An Ontario employer’s “hard-line approach” and unreasonable settlement position in a wrongful dismissal case has resulted in the court ordering the maximum costs allowable under simplified procedure rules to the successful plaintiff.
In a costs endorsement to Lachapelle v. St. Laurent Automotive Group Inc., the Ontario Superior Court of Justice ordered St. Laurent Automotive to pay $62,699.16 in costs after the plaintiff successfully pursued a wrongful dismissal claim.
Case background
The court had previously awarded J.L. $65,610.02 as common-law notice for seven months plus benefits of $6,561 (minus the statutory minimum amounts already paid). The court dismissed claims for bad faith, aggravated and punitive damages, and found nothing was owed under a construction retention bonus.
Despite incurring legal fees exceeding $200,000, J.L. sought costs of $62,699.16 from the defendant. This represented the maximum available for legal fees under Rule 76.12.1 of the Rules of Civil Procedure ($50,000 plus HST), plus $6,199.16 for disbursements.
St. Laurent Automotive argued that costs should be fixed at $30,000 all-inclusive, suggesting the maximum amount payable should be “reserved for cases of higher complexity, or situations where an award of substantial indemnity costs is clearly warranted.”
Reasonableness as the guiding principle
The court noted that when determining costs, “the facts and circumstances of the case are important” and should be considered in relation to the relevant factors set out in Rule 57.01.
“Reasonableness, in light of the facts of the case, is the overriding principle,” the court stated. “The amount ordered for costs must reflect what is fair, reasonable, and proportionate, rather than an exact measure of the actual costs to the successful litigant.”
In simplified procedure actions (involving claims of $200,000 or less), Rule 76.12.1 caps recoverable costs at $50,000 plus HST for fees and $25,000 plus HST for disbursements.
Unreasonable positions forced trial
The court determined this was “a highly disputed action, with the parties unable to agree on matters that should have been agreed upon, for example, the plaintiff’s salary, benefits, and outstanding vacation.”
According to the court, St. Laurent Automotive took unreasonable positions, including:
- Initially refusing to acknowledge that J.L. had been terminated, arguing he had voluntarily resigned
- Refusing to admit the plaintiff’s lay-off constituted constructive dismissal “when this was and should have been obvious”
- Failing to disclose relevant documents
Most significantly, the court found that the trial was required because of “the defendant’s unreasonable settlement position.” J.L. had made two reasonable settlement offers:
- On January 3, 2021, offering to settle for $60,000 less statutory deductions, plus $15,000 for legal fees and disbursements
- On January 12, 2023, “negotiating against himself,” offering to settle for the all-inclusive sum of $40,000
In contrast, St. Laurent Automotive offered just $4,000 to settle the action.
“These offers were genuine attempts to resolve this action. Accepting either of these offers would have been a better outcome for the defendant than proceeding to trial,” the court stated.
Maximum costs justified
The court ruled that J.L.’s request for $56,500 in fees (the Rule 76.12.1 limit plus HST) was “proportionate, fair, and reasonable.”
“A lesser award would undermine the costs consequences intended to encourage early settlement and fair litigation conduct,” the court explained. “It would also fail to reflect the time and effort expended by the plaintiff to achieve a just result after years of unnecessary litigation, considering that the plaintiff obtained a better result than either of his two offers.”
The court noted that “but for the limits imposed on costs imposed by Rule 76.12.1, I would have found it fair and proportionate to order the defendant to pay more in costs, something more reflective of its unsuccessful hardline approach.”
Questioning cost limits in simplified procedure
The court raised concerns about whether the cost limits in simplified procedure actions actually improve access to justice when defendants “can afford to play hard ball irrespective of reasonable offers made by plaintiffs.”
“Fully facing the costs consequences of one’s unreasonable settlement positions might motivate early resolution and improve access to justice,” the court observed.
The court also noted that the maximum amounts prescribed in Rule 76.12.1 “are not indexed and the hourly rates for legal services and for the cost of various disbursements continue to increase.”
For parties in simplified procedure actions, the court offered this caution: “parties involved in a simplified procedure action should know that they must exercise additional constraint in their expenditure of legal costs, or risk being further limited in their recovery of costs from the other side.”
Substantial indemnity costs triggered
The court found that J.L.’s settlement offers triggered Rule 49.10(1), making substantial indemnity costs available from the date of the plaintiff’s first offer.
The court explained that successful parties in civil actions in Ontario “may, depending on various circumstances, generally recover about 60% of his or her legal fees, plus disbursements, from the other side. This proportion may rise to 90% of some or all the successful party’s legal fees depending on offers to settle and other circumstances.”
Even with a reduction to a more “reasonable and proportionate range,” calculating costs at 60% before the settlement offers and 90% after would easily exceed the $50,000 maximum allowed for fees in a simplified procedure action.
For more information, see Lachapelle v. St. Laurent Automotive Group Inc., 2025 ONSC 2879 (CanLII).
