Under Rule 14.07 of the Small Claims Court Rules, a party who makes a formal offer to settle that the other side rejects — and then does better at trial than the offer — can ask the court to increase the costs awarded against the other side, generally up to double the usual amount. Small Claims Court costs are also capped at 15% of the amount claimed under the Courts of Justice Act; how that cap interacts with a doubled costs award is a point courts have not applied with complete consistency, so confirm the realistic range with a lawyer before relying on either figure.
- A formal offer to settle under Rule 14.07 that the other side rejects can lead to an increased costs award if you do better at trial than your offer.
- The increase is generally measured against the usual Small Claims Court costs, not against your damages award.
- Small Claims Court costs, apart from disbursements, are capped at 15% of the amount claimed under section 29 of the Courts of Justice Act.
- How a doubled Rule 14.07 costs award interacts with the 15% cap is not applied with complete consistency by the courts — treat any specific number you see online with caution and get advice on the realistic range for your claim.
- To trigger the cost consequence, the offer generally needs to be a genuine, clearly worded offer made before trial, not simply a demand letter.
- Even without the cost consequence, a well-documented offer can still help demonstrate reasonableness to the court and support settlement discussions.
What an Offer to Settle Is
An offer to settle is a formal, written proposal made by one party to resolve the claim before trial — for a specific dollar amount, or on specific terms. Either the plaintiff or the defendant can make one. The point is not just to try to settle; a properly made offer that is rejected can also carry real cost consequences later if the party who made it does better at trial than the offer would have given the other side.
How Rule 14.07 Works
Rule 14.07 of the Small Claims Court Rules sets out two mirror-image situations. If a plaintiff makes an offer to settle that the defendant rejects, and the plaintiff then recovers an amount at trial that is as good as or better than the offer, the court may increase the costs awarded to the plaintiff. If a defendant makes an offer that the plaintiff rejects, and the plaintiff ends up recovering less than the offer (or nothing), the defendant may be entitled to increased costs from the date the offer was made.
The purpose is to encourage realistic settlement. A party who refuses a fair offer and pushes the case to trial anyway should bear some of the cost of that choice if the trial outcome shows the offer was reasonable all along.
The 15% Costs Cap
Small Claims Court costs work differently than in Superior Court. Under section 29 of the Courts of Justice Act, an award of costs in Small Claims Court, other than disbursements, generally cannot exceed 15% of the amount claimed or the value of the property sought to be recovered, unless the court considers a higher award necessary in the interests of justice. This cap exists specifically to keep Small Claims Court accessible and proportionate.
How the Two Rules Interact
How a Rule 14.07 cost increase interacts with the 15% cap is not applied with complete consistency across cases. Some commentary treats the two as able to work together — potentially pushing an award above 15% of the claim where the rule’s conditions are met — while the cap itself is framed as the default ceiling absent a finding that more is necessary in the interests of justice. Do not rely on a specific percentage or dollar figure you see quoted online without confirming the current approach with a lawyer, since this is an area where courts have reached different results.
Making an Offer That Counts
- Put it in writing, clearly labelled as an offer to settle
- State a specific amount or specific terms, not a vague willingness to discuss
- Make it early enough that rejecting it was a real choice, not a formality right before trial
- Keep a copy and proof of when and how it was delivered to the other side
A plaintiff claims $20,000 and offers to settle for $14,000 early in the process. The defendant rejects the offer and proceeds to trial, where the court awards the plaintiff $16,000. Because the plaintiff did better at trial than their own offer, they can ask the court to consider an increased costs award reflecting the defendant’s rejection of a reasonable offer.
Using Offers to Settle Strategically
Even setting aside the cost consequences, a clear, well-timed offer to settle signals to the court — and to the other side — that you are approaching the dispute reasonably. Whether you are deciding how to respond to an offer, or thinking about making one yourself, it is worth getting a sense of your claim’s realistic value and the potential cost exposure before the deadline passes.
Deciding whether to accept, reject, or make a settlement offer in a Toronto-area or Ontario-wide claim? Our lawyers offer a free 30-minute consultation to help you weigh the costs and risks. Call us at 416-274-2222 or contact us online.
Frequently Asked Questions
A formal, written offer to resolve the claim for a specific amount or set of terms, made by one party to the other before trial. If it is rejected and the party who made it does better at trial, the court may award increased costs.
Rule 14.07 generally allows the court to award up to double the usual costs of the action if the conditions are met. The exact amount is up to the court’s discretion and interacts with the overall 15% costs cap, so the realistic range varies by case.
Section 29 of the Courts of Justice Act generally limits Small Claims Court costs, other than disbursements, to 15% of the amount claimed, unless the court finds a higher award necessary in the interests of justice.
This is genuinely unsettled. Some commentary suggests the two provisions can work together to exceed 15% in the right circumstances, while courts have not applied the interaction with complete consistency. Do not assume either outcome without legal advice specific to your claim.
Not automatically. An offer intended to trigger Rule 14.07’s cost consequences should be a clear, formal settlement offer, not simply a demand letter restating what you are owed.
As early as reasonably possible once you have a realistic sense of your claim’s value, and certainly before trial. The earlier a reasonable offer is on the table and rejected, the stronger the cost consequence argument later.
Yes. A defendant can make an offer to settle as well, and if the plaintiff rejects it and then recovers less than the offer at trial, the defendant may be entitled to increased costs from the date the offer was made.