In Ontario, in most cases, the loser in a step in a civil law suit pays the legal fees of the winner. It is for this reason, we always advise our clients of this and warn that no outcome before a Judge can be guaranteed.
There is good reason for awarding costs against the loser: it reduces frivolous litigation and ensures that we don’t end up looking like the USA legal system. I am aware of the view point that says this stifles legitimate litigation by scaring people away with the threat of legal fees.
The amount of legal fees awarded is divided into two categories: substantial indemnity and partial indemnity costs. Substantial indemnity costs are 100% of the legal fees and disbursements the winner paid their lawyer. Partial indemnity are approximately 60% of the legal fees and 100% of the disbursement the winner paid their lawyer.
Substantial indemnity costs are generally only awarded in a few situations:
1. if there is a contract that entitles the winner to those costs;
2. if the loser has alleged fraud and is unsuccessful;
3. if the winner had offered to settle for amount less than they were awarded.
A company with a good reason to sue should not be afraid to do so. With good legal advice, the risks can be properly managed and you can litigate with confidence.