Small Claims costs rules punish failure to accept reasonable offers to settle

Case Summary

Jolicouer et al v. Scheibler, Court File No. SC-24-00000030-0000 (Fort Frances)

Ontario's Small Claims Court is a branch of the Superior Court of Justice that has jurisdiction to hear civil disputes for the payment of money or the recovery of property of up to $50,000. The Small Claims Court is mandated to "determine in a summary way all questions of law and fact and may make such order as is considered just and agreeable to good conscience".

In keeping with this mandate, the court's procedures contain a number of features which are intended to streamline the proceeding, reduce expenses, incentivize settlement, and penalize unreasonable behaviour by parties. These include less onerous discovery requirements, an early settlement conference presided over by a deputy judge, a modest 'cap' of $100 in costs for most motions, and cost rules intended to encourage resolution.

To this end, section 29 of the Courts of Justice Act limits the costs that can be awarded in an action in the Small Claims Court to 15% of the amount claimed, excluding disbursements, "unless the court considers it necessary in the interests of justice to penalize a party or a party’s representative for unreasonable behaviour in the proceeding."

Relatedly, rule 14.07 of the Rules of the Small Claims Court provides that where a party makes an offer to settle that is not accepted by the other party, the court may award the offering party an amount of costs up to twice the costs of the action, where a judgment is received that is equal to or more favourable than the terms of the offer. The offer must be made at least 7 days before trial and cannot have been withdrawn or expired before trial.

Until October 1, 2025, when the jurisdiction of the Small Claims court was $35,000, this meant that the highest cost award that could be made (subject to "unreasonable behaviour" under section 29) was $5,250. This 'cap' can be doubled to $10,500 if the requirements of rule 14.07 are met. Now that the jurisdiction of the court has been increased to $50,000, those thresholds are $7,500 and $15,000, respectively.

On June 29, 2026, the Small Claims Court issued a costs decision in the matter of Jolicouer et al v. Scheibler (an occupation rent claim we have previously written about). The decision is illustrative of the impact that these rules can have on the bottom line of an unsuccessful party that has ignored a reasonable offer to settle.

In this case, the plaintiffs claimed $35,000 in damages. After trial, $25,720 in damages were awarded. Deputy Judge Jamieson, after considering the cost submissions of the parties and noting that the plaintiffs had "succeeded in obtaining an award equal to approximately 165% of the amount" of their offer (which was $15,000), and thus had met the requirements of rule 14.07. His Honour awarded costs of the action in the amount of $10,500, representing the maximum available at the time of trial. In addition, he awarded the plaintiffs $714.29 in disbursements from the action, plus $900 in costs of a preceding motion to strike, and $127 in motion disbursements. This brought the total costs payable by the defendant to the plaintiffs to $12,241.59.

Consequently, the defendant's failure to accept an offer to settle resulted in a cost award equal to approximately 50% of the damages awarded against her. Rather than resolving the matter for $15,000, the defendant is now on the hook for $37,961.59.

This costs decision is illustrative of the significant impact of the Small Claims Court's rules of costs - even in modest claims - where parties do not act reasonably to consider options to fully and finally resolve their disputes. This jeopardy will be escalated under the increased monetary jurisdiction of the Small Claims Court, which will now hear an even larger volume of Ontario's civil litigation.

The successful plaintiffs were represented by Douglas W. Judson of Judson Howie LLP.

For more information, please contact:

Douglas W. Judson (he/him)

Judson Howie LLP

Email: doug@judsonhowie.ca