What are contingency fees? That’s what’s being offered when you see an advertisement which says, “You don’t pay until we win.” And contingency fees are often offered with free consultations up front. Sounds good, right? So: why don’t all law firms offer contingency fees and free consultations?
For a very long time, the rules of professional responsibility that regulate lawyers in Ontario did not permit contingency fees.
Our Law Society used to prohibit contingency fees because it was thought they could trigger something called “champerty”. “Champerty” is an old-fashioned word: but arose from concern that a lawyer who wasn’t going to be paid until the proceeding ended successfully might lose sight of the client’s interest and “stir up strife” for his own profit.
When after an historic decision in 2002 the Court of Appeal held contingency fees were permissible, the Law Society made sure there were restrictions and conditions to protect clients. You can read about them here: https://www.lsuc.on.ca/ContingencyFees/
Lawyers in Ontario can’t take on criminal law or family law matters on a contingency fee basis but only civil matters. Lawyers working on a contingency fee basis must have an agreement in writing with the client in advance which is clear and unambiguous. That agreement must set out a “fair and reasonable” percentage of the court order or settlement which will be paid to the lawyer if success is achieved.
What’s “fair and reasonable” in each instance will depend upon a number of factors, including: the likelihood of success, the complexity of the claim, the expense of pursuing the claim, the amount of the expected recovery, who is to receive an award of costs and the amount of costs awarded. Lawyers working for contingency fees generally expect 30% or more. If the costs are to be paid to the lawyer in addition to the contingency fee, then the costs agreement must receive judicial approval in advance.
Contingency fees are complicated. In Ontario civil courts they are primarily used in personal injury matters and most typically when somebody has been injured in a motor vehicle accident. The car accident victim may be offered a free consultation, but if after that consultation the lawyer considers that the matter has a low likelihood of success or that the expense of pursuing the claim is too great in comparison with the expected recovery, the lawyer is absolutely entitled to decline to take on the case at all. Even lawyers who offer contingency fees are not obligated to offer them to every client seeking their services.
Lawyers working on contingency fees in personal injury matters know that they will incur significant costs out of pocket up front for medical reports and other related expenses, and that they may carry the expenses of the file for years. These firms generally operate on large lines of credit (which generate significant interest costs). They may seek to offset their carrying costs through various plaintiff funding or financing arrangements which also generate costs that must be passed along to the client. Contingency fees can certainly be an “access to justice” issue for persons who have suffered injury in motor vehicle accidents and expect large recoveries to meet the costs of future care; but personal injury lawyers are well compensated for the risks they take and they deserve to be.
In civil class action proceedings, when many plaintiffs have suffered small losses that would not be cost-effective to pursue individually – but are worth pursuing collectively – contingency fees can also make a big difference. Again it took an historic decision of the Supreme Court in 2001 before the law could evolve in this direction. Individuals would not be able to afford the legal fees and that’s why contingent fee arrangements work in class actions. But it’s still not easy to get a class action court certified so that the group of tort victims can proceed with a representative plaintiff.
There are law firms which have built their business model on contingency fees when their focus of legal practice lends itself to the contingency fee approach. Outside personal injury and class action matters, contingency fees are rare. We don’t act in motor vehicle or class action proceedings, and we don’t offer contingency fees.
However, at Anderson Adams we are sympathetic to your worries about the costs of legal proceedings and we can offer two options to cushion those costs.
First of all, we discount the fee charged on many initial consultations and we try to be generous with our time at those initial consultations. Our experienced law clerks do their best to gather basic facts from you in advance of your initial consultation. Often one of our lawyers can provide a limited opinion up front at that consultation, helping you decide whether you want to proceed before even considering a retainer. There is no obligation for you to retain our firm after an initial consultation.
Secondly, when possible we offer “limited scope” retainers. That means In many instances we can provide legal services in “bite sized” chunks. For example, we may be able to help with drafting legal documents for court proceedings without going “on the record” in a court proceeding. You can read more about limited scope retainers in our blog on the topic.
Free legal services? You know that there is no such thing as a free lunch, and you know that there are significant overhead costs to running a law firm which have to be met out of legal fees. We know that you are always going to be anxious about the costs of litigation. That’s why, whenever we can, we want to help you make an informed decision up front and to offer you legal services on an as-needed basis.
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