In the context of litigation in Ontario, Canada, "cost consequences" refer to the financial implications of a legal case's outcome. When a lawsuit is filed and proceeds through the court system, various parties may incur expenses related to legal fees, court costs, expert witness fees, and other associated expenses. The concept of cost consequences pertains to which party or parties will be responsible for covering these costs.

WHY DO COST CONSEQUENCES EXIST?

As discussed by the Ontario Court of Appeal: 

[C]osts have more recently come to be recognized as an important tool in the hands of the court to influence the way the parties conduct themselves and to prevent abuse of the court's process. 

Barbour v. Bailey, 2016 ONCA 334 (CanLII), at para. 9

In addition to preventing the abuse of court process costs, awards encourage settlement, deter frivolous actions and defences and discourage unnecessary steps that unduly prolong the litigation.

CRITICISM OF COSTS CONSEQUENCES

The most common criticism of cost consequences is that it undermines the pursuit of justice. It is a deterrent to those with legitimate claims who don't want to risk consequences. 

DO COST CONSEQUENCES DETER LEGITIMATE CASES?

In my experience, the answer is no. Most people with legitimate cases will obtain legal advice before deciding whether to pursue a case. If it's a legitimate case with a good prospect of success, cost consequences will be discussed but are rarely the deciding factor. The decision is most often made on a cost-benefit analysis rather than the consequences of losing. 

This doesn't mean that costs and consequences don't sway legitimate cases. They are a vital tool in motivating early settlements and deterring litigants from refusing reasonable offers. 

THE REMOVAL OF COSTS CONSEQUENCES IN ADMINISTRATIVE TRIBUNALS

Tribunals such as the License and Appeals Tribunal (LAT) and the Workplace Safety and Insurance Administrative Tribunal (WSIAT) have removed cost consequences. These tribunals accept the risks of frivolous disputes by removing costs and consequences for the losing party. The expressed motivation for doing so was to remove this so-called deterrent for those who would otherwise choose not to pursue legitimate cases. 

On its face, it looks as if this would promote access to justice by ensuring that everyone feels safe in pursuing administrative disputes. 

The most important takeaway is that neither party is obligated to pay costs. In other words, the wrongdoer who triggered the need for an action has no costs or consequences either. 

THE REALITY OF REMOVING COSTS CONSEQUENCES

In my opinion, the removal of costs and consequences in the LAT and WSIAT creates a significant access to justice issue. The most common scenario can be summarized as follows: 

• 1. The insured is denied coverage for reasons that would never justify a denial if heard by the tribunal. 

• 2. The insured, who has, for lack of better words, an open and shut case on a denial, sees a lawyer. 

• 3. The costs of using a lawyer for the hearing nears or exceeds the cost of disputing the denial of coverage. 

Since there is rarely a large lump sum payment after a LAT or WSIAT hearing, lawyers cannot take these matters on contingency. The insured has to pay legal fees.

If cost consequences existed in these types of tribunal hearings, clients would have the ability to recoup legal fees on legitimate disputes. Lawyers would have the added flexibility of retaining cost awards in their fee structure. 



By removing cost consequences, insurers are open to taking unreasonable positions, knowing that insureds are unlikely to obtain legal representation to dispute these positions.