It is a fundamental strategic decision in litigation: to offer nothing, or to offer next to nothing, in hopes of forcing a plaintiff to abandon their claim or accept a low settlement offer rather than finance a trial and risk an adverse cost award. This “no offer” or “lowball” strategy may seem like a smart, albeit high-stakes gamble, but a growing body of Ontario jurisprudence makes it clear it may not be a gamble a prudent litigant should make. Courts are increasingly using their power to award costs to punish this approach, framing it not as a legitimate tactic, but as a form of unreasonable litigation conduct that undermines the very purpose of the justice system.
Of the recent decisions on this issue, none are more powerful than the Ontario Court of Appeal’s recent ruling in Barry v. Anantharajah, 2025 ONCA 603.
In Barry, the defendant took the hardball approach and offered nothing prior to trial. The case involved a plaintiff who suffered injuries after being hit by the defendant’s car. The defendant initially offered to settle for a dismissal without costs, an offer that was made again prior to trial and was never increased to a monetary amount. The case proceeded to a three-week jury trial where the jury ultimately awarded the plaintiff damages that netted just $16,160.50 after accounting for a finding of contributory negligence and the statutory deductible.
Despite the plaintiff’s modest recovery, the trial judge ordered the defendant to pay $300,000 in legal costs, an amount that was upheld by the Court of Appeal.
The trial judge was particularly critical of the defendant’s “aggressive litigation strategy” and “outdated view that mental health injuries are less worthy of compensation than physical injuries”. Ultimately, the trial judge concluded that the principle of proportionality, which typically links costs to the amount of the award, was not the determinative factor because it was the defendant’s conduct that made a costly trial necessary.
The Court of Appeal explained that it found no error in the trial judge’s reasoning that, 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.” The Court of Appeal agreed with the trial judge’s finding that the defendant was aware of evidence that would entitle the plaintiff to some damages and that its refusal to make an offer was therefore unreasonable.
The Court of Appeal’s analysis in upholding this decision was a powerful endorsement of the trial judge’s reasoning. The appellate court will not interfere with a discretionary costs award unless the trial judge made an error in principle or the award is so disproportionate as to be “plainly wrong”. In Barry, the Court of Appeal found no such error. They agreed with the trial judge’s assessment that the defendant’s litigation strategy was unreasonable and that it was fair and reasonable for the defendant to bear the cost consequences of that aggressive approach.
The Barry decision is not a one-off anomaly. It is the most recent and powerful example of a principle that courts across Ontario have applied to discourage unreasonable litigation.
For example, in Persampieri v. Hobbs, 2018 ONSC 368, the court had to decide costs in a personal injury action where the plaintiff was a successful litigant but had recovered a modest amount of damages. Similar to Barry, the defendants in this case had adopted a “no offer” position from the outset, forcing the matter to trial. The court emphasized that a costs award was not solely determined by the result of the trial, but was also a tool to encourage parties to settle and avoid the unnecessary use of court resources. Despite the relatively small net award of approximately $20,000, the court granted the plaintiff a cost award of over $200,000. The court found that the defendant’s hard ball approach was “uncompromising, and, (in the light of the jury verdict) unreasonable”. The judge explicitly rejected the defendant’s argument that proportionality should be the overriding factor, stating that to do so would “reward the uncompromising… unreasonable behaviour of the insurer” and would have a “denial of access to justice”.
The principles discussed in Persampieri and Barry are affirmed in Moustakis v. Agbuya, 2024 ONSC 4981. In this case, the defendant admitted liability, but the matter proceeded to a 12-day jury trial on damages. Although the jury awarded a total of $330,000, statutory deductions resulted in the plaintiff only recovering $55,252.61. The defendant had made a settlement offer for a dismissal of the action without costs, effectively offering nothing. The judge found that the defendant’s hardball strategy forced the plaintiff, who had a “good but modest claim,” to go to trial. The court again ruled that proportionality must give way to the “important access to justice principles” that underlie Rule 49 and awarded $378,000 in costs and disbursements.
In light of this clear and consistent jurisprudence, the strategy of making no offer, or a negligible offer, is fraught with risk. The courts are sending an unequivocal message that a party’s obligation is to act reasonably and in good faith to resolve disputes.
A failure to do so is not simply a mere negotiating ploy and can amount to a form of unreasonable conduct. For practitioners, this means advising clients that a reasonable offer, even if for a small amount, is a vital tool to manage litigation risk and to protect against the very real possibility that, even if you win by minimizing damages, you will lose on costs.
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