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Posted on February 21st 2006 in Legal Articles

Contingency Fees – Now permitted in Ontario

Contingency Fees – Now permitted in Ontario

“. . . Clearly contingency fees are in the public interest because they provide greater access to justice, and that means helping to make legal services more accessible to people in need.”
Professor Vern Krishna, Treasurer
Law Society of Upper Canada

One of the most commonly-asked questions of personal injury lawyers is whether they will work on a contingency fee basis. While clients may not have a great familiarity with the legal process, one concept they are familiar with is contingency fees.

A contingency fee arrangement is an agreement whereby the lawyer agrees to accept a percentage of the final monetary award obtained by the client. In addition, the lawyer agrees to accept the risk of receiving nothing if the lawsuit is unsuccessful.

Although contingency fees have long been accepted in the United States and in most of the other provinces, until recently they were essentially considered illegal in Ontario. One of the purported reasons behind this ban was that if lawyers had a vested interest in the outcome of litigation, improper conduct might occur.

Despite contingency fee arrangements not being permitted, Ontario lawyers were allowed to enter into quasi-contingency fee arrangements. In essence, legal fees would be deferred until the claim was resolved, at which time the exact amount of the fees and how they should be calculated would be determined.

Partly as a result of a decision of the Ontario Court of Appeal in the fall of 2002, contingency fees are now available in Ontario. Contingency fees have always been something that were desired by both lawyers and clients, however they were never approved by the Law Society of Upper Canada or the legislature by way of the Solicitors Act.

On October 31, 2002 the Law Society approved a change to the Rules of Professional Conduct which had previously suggested that contingency fees were prohibited by law. A maximum percentage has not been specified, rather contingency fees must be fair and reasonable. Under the new rules, a lawyer and client may enter into a contingency fee arrangement provided it:
• is in writing;
• is signed by the lawyer and client;
• contains a statement of the method by which the fee is to be determined, including the percentage that may accrue to the lawyer in the event of settlement, trial or appeal; and
• includes a statement that the client may appeal to a Superior Court Judge for a determination of whether the fee is fair and reasonable.

In including these conditions the Law Society has attempted to structure a contingency fee system that is fair for both the lawyer and the client. They have also included other requirements which further protect the client, specifically:
• that the fee arrangement does not require the lawyer’s consent to discontinue or settle the claim;
• that the client is free to change lawyers or end the lawyer/client relationship at any time; and
• a specific reference that contingency fees shall not apply to family or criminal matters.

The Rules also suggest that a contingency fee agreement should take into account a number of factors and that the written fee arrangement should specifically refer to factors such as:
• the likelihood of success;
• the nature and complexity of the claim;
• the expense and risk of pursuing the claim; and
• who is to receive an award of costs.

Contingency fee arrangements will allow for greater access to justice, particularly to lower- and middle-income earners.

If you have questions about contingency fees, or would like to discuss a contingency fee arrangement please feel free to contact one of our lawyers.