Effective July 1, 2021, the Law Society of Ontario implemented new requirements as part of its ongoing contingency fee reform. These requirements are intended to simplify and standardize the information that potential clients receive if they need to engage a lawyer or paralegal to assist them in a contingency fee matter.
The changes include the following:
- New Standard Form Contingency Fee Agreement:
Under the new changes, every lawyer or paralegal retaining a client under a contingency fee arrangement must use a new standard form agreement to do so. Very few changes can be made to this document by the individual lawyer or paralegal. It is drafted in plain language so that clients can easily understand the agreement. - Requirement to Disclose Maximum Contingency Fee Percentage:
All lawyers or paralegals who operate using contingency fees must now disclosure the general maximum percentage they will charge clearly on their website, or must provide this information during the first client contact. - Simpler Fee Calculation:
For lawyers or paralegals who were retained under a contingency fee agreement prior to July 1, 2021, they were prohibited from taking their legal fees on cost awards. Their fees were only to be taken on damages and interest recovered. The costs were to be returned to the client in the amount awarded. This created complications in the event of an “all-inclusive settlement” where the amount allocated to costs was not directly stipulated in the settlement. The client’s lawyer or paralegal had to then determine what percentage of that settlement would be assigned to costs. This inherently put the lawyer in a conflict of interest with their client, as it was in the client’s best interest to have a larger percentage of the settlement allocated to costs, whereas it was in the lawyer’s best interest to have a lesser percentage allocated to costs. Under the new standard form Contingency Fee Agreement, lawyers or paralegals take their fees on costs. This provides clear direction to lawyers and paralegals and removes any potential conflict of interest between them and their client. - Consumer Guide:
All lawyers and paralegals operating under a contingency fee arrangement must now provide their potential client with a standard form guide entitled Contingency Fees: What You Need to Know. This provides a detailed explanation of contingency fees, drafted in plain language, to assist the client in understanding the agreement they are entering. The guide further provides sample questions to ask your lawyer or paralegal about their expertise and how they will handle your claim.
The biggest advantage of these changes is the ease with which a potential client can compare lawyers and paralegals. Clients will know up front the maximum contingency fee percentage each firm will take, and those fees will be taken on all damages, fees, and costs obtained for the client. There is no room for firms to vary the structure of their contingency fee calculations; all will be uniform across Ontario.
Overall, the changes help potential clients better understand contingency fees and the agreements they are entering into. The standard form Contingency Fee Agreement is shorter and more straight forward than most agreements used prior to the changes. Similarly, the new calculation takes away all confusion and is simpler for a client to understand.
More clarification will likely be needed on the changes in the upcoming months, but for the most part these new requirements are a welcome change for both clients and their legal counsel.
OTLA Members – for more information on the New Contingency Fee Agreements, check out this webinar in our online store here.
