The Effect of Offers to Settle on Court Cost Awards in British Columbia

The new British Columbia Supreme Court Civil Rules, which came into effect on July 1, 2010, includes changes to the rules respecting the effect on offers to settle on costs orders.


In British Columbia, the usual rule is that the successful party in a lawsuit is entitled to “costs” from the unsuccessful party. These costs do not usually cover all of the successful party’s legal expense, but cover a portion of it. The court has discretion over whether to award costs.

The Supreme Court Civil Rules allow a judge to consider offers to settle when making costs orders. The offers to settle must never be put before the court before the judge makes a decision on the substantive issues. But once the judge has made a decision, the parties may show the judge any offers to settle made in accordance with the rules.

The judge can take offers into consideration on costs in a number of ways. If the plaintiff has been successful at trial, but could have received as good or a better result if the plaintiff had accepted the defendant’s offer, the court may deprive the successful plaintiff of costs in respect of those steps in the lawsuit taken after the offer. If the claim is dismissed, the court may award the defendant double costs in respect of those steps taken after the offer. On the other hand, if the plaintiff makes and offer, and enjoys greater success than she would have if the defendant had accepted the offer, the court may award the plaintiff double costs from the time she made the offer.

The rules respecting offers to settle have been amended a few times over the last decade. At times they have been rigid.

The current Rule 9-1 is quite flexible. Rule 9-1 (5) and (6) provide as follows:

Cost options

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

(a) deprive a party of any or all of the costs, including any or all of the disbursements, to which the party would otherwise be entitled in respect of all or some of the steps taken in the proceeding after the date of delivery or service 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 or service of the offer to settle;

(c) award to a party, in respect of all or some of the steps taken in the proceeding after the date of delivery or service of the offer to settle, costs to which the party would have been entitled had the offer not been made;

(d) if the offer was made by a defendant and the judgment awarded to the plaintiff was no greater than the amount of the offer to settle, award to the defendant the defendant's costs in respect of all or some of the steps taken in the proceeding after the date of delivery or service of the offer to settle.

[am. B.C. Reg. 119/2010, Sch. A, s. 21.]

Considerations of court

(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 served 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.

In order to for the court to consider an offer to settle when awarding costs, the offer must be in writing, delivered to all of the other parties of record, and the offer must say that 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 pronounced judgment on all other issues in this proceeding."

B.C. Law Institute Consultation Paper on Proposals for Unfair Contracts Relief

The British Columbia Law Institute published its Consultation Paper on Proposals for Unfair Contracts Relief today.

The B.C. Law Institute is seeking public comments on the proposals. According to today's press release:

"Contract law has traditionally developed case by case in the courts," noted Prof. Joost Blom, Q.C., chair of the BCLI's Unfair Contracts Relief Project Committee. "This consultation paper gives the public the opportunity to participate in policy development on some important longstanding issues in the law of contracts."

The consultation paper contains 46 proposals designed to modernize and clarify how the law of contracts deals with unfairness. Its leading proposal is for British Columbia to enact a Contract Fairness Act. This act would consolidate the major concepts that have evolved in contract law to guard against unfairness.

The consultation paper proposes clarifying the tests for unconscionability, duress, and undue influence and integrating how those concepts operate at the level of procedure and remedy. It proposes establishing an implied duty of good faith in the performance of contracts. And it proposes reforms aimed at modernizing the scope of and remedies available for misrepresentation.

If you wish to comment on the Report, you may provide comments as follows:

by mail:

British Columbia Law Institute

1822 East Mall
University of British Columbia
Vancouver, BC V6T 1Z1

Attention: Kevin Zakreski

by fax: (604) 822‐0144, or

by email: ucr@bcli.org

For comments to be considered before the British Columbia Law Institute prepares its final report, they must be received no later than May 31, 2011.

Parties to a Wills Variation Act Claim

In British Columbia, a spouse or child of a deceased person may apply to court to vary his or her spouse's or parent's will if adequate provision has not been made for the spouse or child. The application is made under the Wills Variation Act.

I have come across a number of Wills Variation Act claims in which the plaintiff has not named all of the proper parties as defendants in the lawsuit.

The proper parties to a Wills Variation Act suit are as set out in Rule 21-6 (2) of the Supreme Court Civil Rules:

Parties

(2) In a proceeding referred to in subrule (1),

(a) the following persons must be parties to the proceeding:
(i) the surviving spouse and children of the testator;
(ii) all beneficiaries under the testator's will whose interest may be affected by the order sought;
(iii) the executor of the will, and

(b) the court may order that any other person be joined as a party.

In a few cases, I have seen the plaintiff name only the executor. More frequently, I have seen the plaintiff name the executor and the beneficiaries, but not a spouse or child who has also been excluded from the will.

The reason it is important to name all of the beneficiaries in a Wills Variation Act claim is that it is the beneficiaries rather than the executor who has an interest in defending against the claim. The executor is supposed to remain neutral in a Wills Variation Act lawsuit.

A spouse or children who have been excluded also have an interest in the lawsuit, because they may advance their own Wills Variation Act claims in the suit. Once one person has brought a Wills Variation Act claim, it has been brought for all persons who are entitled to make a under the Wills Variation Act.

Werbenuk v. Werbenuk Estate

My partner Keith Sabey had the privilege of representing Virginia Derksen, one of the successful parties in the case of Werbenuk v. Werbenuk Estate, 2010 BCSC 1678, which is a Supreme Court of British Columbia judgment released on November 29, 2010.

Mrs. Derksen is the eldest of William Werbenuk’s five children. When she was a young child, her parent’s marriage broke down, and her father abandoned her. He had no contact with her between from when she was 4 until she was 14. He did not obey a court order requiring him to pay child support for her. When she was 15, she approached him and asked for $50 to enter a pageant. He refused.

Mr. Werbenuk remarried and had three daughters, Carrie Werbenuk, Lorraine Werbenuk and Patricia Skwarok, and a son, Randall Werbenuk, with his second wife. Mrs. Derksen wanted to have a relationship with her siblings, but her father discouraged them.

Mrs. Derksen continued in later years to try to have a relationship with her father, and eventually was able to establish some contact with him.

William Werbenuk similarly mistreated his other three daughters. Mr. Justice Wong found the following facts in his reasons for judgment:

[12] The evidence of all of the daughters indicate that their father was a hard and rigid man who ruled his family, and especially the women, with an iron fist. He was a racist whose will and personality dominated his family. He was self absorbed and ordered his wife and daughters about as if they were brought into being merely to satisfy his needs, without regard to their emotional well being. Their evidence provides stark testament to the fact that the father, on frequent occasions, resorted to and engaged in harsh and brutal corporal and other punishments. He ruled those who lived with him and those who incurred his wrath by predictable resort to violence and the threat of violence. The father emotionally abused his wife and daughters on a regular basis and engaged in regular assaults upon their bodies as a form of punishment and, ultimately, as a form of ruling by terror.

[13] The most demeaning form of punishment engaged in by the father on a regular basis was his direction to all of his children, with the exception of Randall, to wash his feet.

When Mr. Werbenuk made his will on March 8, 2006, he left his entire estate to his son, Randall Werbenuk. After William Werbenuk died, Randall Werbenuk as the executor of his father’s will filled an inventory of the estate assets indicating that the gross value of the estate was approximately $434,000. But Mr. Justice Wong found that Randall Werbenuk did not include significant estate assets in the inventory, and the estate is worth more.

William Werbenuk’s three daughters from his second marriage brought a claim under the Wills Variation Act, asking the court to vary their father’s will on the basis that it did not make adequate provision for them. They requested the court to vary the will to make a provision that was just, adequate and equitable.

Because Mrs. Derksen was also entitled to apply, they named her as a defendant in the suit, and she retained Mr. Sabey to represent her.

Mr. Justice Wong varied the will. He held that William Werbenuk had a moral obligation to each of his daughters, which he, Mr. Werbenuk, failed to meet. He found that the three daughters from William Werbenuk’s second marriage had a closer relationship than Mrs. Derksen with their father. He also found that they had greater financial needs. Mr. Justice Wong varied the will to provide Carrie Werbenuk with 23 percent of the estate, Lorraine Werbenuk with 22 percent of the estate, Patricia Skwarok with 20 percent of the estate, Randall Werbenuk with 20 percent of the estate, and Virginia Derksen 15 percent of the estate.

One of the things I find most interesting about this case is the reaction. Very few Wills Variation Act cases get reported in the press, but this case has been covered by media across Canada, including the Vancouver Sun, The Globe and Mail, and the CBC. This afternoon, Keith Sabey was interviewed for a radio show in Toronto. The interviewer seemed shocked that the court could vary the will. Indeed, from reading some comments in the web versions of the press, many people find this decision surprising.

The decision is consistent with the legislation, which expressly provides that a court may vary a will if the maker has not made adequate provision for his or her spouse or children. The facts of this case are remarkable in the egregious conduct by William Werbenuk toward his daughters. But the result is consistent with the principles the courts have developed over decades since the legislation, then called the Testator's Family Maintenance Act, was passed by the British Columbia Legislative Assembly in 1920.

The court will view the will from the perspective of a judicious father, in accordance with contemporary standards. In this case, Mr. Justice Wong found that William Werbenuk fell short of that standard, and the court varied the will substantially. In other cases, the courts have refused to vary wills where parents had rational and valid reasons for leaving children little, or even disinheriting them.

In fairness to the radio interviewer in Toronto, Ontario's legislation is different, each province having its own laws governing wills. But it is interesting to see how surprised some of the media are by the decision.

I am pleased to see the interest in the area of law we practice, and the debate this decision has generated.