Can a party recover legal costs if the other side refused a reasonable settlement offer?

Yes, this is one of the main ways costs consequences arise in Ontario family court. Under the Family Law Rules, a formal written offer to settle can have a direct effect on costs: if the party who rejected the offer ends up doing no better, or worse, than what was offered once the matter is finally decided, the court can order them to pay some or all of the other side's costs from the point the offer was made onward. This is designed to encourage realistic settlement offers and discourage prolonging litigation over positions that turn out to be unreasonable.

Whether costs actually follow depends on the specifics: how the offer compared to the eventual outcome, whether it was a genuine, clear offer capable of being accepted, and the overall conduct of both parties throughout the case. A court isn't required to award costs just because an offer existed, but a well-documented, reasonable offer that was unreasonably refused is a strong factor in a costs decision. Anyone considering making or responding to a settlement offer should get legal advice on how to structure it, since the wording and timing can matter significantly to any later costs argument.