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Civil Litigation - Settlements - Effect of Offer on Costs. Barry v. Anantharajah
In Barry v. Anantharajah (Ont CA, 2025) the Ontario Court of Appeal considered the costs award in an MVA negligence case where, "(a)fter accounting for the jury’s finding of contributory negligence and the statutory deductible for general damages, the respondent’s damages award amounted to $16,160.50.". It dismissed a costs appeal, here from a trial judge award of "$300,000 consisting of $164,148.33 in fees, $21,339.29 for HST, and $114,512.38 in disbursements":[34] The trial judge properly identified the factors to be considered in an award of costs. She expressly made a finding that she agreed with the respondent that she was more successful than the appellant at trial. She stated that the appellant asked the jury to award the respondent nothing for past income loss, while the jury ended up awarding some damages under this head.
[35] However, the trial judge went on to state that “success must be determined relative to the parties’ positions prior to trial”. She considered that the appellant had played “hardball” by offering zero prior to trial rather than even a modest sum.
[36] As illustrated in both Bell Canada and Przyk, it is an error in principle to deny a successful defendant costs due to its refusal to make a pre-trial settlement offer, if that refusal proves to be reasonable. It will be reasonable, for example, where a claim is dismissed, thereby vindicating the defendant’s position. As Zarnett J.A. stated in Przyk, at para. 7: “The refusal of a party to offer a financial settlement before trial is also not a reason to deny that party costs where the refusal is proven reasonable by the verdict.”
[37] In Bell Canada, the trial judge erred in principle by relying on the defendant’s refusal to make an offer where the outcome of the litigation vindicated that refusal. In Bell, the plaintiff’s breach of contract action claiming $19 million was dismissed with the exception of an incidental award of $25,000 which the trial judge treated as “a non-recovery in any meaningful sense” and no party suggested otherwise. The trial judge denied both parties costs and, in refusing costs to the successful defendant, relied on its failure to make a settlement offer until nearly two years into the trial. Carthy J.A., writing for the court, was of the view that no award of costs should be made to the plaintiff. Although the plaintiff recovered a modest sum, he distinguished the case from the example of an assessment of damages in a personal injury case where $1 or $2 million is customarily claimed, or a case where liability is apportioned. In these examples, he reasoned that a trial was necessary to determine the issues of liability and assessment of damages. The trial judge erred in this breach of contract case by relying on the defendant’s failure to make a pre-trial offer as the basis for denying its costs against the plaintiff. Nor was he satisfied that there was an independent basis upon which the trial judge exercised his discretion to deny the defendant its costs.
[38] In Przyk, the plaintiff recovered nothing and Aviva’s decision not to make a monetary offer to settle was confirmed as reasonable by the result in the trial. “Although the absence of a reasonable settlement posture may influence the disposition of costs, when the result of the trial is known, what is reasonable is necessarily judged by that result”: at para. 28. However, as the case raised the novel issue of eldercare relied upon by the trial judge in his disposition on costs, there was an independent basis on which the award could be sustained.
[39] The appellant submits that the trial judge erred because, in finding that the respondent was successful, she applied the wrong test. Assessing success required her to consider the result, not whether the judgment exceeded the appellant’s offer. The appellant particularly focuses on the trial judge’s statement that success must be determined relative to the parties’ positions prior to trial.
[40] I do not accept that the trial judge focused solely on whether the judgment exceeded the appellant’s offer. She started by enumerating factors to be considered under r. 57.01(1). She then addressed success at trial. She expressly made a finding that the respondent was more successful than the appellant at trial. The appellant had asked the jury to award the respondent nothing for past income loss but the jury declined to do so. The trial judge then addressed the respondent’s assignments to the Ontario Disability Support Program and Ontario Works followed by a discussion of general and special damages, contributory negligence, and what must have been the jury’s acceptance of the appellant’s theory that the respondent was a “crumbling skull” plaintiff who would have experienced the ongoing psychological difficulties regardless of the accident.
[41] She then turned to the impugned statement that success is determined relative to the parties’ positions at trial, closing her commentary by stating: “Having set a line in the sand, the Defendant must accept that she lost on her own measure.” The appellant asserts that the trial judge thereby assessed success by looking at whether the judgment exceeded the defendant’s offer. I do not read her reasoning in that way. She concluded on the information available to the appellant that the respondent was going to be entitled to some damages and therefore the refusal to make an offer was not reasonable. Her decision is therefore not contrary to the principle identified in Bell Canada and Przyk, that if a party opts for a “hardball” approach to settlement, that party takes the risks associated with such a posture. Put differently, 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. I see no error in principle in that regard. As Tulloch J. (as he then was) stated in Lenet (Total Business Solutions) v. Dorfin Distribution Inc., 2008 CanLII 6423 (Ont. S.C.), at para. 21: “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.”
[42] If the trial judge can be interpreted as stating that the respondent was entitled to costs because the appellant failed to make a monetary settlement offer, this would amount to an error in principle. While I do not accept that interpretation, even if that were the case, I am persuaded that her reasons reveal independent bases for her decision. She found that the respondent was successful; the appellant had refused to admit any degree of liability prior to trial; and the case raised issues on outdated stereotypes relating to mental health injuries.
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[53] The case under appeal was not one where the respondent’s action was dismissed and the appellant’s offers to settle were vindicated. Here, no offer within r. 49 of the Rules of Civil Procedure was ever made by the appellant and the appellant asked the jury to award the respondent nothing. Instead, the appellant was found liable to the extent of 85% and the jury did award damages, all be they for much less than the respondent had claimed or hoped. But nonetheless, it was open to the trial judge to determine that the respondent was successful at trial. The appellant must be prepared to accept the risk that the principle of proportionality will not invariably serve to reduce a discretionary costs award. Furthermore, as Zarnett J.A. pointed out in Przyk, at para. 12, the result is not the exclusive consideration. . Hazelview Property Services Inc. v. Matsui
In Hazelview Property Services Inc. v. Matsui (Ont Divisional Ct, 2025) the Ontario Court of Appeal comments on the inappropriateness of the RCP R49 settlement-cost rules for appeal costs:[4] The tenant submits that in view of her offer to settle, she should be entitled to costs of the appeal. Assuming that Rule 49 applies to appeals, then under Rule 49.10 (2) the respondent would have to pay costs to the appellant up to the date of her offer and then be entitled to costs thereafter. This would not yield any payment to the tenant. But it also highlights why the terms of Rule 49 do not fit an appeal well. . Gill v. Gill
In Gill v. Gill (Ont CA, 2024) the Ontario Court of Appeal allowed an appeal, this from a dismissal of a claim seeking "the transfer of the property to the appellants in specific performance of the parties’ April 15, 2018 agreement that the trial judge declared was valid and enforceable".
Here the court considers the R49.10 settlement cost consequences, and the exercise of discretion under it:[37] The appellants served an offer to settle on October 12, 2023, eleven days prior to the commencement of trial, which was not withdrawn before trial and was not accepted by the respondent. The appellants’ offer potentially triggers the costs consequences prescribed under r. 49.10 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The relevant portions of r. 49.10 are as follows:(1) Where an offer to settle,
(a) is made by a plaintiff at least seven days before the commencement of the hearing;
(b) is not withdrawn and does not expire before the commencement of the hearing; and
(c) is not accepted by the defendant,
and the plaintiff obtains a judgment as favourable as or more favourable than the terms of the offer to settle, the plaintiff is entitled to partial indemnity costs to the date the offer to settle was served and substantial indemnity costs from that date, unless the court orders otherwise.
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(3) The burden of proving that the judgment is as favourable as the terms of the offer to settle, or more or less favourable, as the case may be, is on the party who claims the benefit of subrule (1) ... [38] The appellants’ offer meets the criteria set out in r. 49.10(1)(a) to (c). The burden on the appellants remains to prove that the judgment as obtained on appeal is as favourable as or more favourable than the terms of their October 12, 2023 offer to settle.
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[41] The appellants are therefore prima facie entitled to their partial indemnity costs up to and their substantial indemnity costs following the service of their offer.
[42] While not automatic, to fulfill the objective of the rule and ensure its predictability, the prima facie costs consequences of r. 49.10 should be applied in the vast majority of cases in order to encourage early settlement and avoid trials: Jarbeau v. McLean, 2017 ONCA 115, 410 D.L.R. (4th) 246, at para. 82; Jacuzzi Can. Ltd. v. A. Mantella & Sons Ltd. (1988), 31 C.P.C. (2d) 195 (Ont.H.C.), at para. 7; Niagara Structural Steel (St. Catharines) Ltd. v. W.D. Laflamme Ltd. (1987), 1987 CanLII 4149 (ON CA), 58 O.R. (2d) 773 (C.A.), at p. 777. The court’s discretion to “order otherwise” under r. 49.10 should be narrowly construed. The court should only depart from the general rule where, after giving proper weight to the policy of the general rule, and the importance of reasonable predictability and the even application of the rule, the interests of justice require a departure: Niagara, at p. 777; Barresi v. Jones Lang Lasalle Real Estate Services Inc., 2019 ONCA 884, 58 C.P.C. (8th) 318, at para. 17; 2651171 Ontario Inc. v. Brey, 2022 ONCA 205, at para. 7.
[43] The rules do not purport to delineate particular circumstances in which the court should exercise its discretion to “order otherwise”. As this court indicated in Niagara, at p. 777:As far as the occasions for resort to the exception are concerned, if the framers of the rules could have expressed the relevant bases or factors with any degree of comprehensive detail it may be assumed that this would have been done. Accordingly, it would be wrong, for several reasons, to attempt to do so by judicial declaration. [44] While not dispositive, factors that have informed the court’s discretion to “order otherwise” in past cases include, for example: the absence of any real compromise: Data General (Canada) Ltd. v. Molnar Systems Group Inc. (1991), 1991 CanLII 7326 (ON CA), 6 O.R. (3d) 409 (C.A.), at p. 414; where the successful claimant’s claim was not really in dispute and took very little time at trial: Cimmaster Inc. v. Piccione (Manufacturing Technologies Company), 2011 ONCA 486, 336 D.L.R. (4th) 506, at para. 33; and where the plaintiff’s claim was successful but the plaintiff was shown to have acted dishonestly in many respects, which made his every assertion and claim suspect and worthy of challenge: Mete v. Guardian Insurance Co. of Canada, 1998 CanLII 7177 (ON CA), 165 D.L.R. (4th) 457, at paras. 19, 21. None of these factors are in play in this case.
[45] I see no reason to depart from the cost consequences of r. 49.10 and to order otherwise than grant the appellants’ partial indemnity costs up to and their substantial indemnity costs following the service of their offer to settle. The appellants’ offer was clear, its terms were fixed, and it represented a genuine and fair compromise. There is nothing about the appellants’ conduct that would disentitle them to costs. The issues of the enforceability of the parties’ agreement and the appropriate remedy were among the main issues at trial. The acceptance of the appellants’ offer would have avoided an expensive trial. It therefore satisfies the objectives of r. 49 settlement offers.
[46] The amount claimed by the appellants must nevertheless be fair and proportionate in the circumstances and within the reasonable contemplation of the respondent if he were unsuccessful. .... . Rebello v. Ontario (Transportation)
In Rebello v. Ontario (Transportation) (Ont CA, 2024) the Ontario Court of Appeal dismissed an appeal, here of "the order of the trial judge dismissing her claims arising from a mistakenly transferred Vehicle Identification Number (“VIN”) in 2018, and a medical drivers’ license suspension in 2016".
The court dismissed an appeal against a substantial imdemnity cost award, grounded in a refused offer to settle:[22] The award of costs is governed by s. 131 of the Courts of Justice Act, R.S.O. 1990, c C.43 and r. 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The determination of costs is discretionary, and this court will not intervene unless there is an error in principle or the costs award is plainly wrong: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303, at para. 27; Galganov v. Russell (Township), 2012 ONCA 410, 294 O.A.C. 13, at para. 23.
[23] We are unable to find any reviewable error in the analysis of the trial judge in his costs determination. The respondent was wholly successful at trial. The appellant failed to accept a reasonable Rule 49 offer to settle. The respondent is thus, as a starting point, entitled to costs of a substantial indemnity basis from the date of the offer: r. 49.10(1). The trial judge found that the appellant’s conduct tended to lengthen unnecessarily the duration of the proceeding. He found that this was a claim doomed to fail, which the appellant litigated in an obstructive manner based on what he termed “patently false arguments.” . Giacomodonato v. PearTree Securities Inc.
In Giacomodonato v. PearTree Securities Inc. (Ont CA, 2024) the Ontario Court of Appeal dismissed a costs appeal where the trial judge found that a settlement offer "lacked the certainty and precision required for a valid r. 49 offer":[12] PearTree contends that the trial judge erroneously concluded that its settlement offer could not attract r. 49 cost consequences solely because it was inclusive of costs and interest. We do not agree. The trial judge did not express the view that an all-inclusive offer to settle could never attract cost consequences. He found that PearTree’s all-inclusive offer to settle lacked the certainty and precision required for a valid r. 49 offer. This finding is consistent with the reasoning in decisions such as London Eco-Roof Manufacturing Inc. v. Syson, 2020 ONSC 3101, at para. 84, which the trial judge cited, and is well-grounded on the record. . Haider v. Rizvi
In Haider v. Rizvi (Ont CA, 2023) the Court of Appeal found error with the lower court's conclusions regarding settlement terms, but also found that analysis to be immaterial and thus ultimately supported the lower court's conclusions - here regarding R49 ['Offer to Settle'], and especially R49.09 ['Failure to Comply with Accepted Offer']:1. There was no reversible error caused by the procedural defect in the way the issue was brought before the court
[18] The appellant has demonstrated no reversible error in the motion judge’s conclusion that the issue could be determined on the motion before her.
[19] Rule 49 applies to offers to settle. Rule 49.09 provides that where a party to an accepted offer to settle fails to comply with the terms of the offer, the other party may (a) make a motion to a judge for judgment in the terms of the accepted offer, and the judge may grant judgment accordingly; or (b) continue the proceeding as if there had been no accepted offer to settle.
[20] In Donaghy v. Scotia Capital Inc./Scotia Capitaux Inc., 2009 ONCA 40, 93 O.R. (3d) 776, leave to appeal refused, [2009] S.C.C.A. No. 92, this court observed that the respondent’s reliance on r. 49.09 was in error because the parties’ settlement occurred outside the scope of r. 49. The settlement did not arise out of an exchange of offers made pursuant to r. 49 and it had been entered into pre-litigation: at para. 15. This error, however, did not affect the merits of the motion in the court below or the appeal. As the court noted, since settlements are enforceable as contracts at common law, the motion to enforce the settlement was in effect a motion for summary judgment to dismiss the action on the basis of the settlement: at para. 16.
[21] In the present case, although the notice of motion relied on r. 49 and the motion judge described the motion as having been brought under that rule, r. 49 was not applicable. The settlement did not arise out of an exchange of offers made under r. 49. Rule 49.09 “is a procedural rule applicable to the acceptance and subsequent non-compliance with an offer to settle:” Gianopoulos v. Olga Management Ltd. (2006), 2006 CanLII 3459 (ON CA), 207 O.A.C. 58 (C.A.), at para. 3. It does not apply to non-compliance with a settlement agreement: Vanderkop v. Manufacturers Life Insurance Company (2005), 2005 CanLII 39686 (ON SC), 78 O.R. (3d) 276 (S.C.), at paras. 14-15, aff’d (2006), 40 C.C.L.I. (4th) 180 (Ont. C.A.). See also 1504641 Ontario Inc. et al. v. 2225902 Ontario Inc. et al., 2021 ONSC 2917, at paras. 3-4, 6, aff’d 2022 ONCA 175, at para. 6, leave to appeal refused, [2023] S.C.C.A. No. 40189; Dodla v. Dodla, 2022 ONSC 5648, at paras. 14-15.
[22] However, it was appropriate for the respondent to bring the matter before the court by way of motion, when the Minutes of Settlement arose out of a settlement entered into after a pretrial conference, and the Actions had not yet been dismissed. The commencement of a fresh proceeding to enforce the settlement was unnecessary and would have been inappropriate: see e.g., Paul M. Perell & John W. Morden, The Law of Civil Procedure in Ontario, 4th ed. (Toronto: LexisNexis, 2020), at pp. 729-730; GMBR Capital Corp. v. Parmar, 2021 ONSC 7798, at para. 25; Donaghy, at para. 11. As McEachern C.J.B.C. stated in Fieguth v. Acklands Ltd. (1989), 1989 CanLII 2744 (BC CA), 59 D.L.R. (4th) 114 (B.C.C.A.), at p. 123, when the issue is not whether the parties concluded a settlement, but some step in its execution, “subsequent disputes should be resolved by application to the court or by common sense within the framework of the settlement to which the parties have agreed”.
[23] The motion judge had jurisdiction to determine the motion and therefore did not err in hearing and deciding it. Although she stated that she was deciding the motion under r. 49.09, in essence she was deciding a motion to enforce a settlement that was reached in an action that had not yet been dismissed.
[24] Accordingly, I would reject this ground of appeal. . Gannes v Chhabra
In Gannes v Chhabra (Div Court, 2023) the Divisional Court considered what might be called an 'exception' to CJA 133(b), the rule that requires leave to appeal where the only issue is one of costs. The appellants argued the CJA 133(b) only applied "where the appeal is only as to costs that are in the discretion of the court ...", and that 'their' costs issue involved no such discretion - it being under the R49.07(5) offer rules which provides for a (firmer) "entitlement" to a cost award (where costs are not expressly included in the offer). The case does not resolve the issues (reserving it) but it raised an interesting issue regarding the R49.07(5) cost provisions:[5] Section 133(b) of the CJA states as follows:No appeal lies without leave of the court to which the appeal is to be taken,
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(b) where the appeal is only as to costs that are in the discretion of the court that made the order for costs[.] [6] The Appellants take the position that s. 133(b) of the CJA does not apply to their appeal because costs were not “in the discretion of the court” below. The Appellants rely on Rule 49.07(5) of the Rules of Civil Procedure, which states as follows:(5) Where an accepted offer to settle does not provide for the disposition of costs, the plaintiff is entitled,
(a) Where the offer was made by the defendant, to the plaintiff’s costs assessed to the date the plaintiff was served with the offer; or
(b) Where the offer was made by the plaintiff, to the plaintiff’s costs assessed to the date that the notice of acceptance was served. [7] Sub-rule 49.02(2) states that rules 49.03 to 49.14 also apply to motions, with necessary modifications. The Appellant submits that in this case, “plaintiff” in Rule 49.07(5)(b) would be replaced with “moving party”.
[8] The Appellants made an offer to settle the motion that contained no disposition as to cost and that was accepted by the Respondents. The Appellants submit that pursuant to Rule 49.07(5)(b), they were entitled to a mandatory order for costs to the date that notice of acceptance was served. The Appellants take the position that once an offer falls under Rule 49.07(5), there is no discretion to decline to award costs and that, as a result, the motion judge lacked jurisdiction to refuse to order costs.
[9] While I am not inclined to view the issue as one of jurisdiction, there is case law that finds that, unlike Rule 49.10, which includes the words “unless the court orders otherwise,” Rule 49.07(5) leaves the court with no discretion to depart from the presumptive costs disposition specified in the rule. See, e.g.: Atlas Holdings & Investments v. Vratsidas, [2009] O.J. NO. 823 (Div. Ct.) at paras. 12-14; Ontario (Attorney General) v. $19,570.00 in Canadian Currency (in rem), 2013 ONSC 3322. . Leaf Homes Limited v. Khan
In Leaf Homes Limited v. Khan (Ont CA, 2022) the Court of Appeal considered the normal rule around setting appeal costs, that settlement offers are disregarded:[154] Typically, this court does not consider settlement offers when deciding costs of the appeal: see Niagara Structural Steel (St. Catharines) Ltd. v. W.D. Laflamme Ltd. (1987), 1987 CanLII 4149 (ON CA), 58 O.R. (2d) 773 (C.A.). ... . 2651171 Ontario Inc. v. Brey
In 2651171 Ontario Inc. v. Brey (Ont CA, 2022) the Court of Appeal considered the impact of unaccepted offers to settle made at trial:[6] First, there is no question that the appellant’s offer was made more than seven days before the hearing of the motions, not accepted by the respondent Brey, had not expired, and the result obtained by the appellant as a result of this appeal is more favourable than its offer to settle. As a result, the appellant is prima facie entitled to its costs on a partial indemnity basis to the date the offer was served and substantial indemnity costs from that date, “unless the court orders otherwise”: r. 49.10(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
[7] While a court retains the discretion to “order otherwise” under r. 49.10(1), this discretion has been very narrowly construed. As this court cautioned in Niagara Structural Steel (St. Catharines) Ltd. v. W.D. Laflamme Ltd. (1987), 1987 CanLII 4149 (ON CA), 58 O.R. (2d) 773 (C.A.), at para. 12, “resort should only be had to the exception where, after giving proper weight to the policy of the general rule, and the importance of reasonable predictability and the even application of the rule, the interests of justice require a departure.” We do not see any circumstances here that would justify a departure from the general cost consequences stipulated under r. 49.10(1). Accordingly, the appellant is entitled to costs on a substantial indemnity basis.
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