Executive Summary: Key Legal and Evidentiary Issues

• Appellant insurer challenged a lower court’s finding that it had a duty to defend the plaintiff in a Landlord and Tenant Board proceeding.

• Deputy judge’s decision ordering the insurer to pay plaintiff’s costs was overturned on appeal.

• Central issue was whether the original costs award could survive despite the appeal ruling in the insurer’s favour.

• Plaintiff argued the costs were unappealable due to being under the $3,500 threshold set by regulation.

• Court clarified that a successful appeal on the merits nullifies any costs award made at first instance.

• Regulatory appeal limits on costs do not override general appellate principles where judgment is reversed.

Appellant insurer challenged a lower court’s finding that it had a duty to defend the plaintiff in a Landlord and Tenant Board proceeding

Ryan Akman, a self-represented plaintiff, initially succeeded in Small Claims Court against Sonnet Insurance Company. The deputy judge found that Sonnet had a duty to defend Mr. Akman, who was acting as a landlord in proceedings before the Landlord and Tenant Board. The deputy judge also awarded Akman $1,600 in costs. Sonnet appealed the decision, and in March 2025, the Divisional Court allowed the appeal, concluding that the deputy judge had made an error of law. The court ruled in favour of Sonnet, set aside the earlier judgment, and awarded it $2,500 in costs for both the appeal and trial levels.

Following the appeal, a dispute arose over how the costs order from the Small Claims Court should be treated. Mr. Akman insisted he was still entitled to receive the $1,600 originally awarded to him, despite Sonnet's success on appeal. The matter returned to court for clarification.

Court clarified that prior costs award was extinguished by successful appeal

Justice Corthorn of the Divisional Court addressed the narrow issue of whether the initial costs order survived the successful appeal. The court reaffirmed the established principle that when an appeal results in a reversal of the lower court’s decision, the original costs award is typically also set aside. The court cited existing appellate authority confirming that the successful appellant is entitled to both the costs of the appeal and of the lower court proceeding, displacing any costs previously awarded to the losing party.

Akman had relied on section 2 of Ontario Regulation 626/00, which bars appeals from Small Claims Court decisions involving costs below $3,500. He argued that since the $1,600 award was not appealable on its own, it should remain intact regardless of the appellate outcome. The court rejected this argument, clarifying that the regulatory restriction did not apply in this context because the costs issue arose incidentally from a valid appeal on the merits, not as a standalone challenge to costs.

Court emphasized fairness and practicality in costs treatment

Justice Corthorn also noted that allowing both parties to enforce their respective costs awards would create an illogical result—effectively requiring Sonnet to pay $1,600 to Akman even after winning on appeal. This would lead to a net payment of $900 to Sonnet instead of the full $2,500 it was awarded. The court found such an outcome to be neither practical nor just.

Outcome confirmed Sonnet’s full appellate success

In summary, the Divisional Court ruled that the initial $1,600 costs award to Akman no longer stood and that only the $2,500 costs award in favour of Sonnet remained enforceable. There were no further costs ordered for the clarification hearing itself. The case reinforces that appellate victories typically unwind earlier cost consequences, and that regulatory limits on cost appeals do not insulate reversed decisions from the normal operation of costs principles.