The Ontario Court of Appeal’s decision in Barry v. Anantharajah, 2025 ONCA 603 (“Barry”), makes clear that a successful plaintiff’s costs award may vastly exceed the damages recovered, particularly where a defendant adopts an unreasonable litigation strategy.
The plaintiff, struck by the defendant’s vehicle while crossing the street, claimed $300,000 in general damages, $700,000 in special damages, and additional future care costs. After a three‑week jury trial, she was awarded $24,166 in general damages and $26,000 for past income loss, with no award for other heads of damage. After applying the 15% contributory negligence finding and the statutory deductible, the net award was $16,160.50.
As the substantially successful party, the plaintiff sought $404,809 in partial indemnity costs and disbursements. The trial judge awarded $300,000, consisting of $164,148.33 in fees, $21,339.29 in HST, and $114,512.38 in disbursements, while excluding $40,000 for duplicative senior counsel.
The trial judge summarized the plaintiff’s extensive evidence of psychological and functional impairment, including testimony from family members, treating physicians, mental‑health professionals, and expert witnesses. The plaintiff argued she was a “thin skull” claimant and sought $100,000–$150,000 in general damages and $500,000–$1,000,000 in special damages.
The defendant “vigorously defended all aspects of the claim,” challenging the plaintiff’s credibility, alleging malingering, and relying on expert evidence that her injuries had resolved within months. The defence argued for $20,000–$30,000 in general damages and no special damages. Notably, the plaintiff had offered to settle for $500,000 plus costs, while the defendant made no monetary offer at any time.
The defendant sought leave to appeal the costs award. Leave was granted, but the appeal was dismissed.
Trial Judge’s Criticism of the Defence Strategy
The Court of Appeal highlighted the trial judge’s findings, including her criticism of the defence’s approach. At para. 31, the trial judge wrote:
the 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stereotypes about the credibility and reliability of Plaintiffs with mental health disabilities and reflected an outdated view that mental health injuries are less worthy of compensation than physical injuries.
At para. 33, she added:
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.
The trial judge nevertheless reduced the costs by $100,000 for proportionality and duplication of counsel.
Court of Appeal: Deference to Costs Awards
The Court of Appeal reaffirmed that costs awards attract a high degree of deference and may only be set aside for an error in principle or if “plainly wrong.” Even where an error in principle exists, an appellate court may uphold the award if there is an independent basis supporting it.
The defendant argued that the trial judge erred by basing entitlement to costs on the defendant’s failure to make a settlement offer. The Court rejected this, holding at para. 41:
[The trial judge] concluded on the information available to the [defendant] that the [plaintiff] was going to be entitled to some damages and therefore the refusal to make an offer was not reasonable… 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.
Even if the trial judge had erred, the Court found independent justification for the award: the plaintiff’s success, the defendant’s refusal to admit liability before trial, and the presence of “issues on outdated stereotypes relating to mental health injuries.”
Proportionality
The defendant argued that the costs award (nearly 20 times the damage) was disproportionate. The Court disagreed. At para. 44, The Court held:
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.
At para. 46, the Court emphasized that proportionality is intertwined with fairness and reasonableness, and appellate intervention is rare. At para. 47, The Court added:
proportionality should be considered but it should not necessarily trump all other considerations… an overemphasis on proportionality… ‘ignores the principles of indemnity and access to justice’.
Insurance Act, s. 258.5
The Court also addressed the interaction between the Rules of Civil Procedure and s. 258.5 of the Insurance Act. It held that insurers cannot rely on proportionality to avoid costs consequences after choosing not to make a reasonable offer. The Court stated:
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.
Conclusion
Barry illustrates the significant financial risk a defendant assumes when refusing to make any settlement offer in the face of a legitimate claim. The decision reinforces:
- deference to trial judges on costs,
- the limited role of proportionality,
- the consequences of unreasonable litigation strategies, and
- the importance of avoiding stereotypes about mental‑health‑related injuries.
