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Keeping a Party in an Action Can (and Sometimes Should) Lead to Paying Costs

By Jordan Petruska

In Zaza v. Toronto, 2024 ONSC 2931, the defendant, Beasley Enterprises Limited was ordered to pay costs to the co-defendant, The City of Toronto for keeping them in the action and failing to conform to the defence and indemnity provisions of their licence agreement.


This action arose from a plaintiff injuring herself at Centre Island in January 2017. As a result of the incident, the plaintiffs commenced an action against the City of Toronto (“the City”) as the owner and occupier of the property and Beasley Enterprises Limited (“Beasley”) as the owner/operator of Centreville.

At the outset, the City argued that Beasley held jurisdiction over the loss location and was responsible for maintaining the area of the incident. The City’s arguments were supported by the provisions of the license agreement that was in place at the time of the accident, which required Beasley to indemnify and hold the City harmless in respect of any claims arising out of Beasley’s operations in the incident area.

Pursuant to the licence agreement, Beasley was required to release and discharge the City from all losses, costs, proceedings, actions, claims, and demands arising from the licensed property. Beasley was also required to assume the City’s defence.

During the first two years of the action, the City made several demands to Beasley to assume the City’s defence and to release the City from the action. Beasley ignored the City’s demands and filed their defence and crossclaim against the City, taking the position that the City was responsible for maintenance of the area in question and should be liable for the plaintiffs’ injuries.

In response, the City served a Rule 49 offer to all parties to be released from the action on a without costs basis. After examinations for discovery were completed, the City submitted a second dismissal offer to be released without costs. The offer was made to prevent the City from incurring further expenses defending the action.

The action ended up settling with Beasley contributing the settlement funds to the plaintiffs. However, the City sought its costs of defending the action. The City made several offers to settle their issue of costs, which were not accepted by the Plaintiffs or Beasley.

As the action could not resolve entirely, the plaintiffs brought a motion for leave to discontinue the action, without prejudice to the City’s right to seek costs of the action and the crossclaim. In preparation of the motion, the City filed a bill of costs which outlined their incurred costs of defending the action in the amount of $21,193.28 on a partial indemnity basis and $31,538.20 on a substantial indemnity basis. The City was seeking costs primarily from Beasley.


Whether an action is treated as dismissed for delay or discontinued, the court has complete discretion to fashion costs award[1]. In order to exercise its discretion on costs in the face of a discontinuance, the Court must analyze the facts and circumstances that gave rise to the action[2]. The Court must also consider whether the plaintiffs and defendants had some justification for starting their action and crossclaim and whether, and when, it became unreasonable to continue.

Beasley argued that costs cannot be awarded unless there is a determination of liability. The Court disagreed with Beasley as their argument went against the logic of rule 23.05, which provides for the right to seek costs of a discontinued action.

The Court referred to Ferrari v. Hanse, 2004 CanLII 52613 (ON SC), where Master Dash noted that “any person has a right to bring parties into an action (by naming them as defendants) or to keep them in the action, but should it be determined by judgment of the court or by agreement of the parties that those defendants are not liable, the party responsible for bringing or keeping them in the action should in most circumstances be responsible for their costs.”[3]

The Court accepted that it is normal practice of defence counsel to proceed through discoveries before admitting liability in personal injury cases and that it is common for co-defendants to agree to be let out of the action without costs. However, Jolley J. stated that kind of practice would not insulate the responsible party from paying costs to the innocent parties who are not willing to absorb their own costs in order to be let out of an action.

In the case at bar, Beasley could have determined the apportion of liability between them and the City during the beginning of this action. The plaintiffs provided clear evidence of the precise location of the accident. Beasley’s evidence on discovery was that it did not find the area of accident to be the responsibility of the City to maintain. Beasley ultimately walked away from its position that the City was liable by discontinuing its crossclaim against the City.

In regards to the licence agreement between the City and Beasley, Jolley J. found that Beasley failed to adhere to the indemnification and hold harmless provisions that it had entered into with the City. As a result, the City was required to incur the costs of retaining counsel and separately defending the action, contrary to the purpose of the indemnity agreement.

The Court also acknowledged the City’s numerous and reasonable offers throughout the action which demonstrated its good faith attempts to terminate its involvement with little or no costs to the plaintiffs or to Beasley. While Beasley did not bring the City into the action, its refusal to either acknowledge the likelihood, or even risk, of responsibility for the area or to indemnify the City effectively meant that the plaintiffs could not let the City out of the action and the City unnecessarily continued to incur costs.

The Court ultimately ordered Beasley to pay the City partial indemnity costs in the amount of $20,689.85.

Take Away

It is often that insurers and counsel are involved in an occupiers’ liability action where there is another defendant, and a service/maintenance agreement was in place which may contain a duty to defend and indemnity provisions.

This case serves as an educative tool to both counsel and insurers on the importance to promptly assess liability and jurisdiction issues at the onset of an action and to adhere to the terms of a given service/maintenance agreement to avoid the risk of being ordered to pay costs to another party.  

[1] N12 Consulting Corp. v. Hulfordi, 2012 ONSC 7306, at para 15.

[2] Carriere Industrial Supply Limited v. 2026227 Ontario Inc., 2013 ONSC 1016, at para 9.

[3] Ferrari v. Hanse, 2004 CanLII 52613 (ON SC), at para 10.