-S.29 of the Courts of Justice Act, R.S.O. 1990, c. 43 governs rules on costs in the
Small Claims Court, which reads at section 29:

  1. An award of costs in the Small Claims Court, other than disbursements, shall not exceed 15 per cent of the amount claimed or the
    value of the property sought to be recovered unless the court considers it necessary in the interests of justice to penalize a party or a party’s
    representative for unreasonable behaviour in the proceeding.

-Rule 19 of the Rules of the Small Claims Court generally governs the power of the Court to make costs rulings. Rule 19.02 authorizes the Deputy Judge to make costs awards in line with s. 29 of the Courts of Justice Act. This same section of the Courts of Justice Act with respect to unreasonable behaviour is repeated and codified into the Rules of the Small Claims Court at Rule 19.06 which reads:

19.06 If the court is satisfied that a party has unduly complicated or prolonged an action or has otherwise acted unreasonably, the court may order
the party to pay an amount as compensation to another party. O. Reg. 78/06, s.39.

-In the Small Claims Court, numerous Deputy Judges have followed these common law principles. Deputy Judge Prattas indicated in Lahrkamp v Metropolitan Toronto Condominium Corporation No. 932, 2017 CanLII 99428 (ON SCSM) that in fixing costs, “the overall objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceedings, rather than an amount fixed by the actual costs
incurred by the successful litigant”. (Citing Wilfred v. Dare et al., 2017 ONSC 2718 (CanLII) and Boucher).

– In fixing costs Justice Feldman of the Court of Appeal has written that the purpose of award costs are to: (i) to indemnify successful litigants for the costs of litigation, although not necessarily completely, (ii) to facilitate access to justice, including access for impecunious litigants, (iii) to discourage frivolous claims and defences, (iv) to discourage and the sanctioning of inappropriate behaviour by litigants in the conduct of their proceedings, and
(v) to encourage settlement. (1465778 Ontario Inc. v. 1122077 Ontario Ltd. (2006), 82 O. R.(3d) 757 (Ont. C.A.)).