A fundamental consideration in determining whether or not to pursue or defend a claim is the costs involved. In the traditional sense, "costs" refers to the expenses of a legal proceeding that are paid by each party to his or her own lawyer. These consist of fees for the time spent by the lawyer and his or her support staff working on the case, plus any out-of-pocket disbursements (i.e. court filing fees, service of documents, court reporters, expenses paid for expert reports, etc.), plus HST. While the winning party may be able to receive some of these costs back from the opposing party, in most cases the winning party will still have to pay a portion of their own legal costs.

On top of these fees that will be paid, should the Defendant lose, not only would the Defendant be required to pay any damages ordered by the court, but interest on the damages. Unless expressly stipulated in a contract, the Courts of Justice Act provides for two different interest rates that are applied to civil matters – pre-judgment and post-judgment interest. These interest rates can vary depending upon what the Bank of Canada rate was when the proceeding was commenced. Pre-judgment interest starts from the date the cause of the claim arose until the time of the judgment. After a court judgment is made, post-judgment interest accumulates until the judgment is finally paid. Given that the process to get to final judgment can take several years, interest often becomes an important consideration in settling matters as it can accumulate to a significant sum.

Due to the costs involved, it may be in the parties' best interests to try to work out a settlement. Should negotiations fail and the matter proceed to a trial, the judge will favour the party who offered a settlement that was equal to or greater than the judgment in ordering "substantial indemnity costs" against the opposing party. Substantial indemnity costs are equal to most or all of the successful party's legal costs. Where no offers to settle have been made, the general rule is that only "partial indemnity costs" will be awarded. Partial indemnity costs may cover roughly half or 60% of the actual costs of the successful party.