances of the usual personal injury plaintiff and the defendant’s motor vehicle insurer. That difference, in and of itself, is not enough for the Court to exercise its discretion to deprive the defendant of costs. If that was the intent of the new rule, it would have been more clearly articulated.

[24] In the present case, Mr. Arnold has put forward no evidence of special circumstances regarding his finances. He has put forward no evidence of other factors that should be taken into consideration in the exercise of my discretion. Accordingly, I will leave it to other courts to consider when it is appropriate to deprive a party of costs when that party has delivered an offer that ought reasonably to have been accepted.

Summary

[25] The offer to settle was one that ought reasonably to have been accepted either seven days after the offer was delivered or, if Dr. Smith’s report had not yet been provided to Mr. Arnold, seven days after the report was delivered. Mr. Arnold is entitled to his costs up to the later of those two dates. The defendant is entitled to its costs after that date. Costs are to be at Scale B.

“Butler J.”