Costs Awards In Ontario Civil Litigation: Who Pays The Legal Fees?

One of the first questions people ask when considering a lawsuit is: what happens if I win — or lose — do I get my legal fees back? 

It’s one of the most practical and important questions in civil litigation, and the answer is more nuanced than most people expect.

Ontario follows what is known as the costs follow the event principle. In plain terms, this means the losing party is generally ordered to pay a portion of the winning party’s legal costs.

This is different from the American system, where each side typically pays their own lawyer regardless of outcome. In Ontario, the prospect of a costs award is real — and it cuts both ways. It can be a powerful incentive to settle, and it can also be a significant financial consequence of losing at trial.

That said, costs awards in Ontario rarely cover 100% of what a party actually spent on legal fees. Understanding the different scales of costs is essential to having realistic expectations.

Ontario courts award costs on different scales depending on the circumstances of the case.

This is the default scale in most civil litigation. Partial indemnity costs typically reimburse the successful party for roughly 50 to 60 percent of their actual legal fees.

The rationale is straightforward: the winning party should be compensated for having to litigate, but not necessarily made whole for every dollar spent on lawyers. Partial indemnity is the baseline expectation in most contested civil matters.

This is a higher scale, typically awarded when a party has engaged in reprehensible, scandalous, or outrageous conduct. 

Substantial indemnity costs generally cover around 80 to 90 percent of actual legal fees. Courts use this scale to send a message and to compensate a party who was forced to spend more than they should have because of the other side’s conduct or unreasonable litigation choices.

This is the highest and rarest scale. Full indemnity means the losing party pays 100 percent of the winning party’s actual legal fees. It is reserved for the most serious situations such as fraud, deliberate misconduct, or cases where a contract specifically provides for full indemnity costs in the event of a dispute.

As noted in our article on Anti-SLAPP motions, full indemnity costs are the default presumption when a defendant successfully brings an Anti-SLAPP motion, reflecting how seriously Ontario courts treat attempts to silence public expression through litigation.

One of the most important, and underappreciated, aspects of costs in Ontario is the Rule 49 offer to settle.

Under Rule 49 of the Rules of Civil Procedure, if a party makes a formal written offer to settle and the other side rejects it, costs consequences follow depending on the outcome at trial:

• If the plaintiff makes an offer and ultimately obtains a judgment equal to or better than the offer, the defendant may be ordered to pay substantial indemnity costs from the date the offer was made.
• If the defendant makes an offer and the plaintiff fails to beat it at trial, the plaintiff may be ordered to pay the defendant’s partial indemnity costs from the date of the offer to settle.

This rule is designed to encourage reasonable settlement. In practice, it means that rejecting a fair settlement offer carries real financial risk — not just in losing the case, but in the costs consequences that follow.

Even once the scale is determined, the court has broad discretion in setting the actual amount of a costs award. Judges consider a range of factors, including:

• The complexity of the issues in dispute.
• The amount of money at stake.
• The importance of the issues to the parties.
• Whether the litigation was conducted efficiently or whether unnecessary steps were taken.
• The experience and rates of the lawyers involved.
• The reasonableness of the time spent on the file.
• Any offers to settle that were made and rejected.

Courts expect parties to provide a costs outline or bill of costs setting out the fees and disbursements claimed. The other side has an opportunity to respond, and the judge makes a final determination — sometimes after brief submissions, sometimes after a more detailed costs hearing.

Costs awards are not just about legal fees. They also include disbursements: the out-of-pocket expenses incurred in the litigation. These can include:

• Court filing fees.
• Process server fees.
• Expert witness fees.
• Transcript and court reporter costs.
• Travel and other reasonable litigation expenses.

Disbursements are generally recoverable in addition to legal fees, though the court may reduce amounts it finds unreasonable or excessive.

Yes, but it is difficult. Costs decisions are highly discretionary, and appellate courts give significant deference to the trial judge’s assessment. An appeal of a costs order will only succeed in the rarest of cases, such as if the judge made an error in principle or if the award is so clearly wrong that it amounts to an injustice.

As discussed in our article on the standard of appellate review, discretionary decisions like costs awards are subject to a deferential standard — meaning the Court of Appeal will not simply substitute its own view of what the costs should have been.

We have experience navigating complex civil litigation matters, including advising clients on costs strategy, settlement timing, and managing litigation risk from start to finish. If you are considering a lawsuit or have been served with a claim, we can help you understand not just the merits of your case — but the full financial picture.

Contact us at 416.901.9984 or info@pintoshekib.ca for a confidential consultation.