One of the first questions clients often ask when considering litigation is: “If I win, will the other side have to pay my legal fees?”

The short answer is sometimes, but rarely all your legal fees.

In the Ontario Superior Court of Justice, the general rule is that the successful party is entitled to an award of costs. But that does not usually mean the losing party will reimburse all of the successful party’s legal fees. Understanding how costs work is important before deciding whether litigation makes financial sense.

What are “costs”?

“Costs” are amounts that one party may be ordered to pay to the other to compensate them for legal fees and disbursements. A costs award is not necessarily the same as your actual legal bill.

Partial indemnity costs

In most cases, costs are awarded on a partial indemnity basis. This means the successful party recovers only a portion of its legal fees. As a general guideline, a partial indemnity award is often in the range of 50% of the successful party’s actual legal fees, although the amount varies depending on the circumstances.

In short, an employee who wins a wrongful dismissal claim may receive costs from the employer, but they should not assume the employer will reimburse all of the employee’s legal fees. The same applies to employers who successfully defend a claim.

Substantial indemnity costs

There are circumstances where a court may award substantial indemnity costs, generally calculated as 1.5 times the partial indemnity rate.

Substantial indemnity costs are the exception rather than the rule and may be awarded where the circumstances justify a higher costs award, such as where a party has acted unreasonably or in bad faith. Even with an award of substantial indemnity costs, a successful party may still have an unrecoverable portion of their legal fees.

Rule 49: The Impact of Settlement Offers

Rule 49 of the Rules of Civil Procedure1 is designed to encourage parties to settle cases rather than proceed to trial. It gives parties an incentive to make and seriously consider formal settlement offers because rejecting an offer can have consequences for legal costs.

For a Rule 49 offer to have these costs consequences, it must:

  • be made at least seven days before the hearing,
  • remain open and not expire or be withdrawn before the hearing, and
  • not be accepted by the other side.

The costs consequences depend on who made the offer and how the trial result compares to it.

If the plaintiff makes the offer: If the plaintiff makes a Rule 49 offer and obtains a judgment that is as favourable as or more favourable than the offer, the plaintiff is generally entitled to partial indemnity costs up to the date the offer was served and substantial indemnity costs from that date onward. The defendant may therefore be required to pay a greater portion of the plaintiff’s legal fees incurred after the offer was made.

If the defendant makes the offer: If the defendant makes a Rule 49 offer and the plaintiff obtains a judgment that is as favourable as or less favourable than the offer, the plaintiff is entitled to partial indemnity costs to the date the offer was served and the defendant is entitled to partial indemnity costs from that date. The plaintiff may therefore have to pay a portion of the defendant’s legal costs, including their costs associated with the hearing itself.

Small Claims Court is different

The Small Claims Court has a different costs regime. Since October 1, 2025, this court in Ontario has jurisdiction over claims of up to $50,000.

The costs regime in Small Claims Court is significantly more limited than in Superior Court. Generally, the successful party can recover costs of up to 15% of the amount claimed or awarded. This means that while the costs consequences of losing may be more limited, a successful party will typically have a greater portion of its legal fees that cannot be recovered from the other side.

Choosing the Right Court Matters

Where you bring your lawsuit can also affect whether you recover any of your legal costs.

Under Rule 57.05 of the Rules of Civil Procedure, if you bring a claim in Superior Court for more than $50,000 but ultimately recover an amount within the monetary jurisdiction of Small Claims Court, the court may decide not to award you any costs.

In other words, you could win your case and still receive nothing toward your legal fees. The court may take the position that, because your judgment was within the jurisdiction of Small Claims Court, you should have brought the claim there in the first place. Choosing the right court at the outset can therefore make a significant difference to the financial outcome of your case.

Conclusion

Ultimately, winning a lawsuit does not necessarily mean walking away with all your legal fees covered.

An employee may win a wrongful dismissal claim but still need to absorb a significant portion of their legal fees. Similarly, an employer may successfully defend a claim but still spend substantial amounts defending itself.

That does not mean litigation is not worthwhile. In many cases, pursuing or defending a claim is the right decision. But it is important to understand the potential costs and recovery before making that decision.

If you are considering bringing or defending a claim, or deciding whether to accept a settlement offer, get legal advice before making a decision that could have significant financial consequences. Our lawyers can help employees and employers assess the potential value, risks and costs of litigation and develop a strategy that makes sense for their circumstances.

Feel free to contact us to discuss your legal situation.

Endnotes

  1. Ontario, Rules of Civil Procedure, RRO 1990, Reg 194, current consolidation (August 12, 2026), https://www.ontario.ca/laws/regulation/900194.

 

The post If I Win, Do I Get My Legal Costs? Understanding Costs in Ontario Litigation appeared first on Rudner Law – Employment Lawyers.