Can I recover my legal costs if I sue the seller and win?

A buyer who sues a seller after closing and wins can ask the court to order the seller to pay some of the buyer’s legal costs. Whether that order is made, and for how much, is decided by rules that differ by province and by court. This page uses Ontario’s Superior Court as the example because its rules are published. Another province, the Small Claims Court or an arbitration may work differently, and a purchase agreement may add its own terms.

The court decides

Section 131(1) of the Courts of Justice Act says that, subject to an Act or rules of court, the costs of and incidental to a proceeding are in the discretion of the court, which may decide by whom and to what extent they are paid. Rule 57.01(1) of the Rules of Civil Procedure lists what the court may consider in addition to the result and any written offer to settle. The list includes the principle of indemnity, the amount claimed and the amount recovered, the apportionment of liability, the complexity of the proceeding, and conduct that tended to shorten or lengthen the proceeding unnecessarily. Winning is one factor among several.

Written settlement offers

Rule 49.10 of the Rules of Civil Procedure gives an offer to settle cost consequences. Under Rule 49.10(1), if a plaintiff’s offer is made at least seven days before the hearing starts, is not withdrawn and does not expire before the hearing, and is not accepted by the defendant, and the plaintiff then obtains a judgment as favourable as or more favourable than the offer’s terms, the plaintiff is entitled to partial indemnity costs to the date the offer was served and substantial indemnity costs from that date, unless the court orders otherwise. A lawyer can explain how a settlement offer fits your claim.

What the purchase agreement says

Read the agreement’s indemnity section. BDC describes indemnities as the ground rules for the compensation a vendor pays if disclosures prove inaccurate or covenants are not respected, and notes that a seller is not liable for misrepresentations forever and that the seller’s liability is typically capped. Ask whether the indemnity mentions legal costs, whether claims must be made within a set time, and whether the cap applies to them. See how representations, warranties and indemnities work.