Update on contingency fee reforms
In December 2017, Convocation approved a series of reforms to regulate contingency fees. The reforms are designed to enhance transparency and protect consumers against unscrupulous practices while safeguarding the role of contingency fees in facilitating access to justice.
Since December, Convocation adopted additional, related regulatory measures and launched a call for comment on proposed rule amendments, a mandatory contingency fee agreement and a Know Your Rights guide for clients.
Amendments to the Solicitors Act and regulations are required to fully implement the contingency fee reforms.
The government’s Budget Bill, introduced on March 28, includes amendments to the Solicitors Act. It repeals subsection 28.1(8) of the Act, removing the restriction on including costs in contingency fee agreements except with leave of the court. The Budget also adds a new section to the Solicitors Act to provide that licensed paralegals may enter into contingency fee agreements with clients.
Once the budget bill is passed, these provisions will come into force on a date to be named by the Lieutenant Governor, achieving some of the Law Society’s proposed reforms. However, certain changes, including the introduction of a mandatory standard form contingency fee agreement, are dependent on changes to regulations.
It is not anticipated that the regulations will be made by Cabinet before May 9, 2018, when the provincial election campaign will begin. It is therefore likely that Government action on the remainder of the Law Society’s proposed reforms will occur after the election.
In the interim, the working group is revising the proposed standard form contingency fee agreement based on the feedback received during the call for comment. The working group is grateful for the helpful input it received from stakeholders and the professions.
Although the contingency fee reforms may not be fully implemented until the regulations are made by the Government following the election, the working group is moving forward with building components of the regulatory model.
The working group is continuing to develop amendments to the lawyer and paralegal conduct rules to require transparency and client reporting measures. These amendments include:
- A requirement for legal professionals to publicly disclose the maximum contingency fee percentage they charge by practice area, allowing increased transparency, and the ability for individuals to shop around for representation.
- A requirement to provide the Know Your Rights Guide to the client prior to entering into a contingency fee agreement. (The working group is also revising the Know Your Rights Guide for the public based on the feedback received during the call for comment.)
- Disclosure requirements on completion of an agreement, to provide the consumer with:
- a clear breakdown of the final settlement or award, including the net amount going to the client, disbursements, 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.
The working group will return to Convocation with proposed rule amendments in the coming months.
For more information, see the Advertising and Fees Issues Working Group webpage.
April 2018 Convocation Newsletter