High fees are often one of the first things that come to mind when hiring a lawyer. Most lawyers bill hundreds of dollars for every hour of work and pursuing a matter to the end of trial can take hundreds of hours, if not more. The cost of competent legal representation should not be a barrier to justice. To account for the fact that many people cannot afford to pay a lawyer up front, many personal injury lawyers will take on work through a contingency fee agreement.
A contingency fee agreement means that you only pay your legal fees if you win your case at trial or negotiate a settlement. If you are unsuccessful, you do not pay legal fees. You may still be responsible for paying other legal expenses, such as disbursements, or out-of-pocket expenses, but this can be discussed with the lawyer before you enter into a retainer agreement so that you know what you are responsible for paying. Some firms do not require you to pay disbursements if you lose, while others will.
A disbursement is an expense that the lawyer pays on your behalf to third parties for the purposes of advancing your claim. This could be court filing fees or paying for a medical assessments and reports to be used at trial.
Contingency fee agreements are common for personal injury claims cases. Lawyers cannot offer contingency fee arrangements for criminal or family law matters.
Recent changes to Ontario contingency fee agreements
Effective July 1, 2021, the Law Society of Ontario implemented standard changes to all contingency fee agreements. The purpose of the change was to enhance consumer protection, improve transparency and fairness to clients, and to improve access to justice. In addition to the current standard form contingency fee agreement, clients must also receive a “Know Your Rights” guide to help further explain contingency fee agreements.
The changes do not impact contingency fee agreements entered into before July 1, 2021.
The key elements of the new standard contingency fee agreement are:
- Costs are included in the amount on which the contingency fee is based – prior to the changes, costs were typically not included when applying the contingency fee percentage
- New provisions on what can and cannot be charged as disbursements
- Plain language is required to ensure the agreement is easily understood by all parties
How does a contingency fee agreement work?
In a contingency fee agreement, the fee you pay for legal services is a percentage of the amount of money you receive as a settlement or award. It also applies to any amount you receive for costs. Costs are money that a court or tribunal may order the losing party to pay to the person who wins the case.
You take the total award, add the costs, subtract the disbursements, then apply the contingency fee percentage and hst. The contingency fee, HST and disbursements go to your lawyer, and you keep the rest.
Here is an example where $100,000.00 is awarded at trial, plus costs of $30,000.00 which includes disbursements of $15,000.00:
| $100,000.00 award + $30,000.00 costs | $130,000.00 |
| Less: disbursements | -$15,000.00 |
| Subtotal: | $115,000.00 |
| Less: 30% contingency fee on subtotal | -$34,500.00 |
| Less: HST on contingency fee | -$4,485.00 |
| Client Receives: | $76,015.00 |
As you can see, even accounting for the repayment of the lawyer’s disbursements, the client takes home more than 70% of the awarded amount.
How is the contingency fee percentage determined?
The percentage charged as a contingency fee typically ranges from 10% to 45%, and is determined by considering factors such as:
- The likelihood of success;
- The nature and complexity of the claim;
- How much time will be required to advance your case;
- The expense and risk of pursuing the claim;
- The amount of the expected recovery; and
- The amount of costs awarded.
Some lawyers might use a graduated contingency fee, where the percentage applied depends on the stage that the matter is resolved. For example, the lawyer might charge 25% if the claim settles before Examinations for Discovery, 30% if it settles before pre-trial, and 35% if it continues past pre-trial to the end of trial.
Other lawyers might use a fixed percentage where the same contingency fee percentage applies regardless of the stage at which the file concludes.
There are some scenarios where the lawyer may use a partial contingency fee where you are expected to pay for some legal services at the outset of your claim, plus the contingency fee if you win.
Some contingency fee agreements allow for the lawyer to take the costs paid by the other side, leaving the entire amount of damages awarded at trial for you.
Law firms must disclose the highest percentage they charge so that there are no surprises.
Review the contingency fee agreement before signing
If you are looking for a lawyer to help you with a personal injury problem, it is important to know what percentage the lawyer charges for contingency fees, and whether you are responsible for paying disbursements regardless of the outcome of your case. You will want to know what type of contingency fee the lawyer charges, whether it is fixed, graduated, or partial.
The lawyers at Siskinds will explain how our contingency fee agreement works and how we are paid before beginning a new client-lawyer relationship with you.
Victoria Edwards practices with the Siskinds Personal Injury department. If you have any questions about the information contained within this article or any other personal injury questions, please write to victoria.edwards@siskinds.com or call her direct line 519-660-7848.