What Happens to Costs When You Discontinue a Lawsuit in Ontario?

Plans change. New evidence surfaces, a business relationship shifts, or the cost of continuing simply outweighs the potential recovery. Whatever the reason, many Ontario plaintiffs eventually ask the same question: can I just walk away from my own lawsuit?

You generally can — but discontinuing a lawsuit in Ontario is rarely free. There is a default costs consequence that catches many self-represented plaintiffs off guard. Understanding it before you file, or before you decide to stop, can save you an unpleasant surprise.

This article explains the default rule, why it exists, and how it should factor into your decision to keep going or pull back.

The Default Rule: You Usually Owe Something

Ontario's civil procedure generally treats a voluntary discontinuance as, in effect, giving up the claim at that point. The common default is that a plaintiff who discontinues is responsible for the defendant's costs up to the date of discontinuance — not the full costs of a trial that never happened, but the costs the defendant actually incurred defending the claim so far.

This is not automatic in every scenario — the parties can agree otherwise, or a court can order differently — but it is the starting assumption a plaintiff should plan around.

Why This Rule Exists

The logic is straightforward: a defendant who is sued has to respond — file a defence, gather evidence, possibly retain a lawyer — regardless of whether the plaintiff eventually follows through. If a plaintiff could walk away at any point without any costs consequence, defendants would bear all the risk and expense of being sued, while plaintiffs faced none of the downside of starting a weak or premature claim.

A default costs consequence encourages plaintiffs to:

• Investigate a claim thoroughly before filing
• Avoid using a lawsuit as a pressure tactic with no intention of following through
• Take the decision to discontinue seriously, since it is not cost-free

When the Rule Can Bend

The default outcome is not absolute. A few common scenarios change the picture:

• Mutual agreement — if both sides agree to end the case, often as part of a settlement, the costs treatment is whatever they negotiate, not the court's default rule.
• Early discontinuance — costs incurred very early in a case, before a defence is even filed, are typically much smaller than costs incurred after extensive steps have been taken.
• Court order — a judge retains discretion over costs generally, and can depart from the default in appropriate circumstances.
• No claim for costs made — if a defendant does not pursue a costs order after a discontinuance, none may be formally assessed.

A Practical Framework Before You Discontinue

If you are weighing whether to drop a claim, work through these questions first:

1. How far has the case progressed? The more steps taken — defence filed, discoveries started, motions argued — the higher the defendant's costs likely are, and the more you may owe.
2. Is settlement instead of discontinuance possible? A negotiated resolution can address costs directly, rather than leaving the default rule to apply.
3. Is there a genuine reason the claim no longer makes sense? New facts, a change in the debtor's ability to pay, or a realistic reassessment of your chances are all legitimate reasons — but they do not erase the costs consequence.
4. What court are you in? Costs exposure in Superior Court proceedings tends to be larger than in Small Claims Court, given the difference in scale and process.
5. Have you spoken with a lawyer about the discontinuance itself? Sometimes a partial discontinuance, an amendment, or a negotiated withdrawal produces a better costs outcome than an outright discontinuance.

Discontinuing vs. Losing at Trial

It can help to compare the two outcomes side by side:

• Discontinuing early generally means the smallest possible costs exposure, since fewer steps have been taken.
• Discontinuing late, after extensive steps, means costs exposure can approach what a losing party at trial might face, since the defendant has already incurred most of the expense of defending the case.
• Losing at trial typically means the largest costs exposure, since the case has gone the distance and a court has made a full costs award, on top of losing the underlying claim.

In many cases, an earlier, honest reassessment of a weak claim is cheaper than pushing forward to trial and losing.

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