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When a matter has settled or the Court has made a determination, there is still the matter of the Bill of Costs.
In lawsuits the Plaintiff is suing for certain relief. In personal injury claims that relief is damages or compensation for the impact the injuries have had on your life including compensation for pain and suffering, loss of earnings and out of pocket expenses.
The Defendant, effectively the Insurance Corporation of British Columbia in motor vehicle cases, tries to defend the claim first on liability by denying that there was any fault and as such no compensation should be paid, and secondly, by arguing that the amount of compensation should be minimal, if any. As a general rule, the successful party is entitled to Court “costs”. That is, repayment of expenses incurred in prosecuting or defending the claim and a contribution to legal fees.
The term “costs” has two components, as indicated above. Firstly, there is compensation for hiring and paying a lawyer. The amount that a successful party receives under this aspect of “costs” is set out in a formula appended to the Supreme Court Rules referred to as a Tariff. The Tariff attempts to account for all the usual steps in a lawsuit and provides for a range of compensation for each step depending upon the level of complexity of the case and the amount of work involved. The general principle behind the Tariff is that a successful party is to receive approximately 30 – 45 percent of what they are paying their lawyer assuming they are paying their lawyer between $150.00 – $200.00 per hour. There is no intention for complete reimbursement of legal fees, only partial reimbursement. Since the Tariff was developed on the assumption that the client is paying the lawyer an hourly rate the Tariff principle of compensation of 30 – 45 percent of actual legal fees paid on an hourly rate does not apply in contingency fee cases where the lawyer is paid a percentage of the recovery. For example, assume a case goes to trial and the length of trial is approximately five days and the Judge awards $20,000.00. If a lawyer was charging $200.00 per hour the actual legal fees for all the work before and through trial could easily approach $50,000.00. However, if the lawyer is being paid 30 percent, the legal fees would only be about $7,000.00. The Tariff might provide for costs of approximately $10,000.00 – $20,000.00.
If, however, after a five day trial the Defendant is awarded $1,000,000.00 the hourly rate charged would still be about $50,000.00. However, a percentage arrangement would yield a fee of approximately $300,000.00. Costs according to the Tariff would still be $10,000.00 – $50,000.00.
The second component of Court costs is disbursements. Disbursements are the expenses incurred in bringing a case to trial or settlement. Disbursements include costs associated with filing fees, agents fees, photocopying, faxing, obtaining medical information from doctors and institutions, obtaining medical/legal reports, obtaining other types of expert evidence such as reports from economists, vocational consultants, cost of care experts, engineers, etc…, as well as litigation support services for interpreting clinical records and hiring private investigators and independent adjusters. The successful party will be reimbursed by the unsuccessful party for most of the disbursements incurred. On some disbursements such as private investigator’s accounts, and litigation support services for interpreting clinical records there can be reductions from the actual expenses incurred. Similarly, if a doctor or other experts charges more than what the Court thinks is fair then the amount reimbursed by the unsuccessful party to the successful party will be reduced.
Usually the Bills of Costs can quickly be resolved by agreement between Plaintiff’s counsel and ICBC. However, sometimes it takes longer and if an agreement can not be reached we may need to proceed to Court for a hearing to determine the amount that the defendant/ICBC is required to pay. If we need to proceed to a hearing for resolution of the Bills of Costs it could take months before we have a hearing date.
We may need to incur, on your behalf, the cost of additional disbursements in the process of resolving or negotiating the Bills of Costs. These disbursements would include the cost of experts providing affidavits justifying their accounts. The affidavits would be used as evidence at a court hearing.
So the Bill of Costs will be resolved, either by agreement or a Court hearing
Formal Offer To Settle
At some point in the lawsuit the parties will probably present a “formal Offer to Settle” to each other. These formal Offers of Settlement can have significant impact on a party’s entitlement to costs and disbursements. When the Defendant presents a formal Offer to Settle to the Plaintiff, the Plaintiff can accept the formal Offer to Settle and the case comes to an end. If the Offer is not accepted and the matter proceeds to trial and the Judge (or Judge and Jury) awards an amount equal to or less than the amount of the formal Offer to Settle by the Defendant, then the Plaintiff will be entitled to costs and disbursements from the beginning of the lawsuit until the date that the formal Offer to Settle was delivered to the Plaintiff’s lawyer, but will not be entitled to costs and disbursements after that date. The Plaintiff will have to pay the costs and disbursements of the Defendant from the date that the formal Offer to Settle was delivered.
What follows below in the next few paragraphs is an example only. The value of the Judgment presented in the paragraphs that follow are hypothetical and used as a standard illustration. The value of every case is different. The numbers are simply used to provide an example of the effect of formal Offers to Settle. In the example, you would be in the position of the Plaintiff and I.C.B.C. would be in the position of the Defendant.
Suppose the Defendant provides a formal Offer to Settle six months before trial for the sum of $20,000.00. Assume the Plaintiff rejects the offer and the matter proceeds to trial. Then assume that the Judge (or Judge and Jury) awards $18,000.00 to the Plaintiff. The Plaintiff will receive from the Defendant (often I.C.B.C.) the sum of $18,000.00 plus costs and disbursements to the date the formal Offer of Settlement was delivered. Costs and disbursements, in this example, could be $8,000.00. Therefore the total amount received by the Plaintiff will be $18,000.00 plus $8,000.00 for costs and disbursements. However, the Plaintiff will not receive costs and disbursements after the date that the formal Offer of Settlement was delivered and will have to pay I.C.B.C.’s costs and disbursements after that date. Costs and disbursements increase substantially at trial. I.C.B.C. could be entitled to, say $20,000.00, for costs and disbursements from the date that the formal Offer to Settle was delivered.
The numbers work out as follows (for the purposes of the example taxes are excluded):
|Less lawyer’s Fees of 30%||$ (5,400.00)|
|Less disbursements incurred for prosecuting the matter through trial||$(15,000.00)|
|Plus costs and disbursements payable by the Defendant to the Plaintiff:||$ 8,000.00|
|Less costs and disbursements payable by the Plaintiff to the Defendant.||$(20,000.00)|
|Total owing:||$ – 25,600.00|
On this example, instead of settling for $20,000 plus costs the Plaintiff ends up owing I.C.B.C. $25,600 at then end of trial. As you can see, by not accepting a formal Offer to Settle the Plaintiff can be placed at serious risk.
The Plaintiff also can present a formal Offer to Settle. If the Defendant refuses to accept the formal Offer to Settle submitted by the Plaintiff and proceeds to trial and the Judge (or Judge and Jury) awards an amount to the Defendant equal to or greater than the amount of the formal Offer then the Defendant will have to pay to the Plaintiff costs and disbursements up until the date that the formal Offer to Settle was delivered to the Defendant and double costs (not disbursements) after that date. Unfortunately, because disbursements are not doubled (only the portion of costs that provides for compensation for hiring a lawyer) and because in personal injury cases disbursements for doctors and other experts tend to be much more significant then in other types of cases, the leverage for formal Offers to Settle is greater for the Defendant than the Plaintiff.
Once the formal Offer of Settlement is delivered to a party, the party can accept any time before the trial begins. However, the party accepting the formal Offer to Settle will not be entitled to costs and disbursements after the date of delivery of the formal Offer to Settle and the other party will be entitled to costs and disbursements from the date of delivery. Therefore, if a formal Offer to Settle is going to be accepted it is better to accept it sooner than later.