Uniformity Key in LSO's Newly Mandated Contingency Fee Agreement

Business woman reviewing a document with a client in her office
As of July 1, 2021, significant changes implemented by the Law Society of Ontario have come into effect regarding Contingency Fee Retainer Agreements. These changes are not retroactive and will not impact contingency fee retainer agreements which have been signed before July 1, 2021. However, for potential litigants who have yet to retain a legal representative, and are considering their options before doing so, these recent changes are important considerations in determining whether to sign a retainer agreement.  

What is a contingency fee retainer agreement?

The foundational concept of a Contingency Fee Retainer Agreement has not changed with the newly implemented reforms. In short, a Retainer Agreement sets out the legal contractual relationship between a client and a legal representative and, specifically, each party’s obligations pursuant to the relationship. A Contingency Fee means that rather than a client paying for their legal representative’s services on an ongoing basis, where fees are calculated based on the time that a legal representative has spent working on a particular file, the legal representative receives payment if the matter is resolved in favour of the client and the client has received compensation. In these circumstances, payment is calculated as a percentage of the monetary settlement or award, rather than on the time spent on the matter. It is important to note that legal professionals are still prohibited from offering Contingency Fee Retainer Agreements for family law and criminal matters, because of public policy considerations. Examples of matters where Contingency Fee Retainer Agreements can be and are typically used include medical malpractice claims, long-term disability insurance claim denials, and personal injury matters of all sorts.  

What has changed?

As of July 1, 2021, Contingency Fee Retainer Agreements must follow the standard wording prescribed by the Law Society of Ontario, the regulatory body that governs the legal profession. Previously, the provisions of Contingency Fee Retainer Agreements could vary between legal service providers. Now, potential litigants can be confident that the wording of each Contingency Fee Retainer Agreement will be consistent. It is important to note that while the wording of the Contingency Fee Retainer Agreement will be consistent, the Contingency Fee percentage can vary between legal professionals. Legal professionals are also now obligated to disclose the standard maximum percentage of a contingency fee charged, either on their website or during the first point of contact with a potential new client. For individuals contemplating whether to sign a Contingency Fee Retainer Agreement, having access to this information at the beginning of the contractual relationship with a legal professional allows for them to make informed decisions regarding their legal representation. Additionally, when circulating a Contingency Fee Retainer Agreement for a potential client’s review, it must be accompanied with the standard form consumer guide, drafted by the Law Society of Ontario. This guide explains the Contingency Fee Retainer Agreement and provides answers to frequently asked questions.  The standard form consumer guide can be found here, via the Law Society of Ontario’s web page. Another significant change is the repealing of subsection 28.1(8) of the Solicitors Act. In repealing this subsection, legal professionals are now able to include legal cost awards as part of the amount on which a contingency fee is calculated.  A legal cost award is additional compensation awarded by the court to a successful litigant or received in settlement to compensate for a portion of the legal fees incurred in reaching a resolution. What this change means, is that a legal representative can charge the agreed-upon contingency fee percentage on the total of the damage award and legal cost award. Once the Contingency Fee Retainer Agreement is concluded, typically when the case is resolved, the legal representative is now required to provide a written breakdown of the award or settlement. Most lawyers have long been providing such a breakdown to clients, but now it is being mandated. This written breakdown must include the net amount received by a client and an itemized list of the legal fees, assessable disbursements and applicable taxes charged to the client. Additionally, unless a court has approved a Contingency Fee, a legal representative must set out the reasonableness of the Contingency Fee charged relative to the time spent on the matter, the legal complexity of the matter, the results attained, and the risks assumed by the legal representative. Finally, a legal representative must indicate that the client has the right to apply to the Superior Court of Justice for an assessment of his or her legal bill.  

Experienced personal injury lawyers

These new amendments are intended to streamline and provide further transparency to potential clients and clients alike, from the start to the end of the relationship. A lawsuit can be a confusing and stressful process for litigants, and our experienced personal injury lawyers are here to provide assistance and support. If you or a loved one are considering commencing a lawsuit, please contact one of our lawyers to have an experienced personal injury lawyer review the information. Contact us today.


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