Court of Appeal for Ontario
Date: August 29, 2025
Docket: COA-24-CV-0668
Judges: Pepall, Paciocco and Sossin JJ.A.
Between
Jacqueline Barry, by way of her litigation guardian Devon Francis Plaintiff (Respondent)
and
Punithavathi Anantharajah Defendant (Appellant)
Counsel
Andrew McCutcheon and Michael Grivich, for the appellant
Gary Will and Gordon A. Marsden, for the respondent
Heard: February 13, 2025
On appeal from: The order of Justice Renu J. Mandhane of the Superior Court of Justice, dated February 29, 2024, with reasons reported at 2024 ONSC 1267.
Pepall J.A.:
Introduction
[1] The respondent, Jacqueline Barry, was crossing the street when she was hit by a motor vehicle driven by the appellant, Punithavathi Anantharajah. In her amended amended statement of claim, the respondent claimed $300,000 for general damages, $700,000 for special damages, and payment for healthcare expenses, future housekeeping, and home maintenance expenses. A three-week trial ensued before a judge and jury, and the jury awarded her $24,166 in general damages, $26,000 in special damages for past income loss, and nothing for the remaining claims. The jury also found the respondent to be 15% contributorily negligent. After 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.
[2] The respondent sought partial indemnity costs and disbursements in the total amount of $404,809. The trial judge awarded her $300,000 consisting of $164,148.33 in fees, $21,339.29 for HST, and $114,512.38 in disbursements.
[3] The appellant was granted leave to appeal and appeals from the costs order. For the reasons that follow, I would dismiss the appeal.
Background Facts
[4] On December 9, 2014, the appellant driver hit the respondent while she was walking across a pedestrian street crossing. The respondent commenced her action in 2016 and claimed over $1,000,000 in damages. A litigation guardian was appointed for the respondent, and any settlement of her claim would have to be approved by the court.
[5] On October 31, 2018, the appellant, through her insurer Aviva, offered to settle for a dismissal without costs. This offer was open for acceptance until two days before the action was called for trial.
[6] On December 18, 2023, the respondent made an offer to settle for $500,000 in damages plus costs and disbursements. In response, on December 18, 2023, the appellant reiterated her offer of a dismissal without costs. In the alternative, the appellant offered to admit liability in exchange for the respondent limiting her claim to the appellant's policy limits of $1 million. The appellant stated that she appreciated that any partial or full settlement of the issues would require court approval. As noted by the trial judge, the appellant never made a monetary offer to settle before or during the trial.
[7] On January 15, 2024, the trial proceeded before a judge and a jury. Both liability and damages were in issue. The appellant conceded liability after the appellant took the stand. The appellant's theory of the case was that the respondent's impairments were either pre-existing, minor, or had resolved by the time of trial. The appellant also argued that the respondent was 25% contributorily negligent.
Reasons of Trial Judge
[8] The trial judge summarized the evidence and the positions of the parties in her reasons for costs, at paras. 9-13:
At trial, the Plaintiff took the stand and testified that because of the accident she has been in near constant pain, is depressed and anxious, is paranoid about being pedestrian and passenger in a car, is untrusting, has memory and cognitive issues, has become unable to take care of herself, and has lost social connections. She testified that she is unable to work, is reliant on social assistance, and has been precariously housed. She states that she terminated a pregnancy after the accident because she did not feel capable of caring for a child because of her pain and mental health issues. The Plaintiff also called evidence from two family members, her family doctor, her treating psychiatrist, her treating social worker, a peer support worker, an expert physiatrist, an expert psychiatrist, a lifecare planner, and an actuary. The witnesses testified that the Plaintiff suffered psychiatric issues as a result of the accident, and that she suffered damages as a result.
In his closing address, Plaintiff's counsel argued that she was a credible witness because her evidence was corroborated by her family members and her treating doctors. On causation, she argued that she was a classic "thin skull" Plaintiff and relied on her expert psychiatrist's opinion that her current condition was caused by the accident. The Plaintiff's position in front of the jury was that they should award her $100,000 to 150,000 in general damages, and somewhere in the range of $500,000 to $1,000,000 in special damages.
The Defendant vigorously defended all aspects of the claim. After an extensive cross-examination of the Plaintiff, the Defendant forcefully argued that the jury should reject her evidence as not being credible or reliable because of her memory problems, her refusal to participate in all aspects of the assessment processes, her results on malingering screening tests, her past instances of dishonesty, and the differences between her reported symptoms and her observed capabilities.
The Defendant also took the stand and called evidence from an expert orthopedic surgeon and an expert psychiatrist. While Defendant's counsel conceded liability after her client took the stand, she argued that the Plaintiff was contributorily negligent in the nature of 25%. She argued that the jury should accept the Plaintiff's own evidence that she did look left before crossing the street to find that she did not exercise due care. She also argued that the jury should infer—despite a total absence of evidence—that the Plaintiff was distracted and on her phone at the time of the accident.
On the issue of causation, the Defendant argued that there was no credible evidence to suggest that the Plaintiff's ongoing problems were because of the accident. She relied on the evidence from her expert orthopedic surgeon who said that the minor soft tissue injuries from the accident would have resolved within 12 weeks, and the evidence of her expert psychiatrist who opined that any psychological issues were resolved by August 2017. The Defendant's position was that the Plaintiff should receive $20,000 to 30,000 in general damages and no award for special damages.
[9] Following the jury's verdict, the trial judge granted the appellant's threshold motion pursuant to s. 267.5 of the Insurance Act, R.S.O. 1990, c. I.8, concluding that the respondent had not sustained a permanent, serious impairment of an important physical, mental, or psychological function as a result of the accident. In a February 8, 2024 endorsement, the trial judge identified that the central issues at trial were credibility and causation. She reasoned that the jury must have accepted the appellant's theory of the case and her submission that the respondent's ongoing psychiatric issues were not caused by the accident. The trial judge shared the jury's concerns about causation. She concluded that the respondent's injuries had resolved and were not sufficiently permanent to meet the threshold test.
[10] On the issue of costs, the respondent sought costs on a partial indemnity basis, plus disbursements, for a total of $400,000. The appellant submitted that no costs should be awarded to either party.
[11] The trial judge identified the factors she was to consider as set out in r. 57.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, which include "the result in the proceeding and any offer to settle or to contribute made in writing". She agreed with the respondent that she was more successful at trial than the appellant. The trial judge also declined to reduce the respondent's damages to zero for the purposes of deciding costs because of her assignments to the Ontario Disability Support Program and Ontario Works. The trial judge recognized that the case was not a "slam dunk" for the respondent. On the issue of general damages, the jury's award had no practical effect due to the statutory deductible. The trial judge also noted that the appellant had had some success on the issue of contributory negligence.
[12] The trial judge reasoned that "success must be determined relative to the parties' positions prior to trial". She applied the principles described in Wray v. Pereira, 2019 ONSC 3354, stating at para. 19 of her reasons for costs:
Where a defendant insurer plays "hardball" by offering zero prior to trial rather than even a modest sum, it leaves the plaintiff in a bind[.] Either she has to abandon her claim entirely and face a claim for costs, or take the case to trial at great cost. As stated by the McKelvey J. in Wray, at para. 12: "In deciding not to make any offer, the defence was setting a clear demarcation line or a 'line in the sand' which can be used to identify success or failure in an action."
[13] The trial judge refused to accede to the appellant's argument that she should exercise her discretion and grant no costs on the basis that, given the amount of the jury award, the matter should have been commenced in Small Claims Court.
[14] She considered the appellant's decision not to make a monetary offer prior to trial to have been unreasonable in the circumstances, stating at para. 27 of her reasons:
At trial, the defence expert psychiatrist admitted that the accident caused or contributed [to] the Plaintiff's psychological injuries from the date of the accident until December 2017. The Defendant also knew that the Plaintiff was on her way to work at the time of the accident, such that it should have been foreseeable that the jury would award some amount for past income loss. In short, the Defendant's decision not to make an offer makes no sense in light of the evidence at trial and which the jury clearly accepted. The Defence would have been aware of this evidence well before the trial.
[15] The trial judge found that the respondent's bill of costs was generally reasonable, with half of the legal fees having been incurred at trial. She also found that the respondent's disbursements, which included fees to obtain discovery transcripts, capacity assessments, and expert reports, were reasonable. However, as the respondent's decision to retain two senior lawyers on the file was excessive, the trial judge decreased the fees by $40,000 to account for duplication. She then reasoned that the appellant would have been well aware of the actual costs of the litigation early in the process.[1]
[16] On the issue of proportionality, the trial judge found it not to be determinative. She concluded that it was the appellant's unreasonable decision not to make any pre-trial monetary offers that effectively necessitated the matter going to trial. She determined that "[s]ignificantly decreasing the Plaintiff's claim for costs in such circumstances risks rewarding Defendants who engage in such bully tactics": citing Persampieri v. Hobbs, 2018 ONSC 368, at paras. 93-108 (where, as in this case, Aviva was also the defending insurer) and Corbett v. Odorico, 2016 ONSC 2961, at paras. 19-20. That said, she noted that the case was closer to Wray, where the court found that proportionality was still an important factor despite the defendant's refusal to make a pre-trial offer, than Corbett. However, the trial judge nonetheless ultimately reduced the quantum of costs by $100,000 "on the basis of proportionality and the higher legal fees necessitated by the Plaintiff's decision to retain two senior lawyers."
[17] The trial judge noted the conduct of both parties and the complexity and importance of the matter. Among other factors, she found that the case raised complex factual issues, involved voluminous medical and employment records, and extensive medical and health-related evidence. The issues were of importance to both parties. The trial judge accepted that the litigation engaged important social, psychological, and financial interests for the respondent.
[18] The trial judge was critical of the appellant's strategy, stating at paras. 31:
[T]he defence's aggressive litigation strategy reflected a knee-jerk reaction that was premised at least in part on underlying stereotypes about the credibility and reliability of Plaintiffs with mental health disabilities and reflected an outdated view that mental health injuries are less worthy of compensation than physical injuries. That is the only way to rationalize the Defendant's decision to offer the Plaintiff nothing when its own psychiatrist admitted that she was damaged by the accident.
[19] The trial judge concluded her analysis with the following at para. 33:
Given that the Defendant's clear tactic was to force the matter to trial in the hopes that the Plaintiff would either withdraw or settle her claim for no monetary compensation, it is fair and reasonable that the Defendant bear the costs of this aggressive litigation strategy. That said, I would reduce the quantum of costs by $100,000 on the basis of proportionality and the higher legal fees necessitated by the Plaintiff's decision to retain two senior lawyers.
Issues
[20] On appeal, the appellant raises two issues.
(I) Did the trial judge err in finding that the respondent was more successful than the appellant; and
(II) Was the costs award of $300,000 wholly disproportionate to the net award of $16,160.50?
Positions of Parties
[21] On the first issue, the appellant submits that the trial judge applied the wrong test to determine success. Counsel argues that assessing success requires a judge to consider the result on the issues, not whether the judgment exceeded the appellant's offer. Counsel highlights that the jury rejected the respondent's theory of the case; the trial judge, on the first issue, shared the jury's concerns on causation; the net award was limited; she was unsuccessful on the threshold motion; and the respondent was found contributorily negligent. The appellant also submits that the trial judge erred in only considering the settlement position of the appellant and not that of the respondent. The appellant asserts that she was either successful or there was divided success.
[22] On the second issue, the appellant submits that the costs award was wholly disproportionate to the amount recovered, arguing that it impedes access to justice and rewards the wrong behaviour. She maintains that the cost order should be set aside and the parties should each bear their own costs.
[23] The respondent rejects these arguments. On the first issue, the respondent submits that the trial judge found that the respondent was successful. She highlights that the appellant pressed the action to trial without making a monetary offer to settle, and asked the jury to award nothing, yet the jury awarded past loss of income, a reasonably foreseeable award. According to the respondent, where an award of damages is foreseeable, an offer to settle that is less than a monetary offer is not truly an offer. Moreover, where a plaintiff has a litigation guardian, as was the case here, the court cannot approve such a settlement and would not have approved it in this case. There was evidence of significant injury as the respondent had not worked since 2014 and there was conflicting evidence on the cause of her injuries. The respondent asserts that the trial judge was entitled to consider the appellant's aggressive litigation strategy within the broader context of other relevant factors under r. 57 of the Rules of Civil Procedure, including the principle of indemnity, the reasonable expectations of the unsuccessful party, the parties' conduct, and the importance and complexity of the matter.
[24] On the issue of proportionality, the respondent submits that the trial judge recognized it as a relevant factor but not a determinative one. The respondent relies on the decision of Brophy v. Harrison, 2019 ONSC 4377, for the proposition that limiting a losing party's exposure to costs proportionate to the size of the claim would encourage those resisting legitimate but modest claims to take unreasonable positions. The respondent states that the appeal should be dismissed because the trial judge did not make an error in principle and the costs award is not plainly wrong.
Discussion
[25] The standard of review on an appeal of a costs award was clearly described by Arbour J. in Hamilton v. Open Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303, at para. 27. A court should set aside a costs award on appeal only if the trial judge has made an error in principle or if the costs award is plainly wrong.
[26] An appellate court takes a deferential approach when reviewing a discretionary award of costs by a trial judge. The reason for deference towards discretionary decisions was described in Cowles v. Balac (2006), 83 O.R. (3d) 660 (C.A.), at para. 41. Deference recognizes the expertise of the lower court, promotes the integrity and autonomy of the proceedings in the lower court, limits the number, length and costs of appeals, and recognizes the advantage that lower courts have from firsthand observation of the evidence. Deference towards discretionary decisions means that a reviewing court "must defer to the judge's exercise of … discretion and must not interfere with it merely on the ground that the members of the appellate court would have exercised the discretion differently": Canadian Pacific Ltd. v. Matsqui Indian Band, [1995] 1 S.C.R. 3, at para. 39, quoting Lord Diplock in Hadmor Productions Ltd. v. Hamilton, [1982] 1 All E.R. 1042, at p. 10.
[27] Sometimes it is helpful to have regard to other areas of the law that apply a high degree of deference to certain lower court orders. For instance, in R. v. Range, 2010 ONCA 488, 257 C.C.C. (3d) 261, at paras. 70-72, Doherty J.A. explained the justification for appellate deference towards the decisions of sentencing judges, stating that sentencing "is anything but an exact science":
In the vast majority of cases, there is no single sentence that is clearly preferable to all others. Instead, there is a range of reasonable options from which the trial judge must make his or her selection. That selection is driven by the judge's evaluation of the sentence that best reflects his or her assessment of the combined effect of the many variables inevitably at play when imposing a sentence. Absent the discipline of deference, sentence appeals would invite the appellate court to repeat the same exercise performed by the trial judge, with no realistic prospect that the appellate court would arrive at a more appropriate sentence. Appellate repetition of the exercise of judicial discretion by the trial judge, without any reason to think that the second effort will improve upon the results of the first, is a misuse of judicial resources. The exercise also delays the final resolution of the criminal process, without any countervailing benefit to the process.
[28] Although of course a sentencing decision differs significantly from a costs award, the discretionary principles at play bear many similarities. As stated by Rothstein J. in Nolan v. Kerry (Canada), 2009 SCC 39, [2009] 2 S.C.R. 678, at para. 126, costs awards "are quintessentially discretionary". This court has recognized that "[a] trial judge has an extremely broad discretion in the awarding of costs, which is entitled to a very high degree of deference and will not be taken lightly by reviewing courts": Frazer v. Haukioja, 2010 ONCA 249, 101 O.R. (3d) 258, at para. 75.
[29] The concept of deference relating to costs awards is reflected in s. 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C43, which represents the basis for a costs award in Ontario:
Subject to the provisions of an Act, or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid.
[30] It follows from this discussion that an appellate court should exercise caution when reviewing a trial judge's costs award. Like the sentencing context, appellate repetition of the trial judge's exercise of discretion in awarding costs, without any basis for review, amounts to an inefficient use of judicial resources. A high level of deference is necessary due to the unique position of the trial judge, who, having observed the proceedings firsthand and grasped the subtleties of the case, is best equipped to assess whether costs should be awarded, in what amount, and at what scale: McNaughton Automobiles Limited v. Co-Operators General Insurance Company, 2008 ONCA 597, 95 O.R. (3d) 365, at para. 27; see also 100 Bloor Street West Corporation v. Barry's Bootcamp Canada Inc., 2025 ONCA 447, at para. 70.
[31] But what of a situation where the trial judge made an error in principle in the exercise of her discretion? In keeping with the high degree of deference owed, such an error is not fatal so long as there is an independent basis on which to uphold the costs order. Relying on this court's decision in Bell Canada v. Olympia & York Developments Ltd. (1994), 17 O.R. (3d) 135 (C.A.), Zarnett J.A. recently explained this principle in Przyk v. Hamilton Retirement Group Ltd. (The Court at Rushdale), 2021 ONCA 267, 70 C.P.C. (8th) 219, at para. 10:
Th[e] deferential approach requires that attention be paid not only to the nature of any error affecting a costs decision, but also to its extent. It is insufficient to identify an error in principle in the course of the trial judge's reasons without considering whether there is an independent basis to uphold the order. An appellate court should be reluctant to interfere with "the exercise of discretion by a trial judge who had a much better opportunity to acquaint himself with, and have a feeling for, all of the factors that formed the basis for the award of costs": [Bell Canada,] at para. 41. Even where a trial judge has relied on a factor that is unsupported by proper legal principles or considerations to deny costs to a successful party, an appellate court should not intervene unless it can "find nothing in the factual circumstances or argument to support the order": Bell Canada at para. 42.
[32] In Przyk, the jury found no liability on the part of a defendant in a slip and fall case and the plaintiff's action was dismissed. Nonetheless, the trial judge denied the defendant an award of costs. Leave to appeal was granted and on hearing the appeal, this court upheld the award even though it concluded that the trial judge's ruling reflected certain errors in principle. The fact that the defendant was insured by Aviva, a large insurer, was not a reason to deny an award of costs. Similarly, the refusal of a party to offer a financial settlement before trial was not a reason to deny that party costs where the refusal is proven reasonable by the verdict. Nor ought the trial judge have sought to correct a general attitude of Aviva toward settlement in other cases in the absence of referring to any unreasonable conduct of the insurer in that particular case. Nonetheless, as there was an independent basis on which to uphold the trial judge's cost award, this court declined to interfere and upheld the costs order.
[33] Turning to an application of these principles to the facts of this case, I will first ascertain whether the trial judge's decision contains an error in principle. If it does, I will then consider whether there is an independent basis on which the costs award should be upheld. I will next consider proportionality, the second issue raised by the appellant, and whether the award is plainly wrong.
[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., 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.
[43] Turning to the issue of proportionality, the appellant submits that the costs award was wholly disproportionate to the judgment.
[44] Rule 1.04(1.1) of the Rules of Civil Procedure provides that, "In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding." The proportionality principle is concerned with both the importance and complexity of the issues and the amount involved. Here there was some recovery by the plaintiff and the trial judge found that the respondent'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. Although the costs order substantially exceeded the recovery, the costs order was proportionate to the importance and complexity of the issues, and to the amount involved in the litigation. I would not interfere with that determination.
[45] From time to time, this court has interfered with the exercise of a trial judge's discretion on the grounds of proportionality. In this regard, the appellant relies particularly on the decisions of Elbakhiet v. Palmer, 2014 ONCA 544, 121 O.R. (3d) 616, leave to appeal refused, [2015] S.C.C.A. No. 427 and Cobb v. Long Estate, 2017 ONCA 717, 416 D.L.R. (4th) 222. The former did not involve a trial judge who had given express or implied consideration to the principle of proportionality and the decision in Cobb is distinguishable. There, the trial judge had made an error in principle in failing to comply with a statutory requirement that invalidated his costs award. However, he had also stated that if he were wrong in his interpretation of the statute, he would order both parties to bear their own costs: see Cobb v. Long Estate, 2015 ONSC 8167, at para. 72, rev'd 2017 ONCA 717, 416 D.L.R. (4th) 222. Having found the identified error, the ratio of the case is that this court adopted the trial judge's alternative costs award.
[46] So long as trial judges have turned their minds to the issue of proportionality either expressly or impliedly, deference is owed to the costs award absent an error in principle or a decision that is plainly wrong.[2] In this sense, proportionality is akin to reasonableness and fairness, the overarching principles to be applied in a costs award. It is rare that an appellate court interferes with a trial judge's assessment of what is fair and reasonable. So too with the principle of proportionality.
[47] I would also add that proportionality should be considered but it should not necessarily trump all other considerations in a costs assessment. This court has recognized that "an overemphasis on proportionality to the detriment of the other equally relevant factors 'ignores the principles of indemnity and access to justice', especially in proceedings where legitimate claims of clearly wronged plaintiffs are being pursued": Bondy-Rafael v. Potrebic, 2019 ONCA 1026, 441 D.L.R. (4th) 658, at para. 64, quoting Gardiner v. MacDonald, 2016 ONSC 2770, at para. 65, aff'd 2016 ONCA 968, 63 C.C.L.I. (5th) 212.
[48] This observation is also reflected in much of the commentary on costs made by many experienced trial judges who of course have a heavy diet of costs decisions with which to grapple. In Aacurate v. Tarasco, 2015 ONSC 5980, 51 C.L.R. (4th) 314, at paras. 15-16, McCarthy J. observed that proportionality should not be invoked to undercompensate a plaintiff for costs legitimately incurred. A pattern of such outcomes would result in a denial of access to justice and it would tend to "encourage those resisting legitimate but modest claims to take unreasonable positions, the logic being that any exposure to costs will be limited because of the size of the claim regardless of the time and expense necessary to extract a judgment": Aacurate, at para. 16.
[49] In Persampieri, Sanderson J. endorsed that proposition. She addressed the issue of proportionality in considerable detail and ultimately awarded costs and disbursements of $237,017.50 in a personal injury case where the plaintiff's net recovery was $20,414.83. Part of the costs award was on a substantial indemnity scale as the plaintiff had fared better at trial than her offer. Aviva, the defendant's insurer, had made an offer of a dismissal of the action without costs. Aviva argued that the cost award should be reduced on the basis of proportionality, but Sanderson J. reasoned that this would unduly minimize the quantum of otherwise usual amounts of costs.
[50] Similarly in Corbett, Hackland J. endorsed the observations in Aacurate and similar cases stating, at para. 25: "It would be an injustice to the plaintiffs to deprive them of otherwise appropriate and reasonable costs because of a modest recovery at trial in the face of a $7.00 settlement offer from the defendant." Similarly, in Brophy, which involved a 10-day jury trial, a net judgment of $17,688.64, and a costs award of $275,456.60 in a case where the defendant made no offer and the plaintiff's offers did not engage r. 49, the trial judge endorsed the principles articulated in Aacurate, Persampieri, and Corbett.
[51] One must also be mindful of the changing face of the cost of legal services in general and legal fees in particular. These have risen significantly in the last 20 years: Clinedale Property Group Ltd. v. BeyRose Acquisitions Ltd., 2024 ONSC 7264, at para. 21, and see generally: "The state of the Canadian legal fee landscape: an in-depth report", Canadian Lawyer Magazine (October 2024); and Noel Semple, "The Cost of Seeking Civil Justice in Canada" (2016) 93 Can. Bar Rev. 639. At the same time, personal injury motor vehicle awards have been circumscribed by legislation: see e.g., Insurance Act, s. 267.5(8.3); Court Proceedings for Automobile Accidents that Occur on or After November 1, 1996, O. Reg. 461/96, s. 5.1(1). When juxtaposed, the damages awards may seem modest in comparison with the legal fees. Proportionality does play an important role in preventing excessive costs awards. Trial judges are well placed to appreciate both the economics at play in an action and what is fair and reasonable and indeed proportionate in a costs award. Hence deference.
[52] In the case under appeal, the trial judge expressly considered the principle of proportionality. She considered, among other things, the complexity of the case, the need for extensive expert evidence, the net amount recovered by the respondent, the reasonable expectations of the appellant, and the offers made by the parties. Although she detailed the offer made by the appellant to dismiss the action without costs, she did not mention the appellant's alternative offer of admitting liability in exchange for the respondent limiting her claim to the appellant's policy limits of $1 million. That said, for the purposes of costs, I do not view this alternative as materially different from the other defence offers. She reduced the quantum of costs by $100,000 on the basis of proportionality and the higher legal fees necessitated by the respondent's decision to retain two senior lawyers. The latter accounted for a $40,000 reduction. The disbursements alone in this case amounted to $114,512.38. Having considered and applied the principle of proportionality, I am not persuaded that the trial judge's discretionary award should be replaced by that of this court. As stated previously in these reasons, costs awards are "quintessentially discretionary": Nolan, at para. 126. While I accept that there may be the occasional case where the quantum awarded is so disproportionate as to merit replacing a trial judge's discretionary award of costs on the basis that the decision is plainly wrong, I am not satisfied that the decision in this case so qualifies.
[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.
[54] This addresses the two issues raised by the appellant. However, I will briefly address an argument raised by the respondent.
[55] The respondent raised s. 258.5 of the Insurance Act in support of her position that the costs award should be upheld. This provision is confined to defence of an action by an insurer that involves loss or damage from bodily injury or death arising from the use or operation of a motor vehicle. Subsection (1) states that an insurer shall attempt to settle the claim as expeditiously as possible and subsection (5) states that an insurer's failure to comply shall be considered by the court in awarding costs.
[56] This court addressed this provision and s. 258.6, the companion provision dealing with mediation, in Keam v. Caddey, 2010 ONCA 565, 103 O.R. (3d) 626 and Ross v. Bacchus, 2015 ONCA 347, 126 O.R. (3d) 255. The former treated the mediation provision as a remedial penalty to compel compliance but also to provide a remedy to the party who was deprived of the opportunity for an early settlement. The court noted that the provision was not intended to be compensatory because that objective was already addressed by other cost considerations in the Rules of Civil Procedure. In Keam, this court increased the cost award by $40,000 to reflect the insurer's refusal to attend mediation, contrary to s. 258.6(1) of the Insurance Act. In Ross, this court noted that those two provisions reflected "a clear expression of the legislature's intention to promote the early and expeditious settlement of claims arising out of motor vehicle accidents": at para. 41. However, the court concluded that the evidentiary record did not support the trial judge's finding that the insurer breached its obligations under ss. 258.5 and 258.6 and overturned the trial judge's award of $60,000 on account of breaches of those two statutory provisions.
[57] The Ross decision has received some commentary. Professor Richard McLaren in John Sanderson & Richard H. McLaren, Innovative Dispute Resolution: The Alternative (Toronto: Thomson Reuters Canada Ltd., 2025) (loose-leaf 2024-Rel. 5) at §§ 5:10 and 5:43 states that it inadvertently promotes mediations that are not conducted in good faith. "Th[e] decision signals the judicial acceptance of hard nose bargaining as a mediation technique", which seems to run counter to the statutory provisions: at § 5:43. In his view, the decision makes refusing to settle because of an interest in dissuading a plaintiff from proceeding to trial a viable strategy, which appears contrary to the purpose of these statutory provisions.
[58] The trial judge did not rely on s. 258.5 of the Insurance Act in her reasons. I note it only to observe that as a principle of statutory interpretation, legislation addressing similar subject matters should be read harmoniously and to give effect to the overall legislative intent: see Onyskiw v. CJM Property Management Ltd., 2016 ONCA 477, 132 O.R. (3d) 295, at para. 43. The Rules of Civil Procedure address costs and s. 258.5 of the Insurance Act addresses costs in the context of a motor vehicle action defended by an insurer. Read together, these provisions should not be permitted to allow an insurer to reap the benefits of the principle of proportionality to escape liability for costs in the face of a modest award. The legislation lends support to the proposition that the principle of proportionality will not and should not invariably triumph when a defending insurer has opted to take the risk of making no monetary offer of settlement. It is of course not required by law to make such an offer, but a party should appreciate that it does take a risk on costs in adopting such a posture. The principle of proportionality is not a perpetual umbrella that protects against a shower of costs legitimately incurred by a plaintiff and reasonably expected by a defending insurer.
Disposition
[59] For these reasons, the appeal is dismissed with costs to be paid to the respondent in the amount of $15,000 inclusive of disbursements and applicable tax.
Released: August 29, 2025
"S.E.P."
"S.E. Pepall J.A."
"I agree. David M. Paciocco J.A."
"I agree. Sossin J.A."
Footnotes
[1] The appellant's partial indemnity costs were between $200,108.38 and $212,526.58. Her substantial indemnity costs amounted to approximately $300,000. The trial judge incorrectly described the latter as partial indemnity costs but they did reflect the appellant's actual costs.
[2] For example, in 100 Bloor Street West Corporation v. Barry's Bootcamp Canada Inc., 2025 ONCA 447, this court appreciated that the trial judge turned his mind to proportionality but reduced the costs award because, among other reasons, it could not have been reasonably anticipated by the parties and it harmed the principle of access to justice. The legal issues at stake were not complex enough to warrant the costs ordered, and the motions and applications did not require significant court time: see paras. 84-85.