For many litigators, the notion that costs awarded by the court will be proportional to the actual success by the winning side is the gospel truth. A plaintiff who wins a lot of money at trial will probably get a larger cost award than one who wins very little, thinks the lawyer. Some use that concept as the basis for risk assessment and corresponding recommendations to their own clients on what steps to take. Unfortunately, this mantra may prove to be illusory following the recent case of Barry v. Anantharajah, 2025 ONCA 603.

The Trial

The plaintiff was struck by a motor vehicle while crossing at a pedestrian crossing. She commenced an action in 2016, claiming more than $1 million in damages for pain and suffering, loss of income, future healthcare costs, and housekeeping and home maintenance expenses.

A jury trial was held in January 2024. Both liability and damages were contested, though the defendant ultimately conceded liability mid-trial. The real dispute centred on causation and the extent of damages. The plaintiff, supported by her family members and a range of medical and mental health experts, alleged that the accident left her with serious and permanent impairments. The defendant, however, argued that her symptoms were either pre-existing, resolved within a short period, or exaggerated. It turns out that, at least in the minds of the jury, the defendant was right. After three weeks of evidence, the jury awarded $24,166 in general damages and $26,000 in past income loss, fractions of the amount claimed and well below the threshold for Simplified Procedure under the Rules of Civil Procedure. They awarded nothing for future care. The jury also found the plaintiff 15 percent contributorily negligent. Once the statutory deductible for general damages was applied, the net judgment stood at just $16,160.50, now under the small claims court threshold.

The Trial Judge’s Costs Award

Despite the very modest recovery, the trial judge awarded the plaintiff $300,000 in costs and disbursements. Her reasoning rested on several key points.

The presiding judge found that success must be determined relative to the parties’ positions prior to trial. The defendant, through her insurer, had taken the position that the claim should be dismissed without costs and accordingly made no settlement offers to the plaintiff prior to trial. At trial, the defendant urged the jury to award nothing at all. Against that posture, any success by the plaintiff meant that she was the more successful party at trial.

Accordingly, the judge considered the refusal to make any monetary offer unreasonable. The defendant’s own psychiatric expert had acknowledged that the accident contributed to the plaintiff’s psychological difficulties until late 2017. The defendant also knew the plaintiff had been on her way to work at the time of the accident, making an award for past income loss foreseeable. What this meant, in the judge’s view, was that some damages were likely to be found, even if only modest. In light of this, the refusal to make even a modest offer “made no sense” and effectively forced the matter to trial.

Continuing with the same reasoning, the judge was critical of the litigation strategy more broadly, remarking that the approach reflected outdated stereotypes about mental health injuries and an unwillingness to treat such impairments as worthy of compensation. She concluded that the strategy amounted to “hardball” litigation tactics that should not be rewarded.

The judge reviewed the plaintiff’s bill of costs and held that a $300,000 award was appropriate to indemnify the plaintiff for costs reasonably incurred and to discourage unreasonable defence tactics.

The Court of Appeal

The defendant appealed, arguing that the trial judge erred in two respects: first, in finding that the plaintiff was more successful; and second, in awarding costs that were wholly disproportionate to the damages recovered.

Standard of Review

The Court of Appeal began by reaffirming the highly deferential standard applicable to costs awards. Quoting long-standing authority, the Court emphasized that costs are “quintessentially discretionary” and appellate courts should intervene only where a trial judge has made an error in principle, or the award is plainly wrong. This deference recognizes that trial judges are best placed to evaluate the conduct of the proceedings, the complexity of the issues, and the fairness of indemnifying one party over another.

Relative Success and the “Hardball” Posture

On the issue of success, the Court noted that the trial judge had properly considered the jury’s award in light of the parties’ positions. The defendant had asked the jury to award nothing, yet the jury awarded damages for past income loss. In those circumstances, the plaintiff was indeed more successful. The Court rejected the suggestion that success should be measured strictly by the net dollar amount obtained. Instead, it confirmed that relative success must also consider litigation posture.

The Court cautioned that while defendants are not legally required to make settlement offers, they assume the risk of adverse cost consequences if they decline to do so and the plaintiff recovers something at trial. A party that “draws a line in the sand” cannot later complain when costs flow from that decision. In other words, a win is a win, even if on a marginal basis.

Proportionality in Context

Turning to proportionality, the Court acknowledged the striking disparity between the damages award and the costs order. However, it emphasized that proportionality is merely one factor and not determinative. The Rules of Civil Procedure require proportionality to be considered alongside other factors, including the principle of indemnity, the conduct of the parties, and the importance and complexity of the issues.

The Court drew on earlier authorities, including Persampieri v. Hobbs and Corbett v. Odorico, where significant costs awards were upheld despite modest damages because defendants had made no meaningful settlement offers. Limiting costs strictly in proportion to damages, the Court reasoned, would encourage defendants to resist modest claims unreasonably, knowing their costs exposure would remain minimal. Such an approach would undermine access to justice.

The Court also noted that the disbursements alone in this case exceeded $114,000, reflecting the extensive expert and medical evidence necessary to advance the plaintiff’s claim. In that light, the overall award was not plainly wrong.

Statutory Context under the Insurance Act

Finally, the Court observed that s. 258.5 of the Insurance Act requires insurers defending motor vehicle actions to attempt to settle claims as expeditiously as possible. Although the trial judge had not relied on this provision, the Court noted that it reinforces the broader policy expectation that insurers meaningfully engage in settlement. A failure to do so may properly inform a costs decision.

The appeal was dismissed, with an additional $15,000 in costs awarded to the plaintiff for the appeal.

Implications for Practitioners

Barry v. Anantharajah underscores that costs awards serve not only to indemnify but also to promote fairness and deter unreasonable litigation strategies. The decision highlights several important lessons for practitioners:

1. Even where damages appear modest, settlement offers ought to be made where some recovery may be foreseeable. Defendants who refuse to make meaningful offers may face substantial cost consequences.
2. Costs awards can exceed damages where justified by complexity, party conduct, and fairness considerations.
3. Courts are increasingly attentive to access to justice. They will not permit defendants to exploit modest claims through hardball tactics that force plaintiffs into costly trials.

The importance of the decision to the typical defence lawyer cannot be understated. It may be common to equate “low damages” with “no damages” in approaching potential settlement offers. The mindset is that an aggressive approach with no offer would dissuade a plaintiff with a modest case from going to trial. Perhaps he or she will abandon ship if they see no voluntary settlement coming in the near future, the misguided defence lawyer may think. But where liability is likely, it is now clear that a “no offer” position may prove to be a serious mistake, at least with respect to potential costs outcomes.

For insurers and defence counsel, the message is clear: refusing to engage in settlement discussions may ultimately result in significant exposure if it is clear that the defendant will be found to be at fault. While the court did not go so far as to suggest that a defendant must make some sort of reasonable offer regardless of the circumstances, withholding any offer where the liability case is strong, as a sort of game of chicken with the plaintiff, could prove disastrous.