It is best practice to hire a lawyer when getting involved in a lawsuit or a dispute. But when new clients approach our firm, they often ask whether they can recover their legal fees. Other common questions are: “If I commence this lawsuit, is there any risk if I am unsuccessful? Can I choose to stop pursuing my claim at any time?”
The short answers are yes, yes, and yes.
The longer (and better) answers are below.
When a court renders a decision, section 131 of the Courts of Justice Act allows it to also make an order on legal fees (often called costs). Section 131states:
131: 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.
Legal fees are usually awarded to the successful party, but the court will also consider the total amount claimed and recovered in the lawsuit, the behaviour of the parties, and any offers to settle. The full list of factors to be considered are set out in section 57.01 of the Rules of Civil Procedure, which can be reviewed here.
The amount of fees awarded are up to the discretion of the court but can be generally broken down into three categories: partial indemnity, substantial indemnity, and full indemnity.
Partial indemnity is around 60% of your legal fees, substantial indemnity is 75%, and full indemnity is 100%. Partial indemnity is considered standard.
What if your case does not go to trial and you settle beforehand?
Congratulations! Settling your lawsuit is often a good idea as it saves you from ongoing legal fees and the inherent risks involved with a trial. When your case settles, both parties must agree on the terms of settlement, including legal fees. However, one incentive to settle a case early on (from the payor’s perspective) is that the legal fees may waived by the receiver in order to encourage the agreement.
Please be aware that offering to settle the lawsuit for the full amount you are claiming usually isn’t accepted. The offer should carry some sort of incentive to the defendant, otherwise, they may take their chances at trial.
Offering to settle your lawsuit isn’t only beneficial when the offer is accepted. Sometimes, it is worthwhile to make an offer even when you don’t expect it to be accepted. Pursuant to Rule 49 of the Rules of Civil Procedure,there are consequences for not accepting reasonable offers to settle.
If a defendant does not accept an offer provided by the plaintiff, and the court awards a judgment better than the offer, then the plaintiff should be awarded their partial indemnity costs up to the date when they served the offer, and substantial indemnity costs thereafter.
By contrast, if a plaintiff does not accept an offer provided by the defendant, and the court awards a judgment to the plaintiff that is less than what the defendant offered, then the plaintiff should be awarded their partial indemnity costs up to the date that the offer was served. However, the defendant will be entitled to their partial indemnity costs thereafter (even though the plaintiff won).
In short, you want to beat your offer when it comes to trial.
The primary risk to commencing a claim and taking it all the way to trial is that you may be ordered to pay the defendant’s legal fees if your claim fails.
One way to minimize that risk is to offer to settle the lawsuit early on and before trial. However, if the defendant believes that they do not owe you any money at all, then they may not accept any settlement offer no matter what. In this case, if you really do not want to risk being ordered to pay legal fees, then you may consider dropping the claim entirely.
If you decide to drop your claim, then you will most likely need the consent of the defendant since they may want to pursue their legal fees. From the defendant’s perspective, why should they have to pay their own legal fees when you started a lawsuit and now want to walk away?
Despite the above sentiment, in cases where the claim is not entirely devoid of merit, defendants will usually consent to the “without costs” dismissal of the claim in order to reduce their own risk as well.
The longer the claim goes on, the more legal fees both sides will incur, and the less likely the defendant will consent to a without costs dismissal.
The foregoing should not be considered to be legal advice and should not be relied upon as such. Please consult a lawyer to get advice and an opinion on your unique circumstances.
The foregoing should not be considered to be legal advice and should not be relied upon as such. Please consult a lawyer to get advice and an opinion on your unique circumstances.