Ontario’s costs system is designed not merely to compensate successful parties but to encourage reasonable conduct and promote settlement. The court’s discretion over cost awards — and the specific machinery of Rule 49 offers to settle — creates a series of financial incentives that experienced lawyers exploit strategically throughout the litigation. Understanding costs is essential to evaluating every major decision in your case.
Ontario courts award costs on one of two main bases. Partial indemnity costs — approximately 50–60% of the successful party’s actual legal costs — are the default. Substantial indemnity costs — approximately 90% of actual costs — are awarded in circumstances involving marked misconduct, rejection of a successful Rule 49 offer, or other circumstances the court considers warrant elevated cost exposure for the losing party.
A formal Rule 49 offer must be served in writing and remain open for a defined period. Where a plaintiff makes an offer the defendant refuses and the plaintiff achieves an equal or better result at trial, the plaintiff receives partial indemnity costs to the date of the offer and substantial indemnity costs thereafter. Where a defendant makes an offer the plaintiff refuses and the plaintiff fails to achieve a better result at trial, the plaintiff may be ordered to pay the defendant’s partial indemnity costs from the date of the offer.
Cost implications for settlement decisions: The Rule 49 cost consequences mean that refusing a reasonable offer becomes increasingly expensive as trial approaches. Your lawyer must model the cost implications of both acceptance and rejection in advising you on any significant offer — costs can dwarf the underlying damages difference between positions.
Disbursements — out-of-pocket litigation expenses — are awarded to the successful party and are in addition to fees. In a serious personal injury case, disbursements can reach $50,000–$200,000, including expert reports, medical record retrieval, accident reconstruction, court filing fees, and trial preparation costs. Understanding disbursement exposure on both sides is essential to realistic settlement valuation.