In this recently released decision, the appellate court upheld the trial judge’s cost award requiring the defendant to pay over a quarter million dollars in legal costs to a personal injury claimant who recovered a paltry $16,160.50 in damages following a three-week motor vehicle personal injury jury trial. Indeed, the cost award was $300,000.
This is not the first lower court decision where a trial judge awarded significant costs to a plaintiff with nominal recovery: see for example Brophy v. Harrison, 2019 ONSC 4377, where just over $275,000 was awarded to a plaintiff who recovered just under $18,000, or Persampieri v. Hobbs, 2018 ONSC 368 which had a very similar outcome.
However, to date, there has not been a detailed review by the appellate court on such cost awards, until now. And this cannot be trivialized, because a lot was at stake. On the one hand, awarding hundreds of thousands of dollars in legal costs for Small Claims Court damage type awards seems wholly disproportionate. Is a defendant in this situation entitled to assert that they were ultimately successful (ie: reducing a $1M claim to almost zero), or that with damages assessed within the monetary jurisdiction of the Small Claims Court or the Simplified Rules, costs should not only be denied to the plaintiff, but paid to the defendant? On the other hand, if a defendant effectively took the position throughout that the case was worth not even a dollar, shouldn’t that defendant not be required to pay a hefty percentage of the plaintiff’s legal fees associated with defeating the defendant’s position (even if only marginally)?
Which of these two arguments would prevail upon appellate review was the burning question. The answer was not good for defendants who take unjustified hardline settlement positions. In this case, the defendant never made a monetary offer to settle prior to trial, and the jury was asked by the defendant to award zero dollars under each head of damages.
The appellate court effectively dispensed the proportionality argument on the basis that the cost award “was proportionate to the importance and complexity of the issues, and to the amount involved in the litigation.” (at para 44). As “long as trial judges have turned their minds to the issue of proportionality either expressly or impliedly, deference is owed to the costs award absent an error in principle or a decision that is plainly wrong.” (at para 46).
The definition of “success” was hotly debated in this appeal, because the defendant argued that it was successful in bringing a million dollar claim down to almost nothing, and that the trial judge was wrong to define success vis-à-vis their pre-trial unwillingness to make a monetary offer to settle. Yes, the plaintiff was more “successful” than a zero offer to settle, but the defendant argued that this was not the test: the test for success should just be about what was claimed juxtaposed against the outcome, and on this basis, the defendant was clearly successful in reducing a million dollar claim to almost pennies.
Although it is clear from the trial judge’s cost ruling that she did take into account the Defendant’s pre-trial negotiation strategy as a grounds for assessing “success,” the appellate court pointed out that this was just but one factor that the trial judge looked at. For example, the trial judge felt that the plaintiff was successful because she convinced the jury to reject the defendant’s plea that zero dollars should be awarded for each head of damages. The trial judge also concluded that the available evidence, leading into trial, made it likely that the plaintiff was going to be entitled to some damages – this is when the trial judge turned to assessing the defendant’s pre-trial settle position.
As such, the appellate court concluded that there was no error in principle. It would be an error in principle had the trial judge simply concluded that the plaintiff was entitled to costs solely because the defendant failed to make a monetary offer to settle before trial. The trial judge assessed success on a multitude of other factors, and only turned to the lack of a monetary offer after determining that this position, carried throughout the trial, was not reasonable.
The strong message from the appellate court is:
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- “a defendant is not required to make any settlement offers, but if that is the posture adopted, it must live with the consequences of that posture if its decision does not prove to have been a reasonable one.” (at para 41)
- Citing with approval paragraph 21 of Lenet (Total Business Solutions) v. Dorfin Distribution Inc., 2008 CanLII 6423 (Ont. S.C.), “Inherent in every lawsuit is the risk that, if the plaintiff succeeds in recovering even a nominal amount, a defendant may be liable to pay costs to the plaintiff.” (para 41)
To this end, the Court of Appeal, in my opinion, went out of their way to make the following references in order to discourage defendants from offering zero dollars to a personal injury litigant in cases where some liability and damage exposure exists:
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- “… proportionality should not be invoked to undercompensate a plaintiff for costs legitimately incurred. A pattern of such outcomes would result in a denial of access to justice and it would tend to ‘encourage those resisting legitimate but modest claims to take unreasonable positions, the logic being that any exposure to costs will be limited because of the size of the claim regardless of the time and expense necessary to extract a judgment’: Aacurate, at para. 16.” (at para 48)
- “The trial judge did not rely on s. 258.5 of the Insurance Act in her reasons … (however,) … the Rules of Civil Procedure address costs and s. 258.5 of the Insurance Act addresses costs in the context of a motor vehicle action defended by an insurer … (and when)…read together, these provisions should not be permitted to allow an insurer to reap the benefits of the principle of proportionality to escape liability for costs in the face of a modest award. The legislation lends support to the proposition that the principle of proportionality will not and should not invariably triumph when a defending insurer has opted to take the risk of making no monetary offer of settlement. It is of course not required by law to make such an offer, but a party should appreciate that it does take a risk on costs in adopting such a posture. The principle of proportionality is not a perpetual umbrella that protects against a shower of costs legitimately incurred by a plaintiff and reasonably expected by a defending insurer.” (at para 59).
Barry v. Anantharajah, 2025 ONCA 603
https://www.canlii.org/en/on/onca/doc/2025/2025onca603/2025onca603.html