Lessons from the Courts: Costs Awards & Impact of Litigation Strategy
2025 10-Under-10 Finalist
Introduction
In civil litigation in Ontario, a favourable judgment is no longer a guaranteed shield from adverse cost consequences. Ontario courts are sending a clear message: litigation strategy, not just outcome, drives costs awards. Parties and insurers (and their counsel) who take entrenched no liability positions, rely reflexively on without costs dismissal offers, or fail to make reasonable Rule 49 offers risk being penalized – even if successful on the merits. This paper focuses on judicial commentary in recent trial costs decisions regarding litigation strategy and costs consequences. A review of recent personal injury cases and cases involving standard of care by lawyers reveals that courts have reduced or denied costs, even when an insurer has made an offer to dismiss without costs before trial. In such cases as discussed below, courts have emphasized the inefficiencies and financial burdens caused by extreme litigation tactics, including refusing to make reasonable settlement offers and insisting on proceeding to trial despite clear risks.The central theme of these recent cases is that courts, when assessing costs, appear to be considering whether a defendant has taken a realistic approach in assessing litigation risks in their settlement positions. Specifically, courts are increasingly critical of strategies such as adopting inflexible no liability positions and without costs dismissal offers which push cases to trial, unnecessarily prolong litigation, and waste judicial and public resources. In some instances, courts have even ruled that a defendant’s unreasonable refusal to make a pre-trial monetary offer constitutes bullying or an aggressive litigation strategy, warranting a costs award against them.
A Refresher on Key Legal Principles for Costs Awards in Civil Actions
Costs for legal proceedings in Ontario are awarded based on principles of success, proportionality, fairness, and reasonable expectations of the parties. Generally, the unsuccessful party must pay a portion of the successful party’s legal fees and expenses. Specifically, fixing costs is governed by section 131(1) of the Courts of Justice Act.1 The amount of costs awarded must reflect “an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant.”2In practice, however, courts have broad discretion to consider all matters relevant to the question of costs in determining whether costs are payable, which party pays costs, the amount which they pay, and on what basis. Rule 57.01 of the Rules sets out a non-exhaustive list of factors to be considered when costs are fixed, such as the result of the proceeding, the amount claimed and the amounts recovered, the complexity and importance of the issues, any conduct of a party that shortened or lengthened the proceeding, any offers to settle made under Rule 49, proportionality, and the parties’ expectations and legal rates, among others.3 The fixing of costs, therefore, is a fact-specific exercise guided by the factors set out in Rule 57.01(1), aimed at ensuring that any costs awarded are reasonable and fair in the circumstances. In Fong v. Chan, the Ontario Court of Appeal summarized that the legislative and rules framework are “designed to foster three fundamental purposes: (1) to indemnify successful litigants for the cost of litigation, (2) to encourage settlements, and (3) to discourage and sanction inappropriate behaviour by litigants.”4
Further, Rule 49 is a cost incentive mechanism designed to incentivize settlement and discourage prolong litigation. Practically, the rule encourages parties to take a hard look at the merit of their case and accept reasonable offers to settle in order to resolve disputes efficiently. Put simply, “if a party has made a Rule 49 offer, and it is not accepted, and the party obtains a result at trial that is as favourable or better for the offeror than the terms of its offer, than the offering party will receive a more favourable costs treatment than they otherwise would.”5 The court does have the discretion to depart from the strict application of the cost consequences contained in Rule 49 in appropriate circumstances.6
Leading up to trial, the plaintiff made two Rule 49 offers to settle – first for $150,000 plus costs and disbursements, then for $100,000, plus costs and disbursements. The defendant refused both offers and made no settlement offers.7 In addressing costs, the plaintiff sought partial indemnity costs of $114,000, and disbursements of $18,677. The plaintiff argued that the defendant took a “hard ball approach to the litigation” which was inconsistent with the goals of the civil justice system. Further, the plaintiff submitted that the defendant’s insurer adopted a bullying strategy which denied the plaintiff access to justice and led to significant costs which it should be entitled to recover.8
In assessing costs, the court emphasized that the most basic legal principle as it applies to costs is “to ensure that the costs awarded are fair, reasonable, proportionate and reflect what the losing party could reasonably anticipate paying.”9 Further, the court also considered the factors set out in Rule 57.01 of the Rules. Justice Edwards found that the outcome of the case, in his view, reflected strategies by both sides, neither of which strategies was reflected in the outcome at trial. His Honour criticized both parties’ approaches: the plaintiff’s claim failed to adequately account for contributory negligence and the realistic value of damages, while the defendant took a rigid “no liability” position and made no offers to settle. Justice Edwards noted that both sides should have taken a more realistic approach to damages and assessed litigation risks reflected in the jury’s award, which may have resulted in an early resolution of the matter.10
In addition, Justice Edwards emphasized that entrenched positions on part of parties and their counsel often result in unnecessary trials which could be avoided if both sides adopt a more realistic position as it relates to liability and damages. Of note, Justice Edwards stated that while parties are entitled to have an honest disagreement on issues of liability and damages, when a party takes a no liability position, then it fails to recognize that there are risks in litigation. Specifically, Justice Edwards stated:
Accordingly, it appears that the defendant’s decision to not make a reasonable settlement offer trumped considerations on proportionality in Justice Madhane’s decision on the quantum of damages in this case. In this regard, Justice Mandhane found that “proportionality is not determinative of my ultimate decision on quantum because it was the defendant’s unreasonable decision not to make any pre-trial offers that effectively necessitated the matter going to trial.”17 Justice Madhane unequivocally stated that there was no doubt that the trial and the associated costs could have been avoided had the defendant made a reasonable offer to settle.18
Relying on prior decisions in Persampieri v. Hobbs, where Aviva was also the defending insurer, and Corbett v. Odorico,19 Justice Madhane highlighted the point that a strict application of the proportionality principle could significantly decrease the plaintiff’s claim for costs and risk rewarding a defendant who engages in “bully tactics”.20 For example, the defendant’s decision not to make an even modest offer early on in the litigation in light of the plaintiff’s evidence regarding past income loss stemming from her injuries, which the jury ultimately accepted, was unreasonable since the defendant would have been aware of this evidence well before trial. Further, the defendant’s strategy to not offer the plaintiff any monetary compensation and force the matter to a jury trial was highly wasteful of court and public resources. On this point, Justice Madhane particularly noted that the defendant’s “aggressive litigation strategy reflected a knee-jerk reaction” which failed to consider the cost to the public when deciding on how to proceed with the litigation.21
For these reasons, the court found that it would be unfair to unduly shave plaintiff’s costs based solely on the proportionality factor (reasonableness of costs ordered relative to the amount awarded). Despite the plaintiff’s modest recovery at trial, Justice Madhane ordered that the defendant bear the costs of its aggressive litigation strategy and pay $300,000 to the plaintiff for costs.
In a similar fashion, in Parker v. Kitchener, Justice Taylor considered the parties’ efforts to resolve the matter and the reasonableness of their offers when assessing costs following trial arising from a personal injury case involving a plaintiff who sued the City of Kitchener from failing to maintain sidewalks. Specifically, Justice Taylor noted the ways in which parties and their counsel “lost all perspective about this case”. In particular, Justice Taylor pointed out that the defendant made no meaningful attempt to resolve the case, which resulted in staggering costs incurred on part of both parties ($80,000 for the defendant’s costs and $69,269 for the plaintiff’s costs). In Justice Taylor’s view, these costs amounts were not proportional to the damages at stake and the low complexity of the issues.22 In addition, Justice Taylor’s costs decision highlighted the fact that the parties’ settlement offers did not attract Rule 49 consideration. While the plaintiff’s offer was for more than double the amount awarded, the defendant only offered a nominal amount of $2,000, inclusive of costs. Although the defendant had made an offer to consent to a dismissal without costs, Justice Taylor stated that this type of offer was not “a meaningful attempt to compromise the claim”.23 In the end, Justice Taylor awarded the plaintiff $15,000, inclusive of disbursements.
In sum, this line of recent cases demonstrate that the courts are increasingly scrutinizing the “no liability position” and/or a without costs dismissal settlement offer made by defendants as an unrealistic approach to litigating cases because such positions fail to acknowledge the risks and uncertainties inherent to litigation. Based on a close reading of the abovementioned cases, it appears that the courts are reminding parties and their counsel that very few disputes are free from risk and that even strong defences to potential liability and damages must account for a degree of potential liability or a higher damages award if proceeding to trial. Another key takeaway from these cases is that courts can award costs which exceed the damages awarded, which should alert parties to the importance of realistically evaluating the strength of one’s case early on and that failing to do so can lead to high adverse costs consequences, even in situation where the damages claim is modest.
Lastly, counsel acting for insurers should be cognizant of the risk that courts may interpret a no liability position or a without costs dismissal offer to settle as characteristic of a bullying litigation strategy, driven by protracted litigation and high legal costs used to pressure plaintiffs from pursuing their claims. Although frivolous and vexatious claims are on the rise – and a dismissal without costs as an offer may be appropriate where a claim clearly lacks merit – counsel should exercise a degree of caution and consider carefully whether such an offer is truly suitable in the specific circumstances of each case, rather than relying on it prematurely at the outset of a case without first conducting a proper assessment of the client’s position alongside litigation risk.
In other cases, courts have refused to award costs outright even if the defendant was mostly successful at trial and more successful than its Rule 49 offer to settle. For instance, the case of Jones v. Keay, involved plaintiffs suing their lawyer for faulty advice on a residential purchase transaction. It was admitted that “the lawyer owed a duty of care to his clients, the plaintiffs, and that a lawyer fell below the standard of care required of a prudent lawyer in the circumstances, specifically, in the faulty advice given in relation to the Planning Act consent stamps and the implications this may have had on the ability to sever a cottage property which they purchased.” The focus of this litigation was on whether there had been a loss resulting from the lawyer’s actions.24
On the issue of costs, the court refused to award costs to the lawyer defendant who was the successful party in the proceeding because the defendant conceded that he had breached the standard of care although the court determined that there was little loss stemming from the said breach. Notably, Justice Christie considered the lawyer’s breach of standard of care in determining a proportionate costs award and found that there was no question that the lawyer’s actions led to unrealized expectations on the part of the plaintiffs. In this regard, Justice Christie concluded that “costs awards have the ability to send a message – both to the parties and the public at large” and that any costs awarded to the benefit of the lawyer defendant would suggest that the court condones the actions of the lawyer, which would send the wrong message.25
Similarly, Justice J.R. Macfarlane in Ingratta v. McDonald, noted the finding at trial of the defendant’s negligence in causing a car collision which resulted in various physical and psychological injuries to the plaintiff in the context of assessing costs. The action was commenced under Rule 76 of the Rules. The plaintiff sought the maximum amount of claim for $200,000 in damages, but the court provisionally assessed her general damages at $50,000 prior to any statutory deductible.26
1 RSO 1990, c C.43.
2 Boucher v. Public Accountants Council for the Province of Ontario, 2004 CanLII 14579 (ONCA), at para. 26.
3 R. R.O. 1990, Reg. 194: Rules of Civil Procedure, Rule 57.01.
4 Fong v. Chan, 1999 CanLII 2052 (ONCA), at para. 22.
Further, Rule 49 is a cost incentive mechanism designed to incentivize settlement and discourage prolong litigation. Practically, the rule encourages parties to take a hard look at the merit of their case and accept reasonable offers to settle in order to resolve disputes efficiently. Put simply, “if a party has made a Rule 49 offer, and it is not accepted, and the party obtains a result at trial that is as favourable or better for the offeror than the terms of its offer, than the offering party will receive a more favourable costs treatment than they otherwise would.”5 The court does have the discretion to depart from the strict application of the cost consequences contained in Rule 49 in appropriate circumstances.6
Lessons from Recent Civil Trial Decisions
In Lawless v. Joanovits, Justice Edwards awarded costs exceeding the general damages in a personal injury claim. The primary issue in dispute was whether the defendant was liable under the Occupiers’ Liability Act and responsible for injuries sustained by the plaintiff on their premises. After a five-day jury trial, the jury found the defendant liable but apportioned 70% of the fault to the plaintiff and only 30% to the defendant. The jury awarded $60,000 in general damages, which, after accounting for the apportionment of liability, resulted in the plaintiff obtaining $18,000 in damages.Leading up to trial, the plaintiff made two Rule 49 offers to settle – first for $150,000 plus costs and disbursements, then for $100,000, plus costs and disbursements. The defendant refused both offers and made no settlement offers.7 In addressing costs, the plaintiff sought partial indemnity costs of $114,000, and disbursements of $18,677. The plaintiff argued that the defendant took a “hard ball approach to the litigation” which was inconsistent with the goals of the civil justice system. Further, the plaintiff submitted that the defendant’s insurer adopted a bullying strategy which denied the plaintiff access to justice and led to significant costs which it should be entitled to recover.8
In assessing costs, the court emphasized that the most basic legal principle as it applies to costs is “to ensure that the costs awarded are fair, reasonable, proportionate and reflect what the losing party could reasonably anticipate paying.”9 Further, the court also considered the factors set out in Rule 57.01 of the Rules. Justice Edwards found that the outcome of the case, in his view, reflected strategies by both sides, neither of which strategies was reflected in the outcome at trial. His Honour criticized both parties’ approaches: the plaintiff’s claim failed to adequately account for contributory negligence and the realistic value of damages, while the defendant took a rigid “no liability” position and made no offers to settle. Justice Edwards noted that both sides should have taken a more realistic approach to damages and assessed litigation risks reflected in the jury’s award, which may have resulted in an early resolution of the matter.10
In addition, Justice Edwards emphasized that entrenched positions on part of parties and their counsel often result in unnecessary trials which could be avoided if both sides adopt a more realistic position as it relates to liability and damages. Of note, Justice Edwards stated that while parties are entitled to have an honest disagreement on issues of liability and damages, when a party takes a no liability position, then it fails to recognize that there are risks in litigation. Specifically, Justice Edwards stated:
There are few, if any, cases which can be described as having no risk. Resolution of cases requires all parties (and this includes the insurers who instruct defence counsel in most personal injury cases) to make an informed and realistic assessment of risk. That risk should be reflected in a party’s Rule 49 Offer. The defence position in this case did not reflect any realistic assessment of risk. If the defence advances a no risk position the defence must expect that such a position may ultimately result in a costs award in favour of the plaintiff even when the jury awards the plaintiff something that falls within the jurisdiction of the Small Claims Court or the Simplified Rules.11
[Emphasis added]
[Emphasis added]
In the end, Justice Edwards concluded that while an award of costs must be proportionate, it must also be reasonable and fair in the circumstances. In sum, a costs award must also “reflect an amount that the losing party might reasonably have anticipated paying in the event of non-success at trial.”12 In the end, the court awarded a costs award of $50,000 plus HST in favour of the plaintiff, along with a full recovery of disbursements in the amount of $18,677.42.
Similarly, Justice Mandhane in Barry v. Anantharajah, awarded costs exceeding the general damages awarded by jury to a plaintiff injured in a motor vehicle accident when crossing the street. The plaintiff sought $1,000,000 in damages. The defendant was represented by counsel acting on behalf of her insurer, Aviva Trial Lawyers. Prior to trial, the plaintiff made an offer to settle in the amount of $500,000 in damages, plus costs and disbursements. The defendant, on the other hand, responded with a without costs dismissal offer. The defendant did not make any further monetary offers before or during the trial. Following a three-week trial, the court awarded the plaintiff $21,166 in general damages and $26,000 in special damages for past income loss. After accounting for the jury’s finding of contributory negligence by 15% and a statutory deductible for general damages of $46,053.20, the plaintiff received $16,160.50 in damages.
As for costs, for her success at trial, the plaintiff requested her partial indemnity costs in the amount of $290,297 and $114,512 for disbursements. The defendant submitted that no costs should be awarded to either party because “neither party was truly successful at trial because the defendant will pay the plaintiff who will in turn have to pay various assignees.” Further, the defendant maintained that given the small amount of damages awarded by the jury, the trial should have been commenced in Small Claims Court and the court has jurisdiction to decline to award any costs pursuant to Rule 57.05(1).13
In assessing costs, Justice Mandhane pointed out the court’s broad discretion when awarding costs pursuant to section 131(1) of the Courts of Justice Act and further considered the various factors set out in Rule 57.01(1) of the Rules, including the result at trial, offers to settle exchanged between the parties, the principle of indemnity, the amount that the unsuccessful party could reasonably expect to pay, the complexity and importance of the matter, the conduct of any parties during the litigation, as well as any unnecessary steps.14 Further, while Justice Mandhane found that the “case was certainly not a slam dunk for the plaintiff”, she agreed with the plaintiff that she was more successful than the defendant at trial and disagreed with the defendant’s position that the plaintiff’s damages for past income loss should be reduced to $0 for the purposes of costs analysis.15
When assessing costs, Justice Mandhane emphasized that success must be determined relative to the parties’ positions prior to trial. In this regard, Justice Mandhane relied on Wray v. Pereira, for the following principle:
As for costs, for her success at trial, the plaintiff requested her partial indemnity costs in the amount of $290,297 and $114,512 for disbursements. The defendant submitted that no costs should be awarded to either party because “neither party was truly successful at trial because the defendant will pay the plaintiff who will in turn have to pay various assignees.” Further, the defendant maintained that given the small amount of damages awarded by the jury, the trial should have been commenced in Small Claims Court and the court has jurisdiction to decline to award any costs pursuant to Rule 57.05(1).13
In assessing costs, Justice Mandhane pointed out the court’s broad discretion when awarding costs pursuant to section 131(1) of the Courts of Justice Act and further considered the various factors set out in Rule 57.01(1) of the Rules, including the result at trial, offers to settle exchanged between the parties, the principle of indemnity, the amount that the unsuccessful party could reasonably expect to pay, the complexity and importance of the matter, the conduct of any parties during the litigation, as well as any unnecessary steps.14 Further, while Justice Mandhane found that the “case was certainly not a slam dunk for the plaintiff”, she agreed with the plaintiff that she was more successful than the defendant at trial and disagreed with the defendant’s position that the plaintiff’s damages for past income loss should be reduced to $0 for the purposes of costs analysis.15
When assessing costs, Justice Mandhane emphasized that success must be determined relative to the parties’ positions prior to trial. In this regard, Justice Mandhane relied on Wray v. Pereira, for the following principle:
Where a defendant insurer plays “hardball” by offering zero prior to trial rather than even a modest sum, it leaves the plaintiff in a bind: Either she has to abandon her claim entirely and face a claim for costs or take the case to trial at great cost. As stated by the McKelvey J. in Wray, at para 12: “In deciding not to make any offer, the defence was setting a clear demarcation line or a ‘line in the sand’ which can be used to identify success or failure in an action.” Having set a line in the sand, the Defendant must accept that she lost on her own measure.16
[Emphasis added]
[Emphasis added]
Accordingly, it appears that the defendant’s decision to not make a reasonable settlement offer trumped considerations on proportionality in Justice Madhane’s decision on the quantum of damages in this case. In this regard, Justice Mandhane found that “proportionality is not determinative of my ultimate decision on quantum because it was the defendant’s unreasonable decision not to make any pre-trial offers that effectively necessitated the matter going to trial.”17 Justice Madhane unequivocally stated that there was no doubt that the trial and the associated costs could have been avoided had the defendant made a reasonable offer to settle.18
Relying on prior decisions in Persampieri v. Hobbs, where Aviva was also the defending insurer, and Corbett v. Odorico,19 Justice Madhane highlighted the point that a strict application of the proportionality principle could significantly decrease the plaintiff’s claim for costs and risk rewarding a defendant who engages in “bully tactics”.20 For example, the defendant’s decision not to make an even modest offer early on in the litigation in light of the plaintiff’s evidence regarding past income loss stemming from her injuries, which the jury ultimately accepted, was unreasonable since the defendant would have been aware of this evidence well before trial. Further, the defendant’s strategy to not offer the plaintiff any monetary compensation and force the matter to a jury trial was highly wasteful of court and public resources. On this point, Justice Madhane particularly noted that the defendant’s “aggressive litigation strategy reflected a knee-jerk reaction” which failed to consider the cost to the public when deciding on how to proceed with the litigation.21
For these reasons, the court found that it would be unfair to unduly shave plaintiff’s costs based solely on the proportionality factor (reasonableness of costs ordered relative to the amount awarded). Despite the plaintiff’s modest recovery at trial, Justice Madhane ordered that the defendant bear the costs of its aggressive litigation strategy and pay $300,000 to the plaintiff for costs.
In a similar fashion, in Parker v. Kitchener, Justice Taylor considered the parties’ efforts to resolve the matter and the reasonableness of their offers when assessing costs following trial arising from a personal injury case involving a plaintiff who sued the City of Kitchener from failing to maintain sidewalks. Specifically, Justice Taylor noted the ways in which parties and their counsel “lost all perspective about this case”. In particular, Justice Taylor pointed out that the defendant made no meaningful attempt to resolve the case, which resulted in staggering costs incurred on part of both parties ($80,000 for the defendant’s costs and $69,269 for the plaintiff’s costs). In Justice Taylor’s view, these costs amounts were not proportional to the damages at stake and the low complexity of the issues.22 In addition, Justice Taylor’s costs decision highlighted the fact that the parties’ settlement offers did not attract Rule 49 consideration. While the plaintiff’s offer was for more than double the amount awarded, the defendant only offered a nominal amount of $2,000, inclusive of costs. Although the defendant had made an offer to consent to a dismissal without costs, Justice Taylor stated that this type of offer was not “a meaningful attempt to compromise the claim”.23 In the end, Justice Taylor awarded the plaintiff $15,000, inclusive of disbursements.
In sum, this line of recent cases demonstrate that the courts are increasingly scrutinizing the “no liability position” and/or a without costs dismissal settlement offer made by defendants as an unrealistic approach to litigating cases because such positions fail to acknowledge the risks and uncertainties inherent to litigation. Based on a close reading of the abovementioned cases, it appears that the courts are reminding parties and their counsel that very few disputes are free from risk and that even strong defences to potential liability and damages must account for a degree of potential liability or a higher damages award if proceeding to trial. Another key takeaway from these cases is that courts can award costs which exceed the damages awarded, which should alert parties to the importance of realistically evaluating the strength of one’s case early on and that failing to do so can lead to high adverse costs consequences, even in situation where the damages claim is modest.
Lastly, counsel acting for insurers should be cognizant of the risk that courts may interpret a no liability position or a without costs dismissal offer to settle as characteristic of a bullying litigation strategy, driven by protracted litigation and high legal costs used to pressure plaintiffs from pursuing their claims. Although frivolous and vexatious claims are on the rise – and a dismissal without costs as an offer may be appropriate where a claim clearly lacks merit – counsel should exercise a degree of caution and consider carefully whether such an offer is truly suitable in the specific circumstances of each case, rather than relying on it prematurely at the outset of a case without first conducting a proper assessment of the client’s position alongside litigation risk.
In other cases, courts have refused to award costs outright even if the defendant was mostly successful at trial and more successful than its Rule 49 offer to settle. For instance, the case of Jones v. Keay, involved plaintiffs suing their lawyer for faulty advice on a residential purchase transaction. It was admitted that “the lawyer owed a duty of care to his clients, the plaintiffs, and that a lawyer fell below the standard of care required of a prudent lawyer in the circumstances, specifically, in the faulty advice given in relation to the Planning Act consent stamps and the implications this may have had on the ability to sever a cottage property which they purchased.” The focus of this litigation was on whether there had been a loss resulting from the lawyer’s actions.24
On the issue of costs, the court refused to award costs to the lawyer defendant who was the successful party in the proceeding because the defendant conceded that he had breached the standard of care although the court determined that there was little loss stemming from the said breach. Notably, Justice Christie considered the lawyer’s breach of standard of care in determining a proportionate costs award and found that there was no question that the lawyer’s actions led to unrealized expectations on the part of the plaintiffs. In this regard, Justice Christie concluded that “costs awards have the ability to send a message – both to the parties and the public at large” and that any costs awarded to the benefit of the lawyer defendant would suggest that the court condones the actions of the lawyer, which would send the wrong message.25
Similarly, Justice J.R. Macfarlane in Ingratta v. McDonald, noted the finding at trial of the defendant’s negligence in causing a car collision which resulted in various physical and psychological injuries to the plaintiff in the context of assessing costs. The action was commenced under Rule 76 of the Rules. The plaintiff sought the maximum amount of claim for $200,000 in damages, but the court provisionally assessed her general damages at $50,000 prior to any statutory deductible.26
In this case, the defendant made two offers to settle in writing before trial: 1) a time limited dismissal of the action without costs, with escalating costs payable by the plaintiff thereafter; and 2) defendant offered to pay the plaintiff $1,094.75 for disbursements in exchange for a release with no timeframe for acceptance. Apart from offering to pay a small amount towards the plaintiff’s disbursements, the defendant never made any offer to pay anything for the injuries he caused even at mediation. The plaintiff made a Rule 49 offer to settle for $150,000 plus interests and costs.27
In considering the various factors per Rule 57.01, the court emphasized that both parties had failed to engage in reasonable settlement efforts and highlighted the disproportionate legal expenses relative to the scope and complexity of the dispute. In particular, Justice Macfarlane criticized the defendant’s strategy for spending nearly $125,000 in defending the action, which was $50,000 more than it could possibly recover in costs. Justice Macfarlane further clarified that the claim was brought for injuries that were clearly caused by the defendant. In Justice Macfarlane’s view, the defendant’s level of spending reflected “a scorched earth approach to litigation that is anathema to resolution of disputes.”28 Lastly, Justice Macfarlane pointed out that neither party made serious efforts to resolve the case on “any kind of economically rational basis,” and given the “significant risk for both parties surrounding the threshold issues, it would have been sensible for the plaintiff to make a more reasonable offer to settle, and for the defendant to offer some amount of compensation for the injuries he caused.”29
In sum, the cases of Jones v. Keay and Ingratta v. McDonald underscore that success at trial does not guarantee a favourable costs award, especially in cases where a party has admitted to a breach of a standard of care or responsibility for injuries caused to the plaintiff. Both cases highlight the importance of proportionality in determining costs and the fact that courts are assessing the broader implications of awarding costs, not only success at trial. Courts appear to be increasingly scrutinizing a party’s litigation strategy as well as the related costs, especially in cases where the party has failed to make reasonable efforts to settle. It is clear that courts expect parties to make genuine efforts to resolve the matter, and a failure to do so can justify a denial or reduction of costs even for a successful party.
These recent cases highlight several critical takeaways for litigants and their counsel regarding the need to realistically assess litigation risks and make reasonable offers to settle in a timely and good-faith manner. In order to mitigate the risk of adverse cost awards, counsel should conduct up-front, early and realistic case assessments and consider how litigation strategy can be tailored to the merits and complexity of a particular matter. While no liability positions and without costs dismissal offers have a role to play in rooting out meritless claims, refusing to engage meaningfully in settlement discussions may be interpreted as tactical gamesmanship and a failure to realistically assess litigation risks by the courts. In this regard, defence lawyers will need to strategize about how Rule 49 settlement offers can be used strategically and in a way that deems them proportional to the complexity of individual cases. In similar respects, the timing of the Rule 49 offer will also be an important consideration of litigation strategy. Litigation is a dynamic process. As new evidence comes to light through discovery and new facts are uncovered, this can materially affect the merits and risks of a case. For this reason, counsel should reassess the strengths and weaknesses of their client’s positions regularly and be prepared to adjust settlement offers accordingly as cases evolve. Counsel and parties alike should be aware of the risk of adverse cost consequences if their settlement offers no longer reflect the realities of a case.
In conclusion, the implications of these recent trial costs decisions are particularly significant for defendants in litigation. Courts appear to be increasingly examining the reasonableness of a defendant’s litigation strategy when assessing costs. While this shift can encourage settlement efforts among parties and discourage unreasonable tactics that can unnecessarily prolong litigation, it also serves as an important reminder for counsel that resolution of cases requires all parties (including insurers instructing defence counsel) to make informed and realistic assessments of litigation risks before recommending particular settlement positions.
In considering the various factors per Rule 57.01, the court emphasized that both parties had failed to engage in reasonable settlement efforts and highlighted the disproportionate legal expenses relative to the scope and complexity of the dispute. In particular, Justice Macfarlane criticized the defendant’s strategy for spending nearly $125,000 in defending the action, which was $50,000 more than it could possibly recover in costs. Justice Macfarlane further clarified that the claim was brought for injuries that were clearly caused by the defendant. In Justice Macfarlane’s view, the defendant’s level of spending reflected “a scorched earth approach to litigation that is anathema to resolution of disputes.”28 Lastly, Justice Macfarlane pointed out that neither party made serious efforts to resolve the case on “any kind of economically rational basis,” and given the “significant risk for both parties surrounding the threshold issues, it would have been sensible for the plaintiff to make a more reasonable offer to settle, and for the defendant to offer some amount of compensation for the injuries he caused.”29
In sum, the cases of Jones v. Keay and Ingratta v. McDonald underscore that success at trial does not guarantee a favourable costs award, especially in cases where a party has admitted to a breach of a standard of care or responsibility for injuries caused to the plaintiff. Both cases highlight the importance of proportionality in determining costs and the fact that courts are assessing the broader implications of awarding costs, not only success at trial. Courts appear to be increasingly scrutinizing a party’s litigation strategy as well as the related costs, especially in cases where the party has failed to make reasonable efforts to settle. It is clear that courts expect parties to make genuine efforts to resolve the matter, and a failure to do so can justify a denial or reduction of costs even for a successful party.
Key Takeaways & Best Practices for Defence Lawyers
These recent cases highlight several critical takeaways for litigants and their counsel regarding the need to realistically assess litigation risks and make reasonable offers to settle in a timely and good-faith manner. In order to mitigate the risk of adverse cost awards, counsel should conduct up-front, early and realistic case assessments and consider how litigation strategy can be tailored to the merits and complexity of a particular matter. While no liability positions and without costs dismissal offers have a role to play in rooting out meritless claims, refusing to engage meaningfully in settlement discussions may be interpreted as tactical gamesmanship and a failure to realistically assess litigation risks by the courts. In this regard, defence lawyers will need to strategize about how Rule 49 settlement offers can be used strategically and in a way that deems them proportional to the complexity of individual cases. In similar respects, the timing of the Rule 49 offer will also be an important consideration of litigation strategy. Litigation is a dynamic process. As new evidence comes to light through discovery and new facts are uncovered, this can materially affect the merits and risks of a case. For this reason, counsel should reassess the strengths and weaknesses of their client’s positions regularly and be prepared to adjust settlement offers accordingly as cases evolve. Counsel and parties alike should be aware of the risk of adverse cost consequences if their settlement offers no longer reflect the realities of a case.
In conclusion, the implications of these recent trial costs decisions are particularly significant for defendants in litigation. Courts appear to be increasingly examining the reasonableness of a defendant’s litigation strategy when assessing costs. While this shift can encourage settlement efforts among parties and discourage unreasonable tactics that can unnecessarily prolong litigation, it also serves as an important reminder for counsel that resolution of cases requires all parties (including insurers instructing defence counsel) to make informed and realistic assessments of litigation risks before recommending particular settlement positions.
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1 RSO 1990, c C.43.
2 Boucher v. Public Accountants Council for the Province of Ontario, 2004 CanLII 14579 (ONCA), at para. 26.
3 R. R.O. 1990, Reg. 194: Rules of Civil Procedure, Rule 57.01.
4 Fong v. Chan, 1999 CanLII 2052 (ONCA), at para. 22.
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5 Rules of Civil Procedure Chapters, Pre-Trial Procedures, Rule 49.01-.09 – Offer to Settle, 1st ed, 2021 CanLIIDocs 2041.
6 K.K. v. K.W.G., 2008 ONCA 489 (CanLII).
7 Lawless v. Joanovits, 2024 ONSC 1561, at para. 7.
8 Lawless v. Joanovits, 2024 ONSC 1561 at paras. 8- 9.
9 Boucher v. Public Accountants Council for the Province of Ontario, 2004 CanLII 14579 (ONCA) and Davies v. Clarington (Municipality) et al., 2009 ONCA 722 (CanLII).
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10 Lawless v. Joanovits, 2024 ONSC 1561 at paras. 9-11.
11 Lawless v. Joanovits, 2024 ONSC 1561 at para 14.
12 Lawless v. Joanovits, 2024 ONSC 1561 at para. 16.
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15 Barry v. Ananatharajah, 2024 ONSC 1267 (CanLII) at para. 18.
16 Wray v. Pereira, 2019 ONSC 3354 (CanLII), at paras. 11-12.
17 Barry v. Ananatharajah, 2024 ONSC 1267 (CanLII) at para. 23.
18 Barry v. Ananatharajah, 2024 ONSC 1267 (CanLII) at para. 23.
19 Persampieri v. Hobbs, 2018 ONSC 368 at paras. 93-108, and Corbett v. Odorico, 2016 ONSC 2961at paras. 19-20.
20 Barry v. Ananatharajah, 2024 ONSC 1267 (CanLII) at para. 23.
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21 Barry v. Ananatharajah, 2024 ONSC 1267 (CanLII) at paras. 27-28, 31.
22 Parker v. Kitchener, 2024 ONSC 2282 at para. 7.
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24 Jones v. Keay, 2024 ONSC 1139 at para. 1.
25 Jones v. Keay, 2024 ONSC 1139 at paras. 6-7, 10.
26 Ingratta v. McDonald, 2024 ONSC 1349 at para. 1.
27 Ingratta v. McDonald, 2024 ONSC 1349, at para. 6.
28 Ingratta v. McDonald, 2024 ONSC 1349 at para. 8(k).
29 Ingratta v. McDonald, 2024 ONSC 1349 at para. 8-9.
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