The Toll of the Tough Road
It is well known that in Ontario, the Superior Court of Justice holds broad discretion when awarding costs.[1] In exercising this discretion, the court may consider, in addition to the result of the hearing, a range of factors including offers to settle, the principles of indemnity, the amount an unsuccessful party could reasonably expect to pay at the step of the proceeding for which costs are being fixed, the complexity and importance of the issues, and the conduct of the parties throughout the litigation.[2]
Generally, the effect of these principles has been an implicit understanding among litigators that costs awards are proportional to the monetary outcome achieved by the successful party. Put simply, larger cases tend to attract larger costs awards, and vice versa. Indeed, this unwritten rule often underpins defence counsel’s risk assessments when advising clients in advance of a hearing.
In Barry v. Anantharajah, 2025 ONCA 603, however, the Court of Appeal upheld a $300,000 costs award arising from a jury trial where the plaintiff recovered just over $16,000 in damages. In short, Jacqueline Barry was stuck by the defendant motor vehicle while crossing at a pedestrian walkway and sued the driver, Punithavathi Anantharajah, for over $1,000,000 in damages for pain and suffering, loss of income, future care costs, and housekeeping expenses.
Shortly before the trial, the plaintiff made a settlement offer for $500,000 in damages plus costs and disbursements. The defendant served a counter-offer for a dismissal of the action without costs. The defendant made no other settlement offers before or during the trial.
At the jury trial, both liability and damages were contested, with the defence conceding liability part-way through the trial. Causation and damages were the central issue of the trial. The jury returned a verdict awarding the plaintiff $21,166 in general damages, $26,000 in special damages for past income loss, and $0 for future care.
The plaintiff was also found 15% contributorily negligent and the trial judge found that the plaintiff’s injuries did not meet the statutory threshold since she failed to establish that she had sustained a permanent, serious impairment of an important physical, mental, or psychological function due to the accident pursuant to s 267.6 of the Insurance Act.
After deductions for contributory negligence and the statutory deductible, the plaintiff’s net recovery was $16,160 – well below the threshold for an action brought under the Simplified Procedure and a fraction of the prayer for relief.
Despite the modest damages award, the trial judge awarded the plaintiff $300,000 in costs.
Issues on Appeal
The defendant appealed the costs award, arguing that the trial judge erred in two regards:
- In finding that the plaintiff was “more successful”; and
- In awarding costs that were wholly disproportionate to the damage award.
Standard of Review
Justice Pepall, writing for the court, reiterated that costs awards are “quintessentially discretionary”[3] as per s. 131(1) of the Courts of Justice Act and that appellate courts should intervene only where there is an error in principle or the award is plainly wrong. This deference recognizes the advantage that lower courts have from firsthand observation of the evidence.
Analysis
The Court rejected the argument that the trial judge misapplied the legal test for finding that the respondent was successful. The respondent was found to be more successful, as the appellant had asked the jury to award the respondent nothing for past income loss, a position the jury declined to accept.
The Court found that while defendants are not required to make settlement offers, they must then live with the consequences of that litigation posture if its decision proves to be unreasonable. Crucially, the Court specified that it would be an error in principle for a trial judge to award costs exclusively because the appellant failed to make a monetary settlement offer.
However, even if that concern arose, the trial judge’s reasons disclosed independent and sufficient bases for her decision. Namely, that the respondent was successful at trial, the appellant had refused to admit any degree of liability prior to trial, and that the case raised issues on outdated stereotypes relating to mental health injuries.
Turning to proportionality, the Court conceded that the costs substantially exceeded the recovery, but affirmed that the costs order was proportionate to the importance and complexity of the issues, and to the amount involved in the litigation. The Court rejected the argument that the costs award should be overturned on the basis of disproportionality. It noted specifically that there was some recovery by the respondent, and that the trial judge found that the appellant’s unreasonable refusal to make a monetary offer required that this complex and important matter go to trial, resulting in voluminous medical and employment records, and extensive mental and health-related evidence.
The Court recognized that while proportionality should be considered, it should not be overemphasized to the detriment of other equally relevant factors. Such an outcome would result in a denial of access to justice, and would tend to encourage defendants to resist modest claims unreasonably, providing certainty that their costs exposure would remain minimal.
The Court referenced s 258.5 of the Insurance Act, saying that an insurer should not be permitted to “reap the benefits of the principle of proportionality to escape liability for costs in the face of a modest award”.[4]
Disposition
The Court upheld the trial judge’s cost award and ordered additional costs to the respondent in the amount of $15,000 for the appeal.
Takeaways
This decision is a pointed reminder that strategic risk management must sit at the centre of trial preparation. It reinforces the Court’s dual objectives of promoting fairness and discouraging unnecessarily aggressive litigation tactics.
Costs awards are not a mechanical exercise, and in appropriate cases, can eclipse the damages themselves. While proportionality remains a guiding principle, it is not a safe harbour against an otherwise justified cost award.
Settlement offers matter, even in cases that appear modest or nominal. Adopting a “hard ball” approach, drawing a “line in the sand” and offering nothing before trial significantly heightens the risk of serious cost consequences. The takeaway is clear: a formal monetary offer, however modest, should almost always be seriously considered in advance of trial.
Plaintiffs’ counsel similarly should not assume that “success” at trial will automatically translate to a favourable cost award. The Court has signaled it will look beyond the headline result and scrutinize how the case was litigated. Overreaching claims, rigid settlement positions, or the rejection of reasonable defence offers can erode (and possibly even reverse) an otherwise expected entitlement to costs.
Proportionality cuts both ways. Advancing inflated damages claims, pursing marginal issues, or adopting an all-or-nothing settlement posture may expose plaintiffs to adverse cost consequences, particularly where the recovery falls short of what was reasonably achievable earlier in the litigation.
In short, plaintiffs’ counsel must approach settlement with the same strategic discipline as defence counsel. Early, realistic offers and measured litigation conduct are not merely tactical choices – they are critical risk-management tools in protecting clients from unintended costs exposure.
[1] Courts of Justice Act, RSO 1990, c C.43, s 131.
[2] Rules of Civil Procedure, RRO 1990, Reg 194, s 57.01.
[3] Barry v. Anantharajah, 2025 ONCA 603 (CanLII), at para 28.
[4] Barry v. Anantharajah, 2025 ONCA 603 (CanLII), at para 58.