Convocation approves plans to regulate contingency fees for better public access and protection

Posted: 12/01/2017

Advertising and Fee Arrangements Issues Working Group report on referral feesConvocation approved a report with several recommendations to protect access to justice for the public, while ensuring protection from unscrupulous practices and unreasonable fees.

“The existence of contingency fees is critical in opening the doors to justice for all Ontarians, no matter the individual’s financial situation,” says Malcolm Mercer, Chair of the Law Society’s Advertising and Fee Arrangements Issues Working Group. “The recommendations transform the way contingency fees work, providing equal access to justice for all individuals, regardless of their ability to pay, while increasing transparency and consumer protection.”

The recommendations, developed by the Law Society’s Advertising and Fee Arrangements Issues Working Group, are designed to regulate contingency fees to facilitate legal representation at a fair and reasonable cost. They include:

  • The introduction of a mandatory standard contingency fee agreement.
  • A ‘Know Your Rights’ guide for the public.
  • Disclosure requirements on completion of an agreement, which provide the consumer with the following:
    • a clear breakdown of the final settlement or award, the net amount going to the client, disbursements costs, legal fees and taxes;
    • a statement explaining the reasonableness of the fee in light of factors such as legal complexity, the results achieved and the risk assumed, including the risk that the matter would not have been successful; and
    • a statement that the client has the right to assess the account.
  • A requirement for legal professionals to publically disclose the maximum contingency fee percentage they charge by practice area, allowing increased transparency, and the ability for individuals to shop around for representation; and
  • New reporting information required on lawyers’ and paralegals’ annual reports to the Law Society. Aggregate data will be shared with the public and policy makers to better inform future consumer choice and policy decisions.

The contingency fee reforms are intended to apply to arrangements with individuals and small businesses and partial contingency fee arrangements. They will not apply to class actions. More detail on the reforms is available in the Professional Regulation Committee report to Convocation.

The new regulatory measures were approved in principle. The Working Group will return to Convocation with recommendations for rule amendments. The development of resources and amendments to the Solicitor’s Act are also required for full implementation.

Introduced in Ontario over a decade ago, contingency fees provide members of the public with access to justice by allowing clients not to pay legal fees until a settlement or trial results in damages recovery. The lawyer or paralegal usually receives a fee calculated as a percentage of what is recovered.

“The access to justice benefits of contingency fees are well recognized,” says Mercer.

“For personal plight cases, such as motor vehicle accident cases, the contingency fee arrangement provides an option that assists particularly vulnerable clients who otherwise may be deprived of the ability to advance their claims.”

The Law Society examined the idea of capping contingency fees, but found doing so was not in the public interest as caps would likely pose a barrier to accessing legal services.

The contingency fee reforms build upon the Law Society’s changes to referral fees and advertising rules, which came into effect earlier this year. These measures, along with the strengthening of the rules governing the advertising of legal services, increase transparency for the consumer and add additional public protection measures.

More information is available in the Professional Regulation Committee report to Convocation and on the Advertising and Fee Arrangements Issues Working Group webpage.

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