Under a contingency arrangement, a lawyer’s fee is tied to the success or failure of the lawsuit or transaction. If you succeed in your claim or successfully complete a transaction, your lawyer receives a pre-negotiated percentage of your recovery. What if your claim fails or the transaction is not completed? The lawyer’s fees in that situation are also negotiated in advance. You may be required to pay only a flat fee, or only disbursements, or nothing at all.
For a long time, legislators frowned upon contingency fee arrangements. It was feared that allowing contingency fee billing would encourage frivolous lawsuits. On the other hand, it was feared that lawyers would accept only cases they were certain to win. Access to justice considerations have resulted in the allowance of contingency fee arrangements. After all, the requirement to pay for legal representation up front can act as a barrier for some clients seeking a lawyer.
Ontario’s Solicitors Act establishes several requirements for contingency fee agreements:
- The agreement must be in writing.
- In some cases, the agreement may require court approval.
- Contingency fees are not permitted in criminal, quasi-criminal or family law matters.
- The agreement must specify the percentage of the lawyer’s recovery, and that it excludes any amount received for costs and disbursements.
- The agreement must stipulate the circumstances under which the fee is payable.
- The agreement must allow the client to collect full payment for costs awards even if it exceeds the amount payable under the agreement, if the awards are used to pay the lawyer.
- The client must retain the right to make all critical decisions in conducting the matter.
- A lawyer representing a plaintiff is not permitted to recover more than the plaintiff recovers in damages.
- The agreement must include a simple example showing how the fee is calculated.
- The agreement must describe the possible disbursements and state whether the client is responsible for paying disbursements or taxes.
Lawyers are not permitted to collect both contingency fees and legal costs in the same matter except with a judge’s approval. Courts have the authority to review all contingency fee agreements.
Contingency fees charged by lawyers can range from 10 per cent to 45 per cent of a client’s recovery. A client considering a contingency fee billing arrangement should carefully consider whether that is reasonable. Factors a client should consider include:
- The total estimated cost if an hourly rate or flat fee billing method applied;
- The complexity of the matter;
- Who is responsible for paying up-front expenses; and
- What the client will be required to pay if he or she is not successful.
There are several different ways that lawyers calculate and bill fees. Contingency fees may be appropriate in some circumstances, but not all. You should discuss your budget and a lawyer’s billing methods before retaining a lawyer.
Contingency Fees LSUC