Unlike jurisdictions where each side is expected to pay its own lawyer regardless of the outcome, Ontario follows what is commonly called a “loser pays” or cost-shifting system.
The Short Answer: In most Ontario civil lawsuits, the successful party may recover a portion of their legal costs from the unsuccessful party. However, losing a lawsuit does not automatically mean paying 100% of the other side’s lawyer’s bill. Ontario courts have discretion over costs and consider the outcome, settlement offers, the parties’ conduct, the complexity of the case, and other relevant factors.
Understanding this potential cost exposure is an important part of evaluating whether to start, defend, or settle a civil lawsuit.
How Does the “Loser Pays” Rule Work in Ontario?
In Ontario civil litigation, the court will typically address legal costs after determining the outcome of the case.
The successful party may be awarded some of the legal fees and expenses they incurred in pursuing or defending the lawsuit. These expenses can include lawyer’s fees as well as disbursements, such as court filing fees, expert fees, and other necessary litigation expenses.
This does not mean that the successful party automatically receives everything they spent.
Ontario courts have broad discretion when deciding whether costs should be awarded and, if so, how much. Rule 57 of Ontario’s Rules of Civil Procedure identifies a number of factors the court may consider when making that decision.
Does the Losing Party Pay All of the Winner’s Legal Fees?
Usually, no.
A successful party in an Ontario lawsuit should not assume that the opposing party will be ordered to reimburse their entire legal bill.
You may sometimes hear that a successful party can recover approximately 50% to 60% of their legal fees on a partial indemnity basis. While that can be a useful general estimate when discussing litigation costs, it is not a guaranteed percentage.
The amount ultimately awarded depends on the circumstances of the particular case and the court’s assessment of what is reasonable.
This distinction is important when deciding whether litigation makes financial sense. Even if you have a strong case, you should consider the possibility that some of your legal expenses will remain your responsibility.
What Are Partial and Substantial Indemnity Costs?
Ontario litigation commonly refers to costs as being awarded on either a partial indemnity or substantial indemnity basis.
Partial indemnity costs are the more common level of costs awarded to a successful litigant. They provide reimbursement for part, rather than all, of the successful party’s reasonable legal costs.
Substantial indemnity costs represent a higher level of cost recovery. They can arise in certain circumstances, including as a consequence of a qualifying settlement offer under Rule 49.
The important point for litigants is that a costs award and your actual lawyer’s bill are two different things. The amount you spend pursuing or defending a lawsuit will not necessarily be the amount the opposing party is ordered to pay.
What Does the Court Consider When Awarding Costs?
A judge does not look only at who won and who lost.
Under Rule 57 of the Rules of Civil Procedure, the court may consider factors including:
- the amount claimed compared with the amount actually recovered;
- the complexity and importance of the issues;
- whether a party’s conduct unnecessarily lengthened the litigation;
- whether unnecessary or improper steps were taken;
- whether a party unreasonably refused to admit something that should have been admitted;
- written settlement offers; and
- other circumstances relevant to determining a fair costs award.
These factors give Ontario courts considerable discretion. The Rules even provide that, in an appropriate case, costs may be awarded against a party that was ultimately successful. This is one reason the parties’ conduct throughout the litigation can matter in addition to the final result.
How Can a Rule 49 Settlement Offer Affect Legal Costs?
Settlement offers can have a significant effect on costs in an Ontario lawsuit.
Under Rule 49 of Ontario’s Rules of Civil Procedure, a party can make a formal settlement offer. If the offer satisfies the requirements of the Rule and is rejected, the result ultimately obtained in court can lead to important cost consequences.
For example, when a plaintiff makes a qualifying Rule 49 offer and later obtains a judgment as favourable as or more favourable than that offer, the plaintiff may be entitled to partial indemnity costs up to the date the offer was served and substantial indemnity costs after that date, unless the court orders otherwise.
A qualifying defendant’s offer can also affect which party is entitled to costs after the date of the offer.
For this reason, settlement offers are not simply about determining how much someone is willing to accept or pay. They can be an important part of the overall litigation strategy and potential financial outcome.
How Do Legal Costs Affect the Decision to Settle or Go to Trial?
Every lawsuit involves both legal risk and financial risk.
Before proceeding to trial, a plaintiff should consider the strength and potential value of the claim, the legal fees required to pursue it, and the possibility of an adverse costs award if the claim is unsuccessful.
A defendant faces similar considerations. Even where there is a strong defence, the cost of continuing litigation and the possibility of paying part of the plaintiff’s costs must be weighed against available settlement options.
This is one reason cost exposure should be evaluated throughout a lawsuit rather than only when trial approaches.
Powell Litigation’s Toronto civil litigation lawyers represent plaintiffs and defendants in civil and commercial disputes throughout Ontario. Understanding the potential costs, risks, and likely outcomes of a dispute can help clients make informed decisions about whether to litigate, negotiate, or pursue a resolution.
Frequently Asked Questions About Legal Costs in Ontario
Does the losing party always pay legal fees in Ontario?
No. While the successful party is often awarded costs, the court has discretion over whether costs are awarded and the amount. The outcome of the lawsuit is important, but it is not the only consideration.
How much of my legal fees can I recover if I win a lawsuit in Ontario?
There is no guaranteed percentage. Partial indemnity costs are intended to reimburse only a portion of reasonable legal costs. The amount awarded will depend on the circumstances of the case and the court’s discretion.
Can I have to pay the other side’s legal fees if I lose?
Yes. An unsuccessful plaintiff or defendant may be ordered to pay a portion of the successful party’s legal fees and disbursements in addition to paying their own lawyer.
What is a Rule 49 settlement offer?
A Rule 49 offer is a formal settlement offer made under Ontario’s Rules of Civil Procedure. If the offer meets the requirements of the Rule, rejecting it and then failing to achieve a more favourable result in court can have significant consequences for costs.
Should legal costs affect whether I settle a lawsuit?
Yes. Potential legal fees and adverse cost awards should be considered alongside the strength and value of the claim or defence. A civil litigation lawyer can assess these factors in the context of the specific dispute.
Speak With an Ontario Civil Litigation Lawyer
The “loser pays” rule is an important part of civil litigation in Ontario, but there is no simple formula for determining exactly how much one party will be required to pay another.
At Powell Litigation, our lawyers represent plaintiffs and defendants in civil disputes and provide practical advice about litigation strategy, settlement, and potential cost exposure. If you are considering starting a lawsuit or have been served with a claim, understanding these risks early can help you make better-informed decisions about how to proceed.