Effective July 2, 2008, the rules relating to formal offers to settle in the British Columbia Supreme Court have changed significantly—Rules 37 and 37A of the Rules of Court have been repealed and replaced with the condensed Rule 37B. The new Rule is similar to Rule 37A. The significance of the changes is the removal of Rule 37. Parties no longer have the option of making a Rule 37 offer and taking advantage of its costs provisions.
A Rule 37 offer’s dominant feature was the consequences related to costs: depending on the offering party and the outcome at trial, Rule 37 explicitly outlined the parties’ rights to costs and double costs. If a plaintiff refused to accept a defendant’s offer but, following a trial, received an amount equal to or less than the offer, the defendant received its costs incurred after the date when the offer was delivered. If a court dismissed a plaintiff’s case, the defendant received its actual costs up to the time of the offer’s delivery and double costs thereafter. On the other hand, if the plaintiff made an unaccepted offer and received judgment for an equal or greater sum, it would receive its costs to the date of the offer’s delivery and, subsequently, double costs.
These costs consequences often provided an incentive to make reasonable settlement offers and encouraged litigating parties to critically examine the strength of their cases. The new regime vests the Court with the discretion to award costs or double costs in the face of an offer to settle. While Rule 37B is similar to its predecessor, Rule 37A, it does not bind courts to the strict consequences litigants and lawyers have grown accustomed to.
When the new Rule was enacted, Subsection 6 was added to provide guidance in the Court’s exercise of discretion; it provides the following suggestions to guide the costs assessment:
(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;
(c) the relative financial circumstances of the parties;
(d) any other factor the court considers appropriate.
While the first two factors were likely driving forces behind the original Rule 37, the Court now has the authority to assess costs on a case-by-case basis, with room to consider other relevant dynamics. The sole stipulation is that the Court can only order double costs to address costs arising after delivery of an offer to settle.
Moving forward, any offer made after July 1, 2008 must conform to Rule 37B in order to be considered in assessing costs. The new form requires that an "offer to settle" be made in writing by a party to a proceeding, be delivered to all parties involved in the proceeding, and contain the following clause:
The ….[name of 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.
These requirements are similar to those found in Rule 37A.
The application of the new Rule is not limited to offers made after July 1, 2008. An offer to settle under the new Rule also includes offers made and delivered before July 2, 2008, pursuant to Rules 37 or 37A; however, to conform with Rule 37B, any such offer must have met the requirements of form under those rules and there was no court order with respect to the offer. If a party no longer wishes to have their offer outstanding, it may be withdrawn prior to acceptance.
It is unclear how the Court will exercise its discretion. The new Rule allows the Court to make costs awards commensurate with those available under the prior regime. However, it is uncertain whether the Court will continue to do so or if it will adopt a new approach and develop an entirely independent body of law, influenced by the broadened discretion.