August 14, 2025
Litigation is expensive, time-consuming, and emotionally draining. That’s why Ontario courts strongly encourage parties to settle disputes before trial. But what happens if one party unreasonably refuses a fair settlement offer? The answer: they may pay for it—literally.
In Ontario, courts have the discretion to impose cost consequences on parties who reject reasonable offers to settle and then fail to achieve a better result at trial. This principle is grounded in Rule 49 of the Rules of Civil Procedure, which is designed to promote early settlement and efficient use of court resources.
Litigation strategy isn’t just about winning—it’s also about managing risk. Parties in Ontario lawsuits should think carefully before rejecting a reasonable settlement. Judges have little patience for parties who clog up the system when resolution was possible.
What Is a Rule 49 Offer?
A Rule 49 offer is a formal written offer to settle that complies with certain requirements under the Rules of Civil Procedure. If a party makes a Rule 49 offer and the other side declines it, they risk cost penalties if the final court judgment is less favourable than the offer.
In short: refusing a reasonable offer can backfire, especially when the court finds that the trial could—and should—have been avoided.
How Are Costs Calculated?
Ontario courts typically award legal costs on either:
- Partial indemnity (the usual, lower level—roughly 50–60% of actual legal fees)
- Substantial indemnity (a higher level—often 80–90%)
If a party makes a Rule 49 offer that is better than what the other side achieves at trial, the successful party may be awarded substantial indemnity costs from the date of the offer forward.
Key Takeaways
- Early settlement can save both time and money.
- Rule 49 offers should be taken seriously—they carry real cost risks.
- Refusing a fair offer may result in having to pay the other side’s legal fees at a higher rate.
- Courts assess not only whether the offer was reasonable, but also whether rejecting it led to unnecessary trial time.
How Weilers LLP Can Help You
If you’re involved in a lawsuit, you want lawyers like the litigation team at Weilers LLP, who will give you sound advice about the strategic use of Rule 49 offers. A well-timed offer—and a well-reasoned response—could make all the difference.
Give us a call. We may be the right lawyers for you.