[Since I wrote this post, the Rules have been changed. I wrote an updated post on December 18, 2010 here.]
In British Columbia court cases, the judge has discretion to award court costs to a party. The usual rule is that the unsuccessful party is required to pay costs to the successful party. The costs do not generally fully cover the party’s legal fees, but the court costs award can be substantial.
Rule 37 of the Supreme Court Rules is designed to facilitate settlements before trial. If the plaintiff makes an offer to settle that complies with Rule 37, and receives an award after a trial that is equal to or better for the plaintiff than the offer, the plaintiff is entitled to costs up to the date of the offer, and double costs thereafter.
The defendant may also use Rule 37 to make offers. If the defendant makes an offer, and the plaintiff is successful at trial, but does not get a result that is better than the defendant’s offer, the plaintiff is entitled to costs only to the date of the offer, and the defendant is entitled to costs thereafter. If the plaintiff loses at trial, the defendant receives costs up to the date of the offer, and double costs thereafter.
Rule 37 can be used by either side to put pressure on the other to accept an out-of-court offer by increasing the potential costs to the other side if he or she loses, or does not do better than the offer.
When a party makes an offer to settle under Rule 37, he or she may not disclose the offer to the judge during the trial. After the judge has ruled on the substantive issues in the case, the parties may disclose the offer when making submissions on costs.
[Update: Effective July 1, 2008, Rule 37 was replaced by a more flexible Rule 37B. See my post on the amendment here.]