A successful litigant is typically entitled to their costs as against the unsuccessful party. However, many litigants are surprised to learn that a costs award in the usual course does not mean full reimbursement of the legal expenses incurred. Rather, the general rule is that the amount of costs is based on the tariff set out in Appendix B of the Supreme Court Civil Rules, plus disbursements. The costs that are awarded to the successful party, in most cases, will equal only part of the actual litigation costs incurred by that party.

One of the purposes of costs awards  is to deter litigation and unnecessary costs associated with doubtful cases or defences. To further this goal and promote settlement of disputes, Supreme Court Civil Rule 9-1 provides that the court may consider a settlement offer in the exercise of its discretion to award costs. Among other things, a “formal” offer may be used by the successful party to seek an award of double costs of all or some of the steps taken in the lawsuit after the date of the formal offer. In considering whether the award of double costs should be made, the court may consider a number of factors, including whether the offer was such that it should have reasonably been accepted by the other party, the relationship between the terms of the offer and the actual outcome of the trial and the relative financial circumstances of the litigants.

A recent decision of the Supreme Court of British Columbia, 1029865 B.C. Ltd. v. 1007442 B.C. Ltd., 2017 BCSC 2381, highlights the role of credibility as a factor to an award of double costs. This case involved an action by a purchaser against a vendor in respect of a real estate transaction that failed to complete. Following a four day trial, the plaintiffs’ claim was dismissed and costs were awarded in favour of the defendants. Prior to trial, both defendants made formal offers of settlement to the plaintiffs, setting out a summary of the evidence available to the parties and the applicable law, which the defendants argued should have enabled the plaintiffs to conclude they had no reasonable prospect of success.

While the court noted that both defendants’ offers were reasonable and set out in detail the arguments in support of their position, the outcome of the case depended in part on findings of credibility. As credibility was a determining factor, the court concluded that some risk was faced by each of the parties in proceeding to trial. As a result, the court was not prepared to award double costs, which were referred to as a “punitive measure”, to the successful defendants. A lesson that may be gleamed from 1029865 B.C. Ltd. v. 1007442 B.C. Ltd. is that where credibility is an important consideration to the outcome of the dispute, formal offers of settlement should specifically identify the credibility hurdles faced by the opposing party. Where credibility issues are properly identified, the offer of settlement may stand a better chance of successfully supporting an award of double costs.