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Contingency fees: Can you pay your lawyer a percentage?

Region: Ontario Answer # 471

Contingency fees are tied to the success or failure of your lawsuit or other transaction. If your lawyer is successful in winning your claim or negotiating a business deal, he or she receives a fee calculated as a percentage of what you are awarded in a court ruling or the value of what you gain in a deal. If the lawsuit or transaction fails, your lawyer may receive an agreed-upon flat fee or disbursements only or perhaps nothing at all.

Historically, lawmakers were reluctant to allow contingency fees because they feared it would encourage frivolous lawsuits since clients pay nothing at the start, and that some lawyers may only take on cases that they were reasonably certain would win. That said, paying for legal representation up-front can be prohibitive in many cases. By allowing contingency fees, people have greater access to justice, especially those who cannot afford a lawyer and those who do not qualify for legal aid.

Contingency fees can be a good thing for the client but this type of fee arrangement should be considered carefully. Under the Ontario Solicitors Act, contingency fee agreements must be in writing between the lawyer and client — with court approval required in some cases, such as large class action lawsuits. Also, contingency fees are not allowed in criminal, quasi-criminal or family law matters. Among other things, the contingency fee rules also state that the following be included in the agreement:

  • the contingency upon which the fee is to be paid,
  • allows the client to collect full payment for an award of costs, even if it exceeds the amount payable under a contingency fee agreement, if the award is used to pay the client’s solicitor,
  • a statement that the client retains the right to make all critical decisions regarding the conduct of the matter,
  • if the client is the plaintiff, a statement must be included stating that the lawyer shall not be paid more in fees than the client recovers in damages from the lawsuit,
  • a simple example of how the contingency fee will be calculated,
  • a description of disbursements, and a statement about whether the client is responsible for payment of the disbursements or taxes.

Also, the law precludes lawyers from collecting both the contingency fee and legal costs (unless approved by a judge), and gives the court the right to review contingency fee agreements.

Changes to contingency fees

On July 1, 2021, the Law Society of Ontario announced the following amendments to contingency fees:

Under the Solicitors Act:

  • repeal subsection 28.1(8), which prohibits the inclusion of costs in the amount on which a contingency fee calculation is based

Under Lawyer and Paralegal Conduct Rules:

  • requirement to disclose the maximum contingency fee percentage charged in certain circumstances
  • requirement to provide potential clients with the standard form consumer guide – Contingency Fees: What you need to know
  • requirement to provide certain fee-related reporting to clients on completion of the agreement

Can paralegals charge contingency fees?

The Solicitor’s Act also includes new section 32.1 that allows paralegal to enter into contingency fee agreements – except in Criminal Code (Canada) or any other criminal or quasi-criminal matters.

More information on the amendments can be found from the Law Society of Ontario here.

Should you pay a contingency fee?

If you and your lawyer (or paralegal) are considering entering into a contingency fee arrangement, investigate whether it truly is the best deal. The typical contingency fee may be anywhere from 10% to as much as 45% of what you may be awarded. You must decide if this is a fair amount in your situation. In deciding whether the percentage is appropriate, it is a good idea to consider:

  • what the estimated costs would be based solely on an hourly rate or fixed fee,
  • the complexity of the legal matter,
  • who pays for any up-front expenses, and
  • what, if anything, you may be required to pay if the case fails.

Always discuss what fees will be charged and how your case will be handled before entering into an agreement with your lawyer.

For more information on contingency fees, visit 862 How lawyers and paralegals calculate their fees.

If you or someone you care about has been injured, contact our preferred Personal Injury experts, Nicola (Nick) Giannantonio Legal Services . They offer a free consultation and do not charge up-front fees.








								

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