Weilers LLP

Contracts as to Legal Costs

Contracts as to Legal Costs

June 1, 2023

By Jonathon Clark

Ontario, like most of Canada, follows the British tradition of requiring a losing party to reimburse the winning party a portion of their legal expenses after a trial. This differs from the American tradition.

How much of the actual legal costs should be awarded as court costs payable by a losing party?


Specifically, what costs should be payable if payment of the actual claim is based on an indemnity clause which contains an agreement to indemnify the winning party for their full legal expenses?


A recent Ontario Court of Appeal decision dealing with a lengthy and complex product liability dispute revisits this issue and reminds us of the basic principles:

  • An award of court costs is always subject to the discretion of the judge making the decision;
  • An appeal court will only vary the costs where they are based upon a wrong principle, or reflect an obvious and fundamental error of law;
  • Where a contractual provision as to costs exists, it does not exclude the right of the court to exercise its discretion and award an amount that differs from the terms of the contract; however, generally judges will exercise their discretion so as to reflect the contract;
  • Judges may exercise their discretion differently where there is “good reason” to do so; and
  • “Good reason” includes where the winning party engaged in “inequitable conduct” or there are “special circumstances” which would make the contractual costs “unfair or unduly onerous”.

In this particular case, the judge mistakenly thought that the contract claim for cost indemnity should be a separate action. He was wrong. This is the sort of error in law which the Court of Appeal will correct. They sent that issue back to the trial judge to determine costs again on the basis of the principles discussed, even though they denied the rest of the appeal.


Costs can be an important issue in every case and part of the Weilers LLP proud tradition is providing our clients with experienced and effective strategic advice about the effect of costs. Our advice is not generic but is tailored to the particular circumstances of every case. Our progressive approach helps anticipate what may happen in your case. We do not have a crystal ball and cannot give guarantees, but we are proud of our track record.

If you want lawyers who think strategically, even about costs of litigation, why not give Weilers LLP a call and see if we are the right lawyers for you.