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Double costs awarded against employer for failing to accept employee's settlement offers in wrongful dismissal case

Jurisdiction: - British Columbia
Sector: - Retail Trade

In Hutson v. Michaels of Canada, ULC, 2009 BCSC 1587, the court awarded the dismissed employee "double" court costs because of the employer's failure to accept the employee's pre-trial settlement offers.

Background

The decision dealing with the merits of the wrongful dismissal lawsuit was delivered orally by the BC Supreme Court on September 18, 2009. This decision does not appear to be reported. The decision dealing with the costs award is reported and offers some information about the merits of the lawsuit.

The employee was dismissed for just cause on August 29, 2005 because of an altercation with/alleged assault on another employee. He had approximately 12 years of service.

In October 2005, the employee (through his lawyer) offered to settle the matter for $100,000. The employer did not accept the offer.

In January 2006, the employee commenced his lawsuit.

In December 2007, the employee's lawyer made a formal offer to settle under the former Rule 37 in the amount of $75,000, exclusive of costs and disbursements. The employer did not accept this offer.

In September 2008, the employee's lawyer made a further offer for $59,159.67, plus taxable costs and disbursements. The offer was made pursuant to Rule 37B of the Rules of Court, and the lawyer reserved the right to bring it to the court's attention after judgment. The employer did not accept this offer.

The lawsuit eventually went to trial.  At trial, the court ruled that the employer did not have just cause to dismiss the employee and awarded him a notice period of 15 months.

The court, however, rejected some of the employee's claims for lost "benefits" over the notice period, including a bonus in 2006, stock option loss, lost vacation time, certain health benefits and the loss of the employer's discount plan.

In total, the court awarded the employee damages of approximately $111,500.

Law on Costs

The court noted that Rule 37B was introduced in July 2008 to reinforce the principle of judicial discretion in awarding court costs. It vests an overall broad discretion in the court to consider an offer to settle in the awarding of costs.

The factors which a court may consider concerning an offer to settle are set out in Rule 37B(6):

(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.

Application of Law to Facts

The court noted that, pursuant to the Rules, there were two offers by the employee that it could take into consideration: the December 2007 offer and the September 2008 offer.

The court further stated, however, that while the October 2005 offer did not constitute an offer under the Rules, it nonetheless was a factor the court could take into account pursuant to Rule 37B(6)(d).

The court then reviewed the four factors set out in Rule 37B(6).

In relation to the first factor, the court found that the December 2007 offer was one that reasonably ought to have been accepted by the employer. In relation to this factor, the court specifically:

  1. rejected the employer's argument that a wrongful dismissal case premised on just cause was unique than other breach of contract cases, in that it resulted in an all or nothing outcome for employer;
  2. stated, or at least inferred, that if the employer was aware that there was significant risk associated with proving just cause for dismissal, given the high standard imposed by the courts, the employer erred by seemingly taking the position that there was no risk in that, to the court's knowledge, it did not made a counter-offer;
  3. the employer's case for just cause had not been as strong from the outset as the employer believed, particularly when the court applied the "contextual" approach set out in McKinley v BC Tel 2001 SCC 38.

In relation to the second factor, the court stated that the fact that the judgment was in excess of both the December 2007 and September 2008 offers weighed strongly in favour of the employee.

In relation to the third factor, the court rejected the employer's arguments that the significant losses it had incurred as a result of the economic downturn should be considered. In this regard, the court noted that the employer had not adduced any evidence of its financial circumstances, which the case law on Rule 37B(6)(c) had made clear was necessary. 

The court went on to say that even if the employer had adduced evidence, the court  would have found it difficult to exercise its discretion in favour of the employer given the significant financial and power imbalance between the parties.

In relation to the final factor, the court stated that while the employee had not been successful in relation to all of the claimed benefits over the notice period, these issues had consumed very little time during the hearing and were insignificant in comparison to the other issues upon which the employee was successful.

Conclusion

Based on the above, the court ruled that the employee was entitled to "double costs" commencing seven days from the date the employer received the offer to settle in December 2007.

Comment

The losing party in a lawsuit is typically ordered to pay the winning party's "costs". Costs are awarded in accordance with a tariff that is set out in Appendix B of the Rules of Court. The amount received by the winning party in accordance with the tariff, however, is typically far less than the actual legal fees they have incurred, perhaps in the 25% to 33% range. An award of double costs helps to bridge this gap.