[Since I wrote this post, the Rules have been changed. I wrote an updated post on December 18, 2010 here.]
The British Columbia Supreme Court Rules have been amended to give the courts greater flexibility in awarding court costs after one party has made a formal offer to settle. Rule 37B replaced Rules 37 and 37A effective July 1, 2008.
The old Rule 37 provided mandatory costs consequences when one party made an offer that complied with the requirements of Rule 37. For example, if the plaintiff made an offer to settle, and the court awarded the plaintiff more that the offer, the plaintiff was entitled to ordinary costs to the date of the offer and double costs for steps taken after the offer. The offer could only be disclosed to the trial judge after the judge had ruled on the substantive issues. I have discussed offers under Rule 37 here.
Rule 37A applied to offers that did not meet all of the requirements of Rule 37, and provided that the court could consider the offer on the issue of costs.
The new Rule 37B will apply to all offers to settle complying with the new rule.
If an offer is made, and the party making the offer sets out that the party "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 the proceeding," the court may then consider the offer in determining who gets court costs, and how much. The court may deprive a successful party of costs, or may order that a party receive double costs for some or all steps in the lawsuit.
The court may consider whether the other party should reasonably have accepted the offer. The court may also consider the result, and the financial circumstances of the parties, as well as any other factors the court considers appropriate.
The text of the new Rule 37B, posted by Continuing Legal Education Society of British Columbia, is here.
I don't know the rationale for this change. I have notice quite a bit of litigation over when Rule 37 applied and when it did not. The results could be harsh in some circumstances. Although the purpose of the rules concerning offers to settle are to encourage negotiation, in some cases plaintiff's made offers under Rule 37 for the full extent of their claim, and defendants made offers under Rule 37 offering nothing.
I think a more flexible approach under the new Rule 37B makes sense.