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Frequently Asked Questions about Contingency Fees

The Law Society of Ontario has developed these Frequently Asked Questions to support lawyers and paralegals with understanding and implementing the requirements of Ontario’s new contingency fee regime. Guidance is grouped by topic:
  1. Overview and Purpose
  2. Contingency Fees
  3. Contingency Fee Agreements
  4. Client Disclosure Requirements
  5. Marketing Requirements
  6. Statement of Account
  7. Record Keeping and Reporting Requirements
  8. Resources and Supports

Overview and Purpose


Contingency Fees

  • 9. What is a contingency fee?
    A contingency fee under the Solicitors Act is one in which any part of the lawyer or paralegal’s  fees for legal services is contingent or dependent on the successful disposition or completion of the matter for which the lawyer or paralegal is retained.
     
  • 10. When can I charge a contingency fee?
    Lawyers can charge a contingency fee in any matter except for family law, Criminal Code (Canada), or any other criminal or quasi-criminal matters.

    Paralegals can charge a contingency fee in any matter within their permitted scope of practice except Criminal Code (Canada) or any other criminal or quasi-criminal matters. The application of the contingency fee provisions of the Solicitors Act and its regulations to paralegals does not alter paralegals’ permitted scope of practice.
  • 11. How can contingency fees be structured?
    Contingency fee arrangements can be structured in different ways, including
     
    • Fixed percentage: The percentage that the lawyer or paralegal receives remains the same throughout the matter.
    • Staged or graduated:  The percentage that the lawyer or paralegal receives changes depending on the stage at which the matter is resolved. If it is resolved at an early stage, the percentage is lower. In later stages, the percentage goes up.
    • Partial: The client pays for some legal services at the outset of the matter or as it proceeds, plus a contingency fee if the client settles or is successful at trial. With a partial contingency fee arrangement, the percentage may be lower.
    • Bonus or premium: The client pays a bonus, premium, or other amount in addition to the lawyer or paralegal’s legal fees if a positive result is achieved in the matter.

    For more information about requirements relating to maximum contingency fees, determining the contingency fee for a matter, and how contingency fees may be calculated, see the questions that follow.
     
  • 12. Is there a maximum contingency fee I can charge?
    No maximum percentage has been prescribed by regulation.

    However, lawyers and paralegals are prohibited from charging a contingency fee that exceeds the amount the client receives under an award for damages or by way of settlement, including any costs but excluding disbursements and taxes.  Lawyers and paralegals must also ensure the contingency fee is fair and reasonable and disclosed to the client in a timely fashion. The factors for lawyers and paralegals to consider in determining whether a contingency fee is fair and reasonable for a particular matter are described below.

    For information about the requirement to post or disclose the maximum contingency fee charged when advertising fees, see the question Are there requirements specific to marketing legal services where clients may be charged on a contingency fee basis?
     
  • 13. How do I determine the appropriate percentage or other basis for the contingency fee?
    Lawyers and paralegals must ensure the contingency fee is fair and reasonable and disclosed to the client in a timely fashion. In determining what is fair and reasonable, lawyers and paralegals must consider several factors, including
     
    • the likelihood of success;
    • the nature and complexity of the claim;
    • the expense and risk of pursuing the claim;
    • the amount of the expected recovery; and
    • who is to receive an award of costs.

    As part of the new transparency requirements, lawyers and paralegals must advise clients of the factors they took into consideration in determining that the contingency fee is fair and reasonable. For more information, see the Client Disclosure Requirements section below.
     
  • 14. Can I include disbursements and taxes when calculating a contingency fee?
    No. If the contingency fee agreement provides that the fee is a percentage of the amount recovered by the client under an award or settlement, then the lawyer or paralegal must exclude any amount that is specified as being in respect of disbursements or taxes from the calculation. 

    However, if the contingency fee agreement makes clear that the client is responsible for paying such disbursements or taxes and the lawyer or paralegal paid them during the course of the matter, the lawyer or paralegal is entitled to be reimbursed for them from any amount recovered by the client under an award or settlement. Except as provided under Section 47 of the Legal Aid Services Act, 1998, the amount to be reimbursed is a first charge on the amount recovered under the award or settlement.
     
  • 15. Can I include a costs award in the amount on which a contingency fee is calculated?
    Yes. The Solicitors Act no longer prohibits a lawyer or paralegal from including costs in the amount on which a contingency fee is based.
     
  • 16. Where can I find examples of how to calculate contingency fees?
    Lawyers and paralegals may wish to consult the Standard Form CFA and Contingency fees: What you need to know consumer guide.
     

Contingency Fee Agreements

  • 17. What is a contingency fee agreement?
    A contingency fee agreement  is a retainer agreement under which payment, including payment of a bonus or premium, is dependent on the successful disposition or completion of a client’s matter. In Ontario, O. Reg. 563/20 prescribes the required form and content of contingency fee agreements and sets out impermissible terms.
     
  • 18. Do I have to use the Standard Form CFA posted on the Law Society’s website?
    Yes, lawyers and paralegals must use the Standard Form CFA unless:
     
    • The court has approved the contingency fee agreement, or the contingency fee set out in the agreement.
    • The contingency fee arrangement is with a client that is a business that
      • employs more than 25 individuals,
      • employs, as a legal advisor on a full-time basis, a person authorized under the Law Society Act to practice law or provide legal services in Ontario, or
      • has gross annual revenues exceeding $10 million.

    In this situation, however, lawyers and paralegals must ensure that the contingency fee agreement includes the information identified in Section 7(4) of O. Reg. 563/20 (the “Non-Standard Form CFA”). For more information, see the question “Are there any requirements for Non-Standard Form CFAs?” 
     
  • 19. If I am required to use the Standard Form CFA, am I permitted to modify it?
    The Standard Form CFA can only be modified in the following ways: 
     
    • filling in relevant information for the matter;
    • removing or tailoring optional language (for example, text that is highlighted red) as appropriate for the matter; and
    • aligning the Standard Form CFA with law firm branding (e.g., putting the Standard Form CFA on the firm’s letterhead).
  • 20. What should I do if there is additional relevant information not included in the Standard Form CFA?
    Lawyers and paralegals must be honest and candid with their clients, communicating with them at all relevant stages of a matter in a timely and effective manner. These duties require that lawyers and paralegals inform their clients in a timely manner of information known to them that may affect the clients’ interests in the matter. In the context of contingency fees, these duties include providing clients with any additional information specific to their matters or situations not captured in the Standard Form CFA. Lawyers and paralegals may consider explaining to clients that the Standard Form CFA applies to many areas of law and, as a result, may not completely align with or address all the specific facts or circumstances of their matter.
     
    Notwithstanding the above, lawyers and paralegals must comply with the contingency fee requirements and must not modify the Standard Form CFA, except as noted in “If I am required to use the Standard Form CFA, am I permitted to modify it?”
  • 21. What should I do if my client is offered a structured settlement and we have signed a Standard Form CFA?
    A structured settlement is one in which some or all of the settlement is paid to the client at intervals over a specified period, rather than in one lump sum. Structured settlements are appropriate and beneficial for clients in some cases.

    The Consumer Guide and Standard Form CFA are client-focused documents that apply to various practice areas and address the most common situations. They do not address structured settlements.

    As a result, in this situation, you must
     
    • explain to your client how the structured settlement works;
    • advise the client how the contingency fee will be calculated (e.g., it will likely be calculated based on the total amount of the settlement);
    • inform the client that the amount they receive from a structured settlement may be more or less than what they might receive as a lump sum, depending on how it is structured and the period over which it is paid; and
    • take extra care to highlight for your client information not captured in or that differs from the information presented in the Consumer Guide and Standard Form CFA.
     
    These obligations arise from your duty of honesty and candour. You should confirm these explanations with your client in writing and provide a written estimate of the approximate net amount the client is to receive from the settlement.

    Note, however, that you are prohibited from modifying the Consumer Guide or the Standard Form CFA and must comply with all other contingency fee requirements. For more information, see “If I am required to use the Standard Form CFA, am I permitted to modify it?”.
     
  • 22. Are there any requirements for a Non-Standard Form CFA?
    Yes. A Non-Standard Form CFA must be in writing and it must include the statements identified in Section 7(4) of O. Reg. 563/20. These statements explain to clients, among other things, the contingency fee structure, awarding of costs, reimbursement of disbursements, manner of termination, and the client’s right to assess the lawyer or paralegal’s bill. There is no specific template or format required for a Non-Standard Form CFA. To ensure compliance with these requirements, lawyers and paralegals should consult Section 7(4) of O. Reg. 563/20 and consider using the Law Society’s Non-Standard Form Contingency Fee Agreement Checklist.

    It is important to note, that the above requirements do not apply to:
     
    • contingency fee agreements entered into before July 1, 2021, and
    • contingency fee arrangements approved by the court (either the contingency fee agreement itself or the fee set out in the agreement).
  • 23. What terms are not permitted in a contingency fee agreement?
    Lawyers and paralegals are prohibited from including in a contingency fee agreement a provision that
     
    • requires the lawyer or paralegal’s consent before a claim may be abandoned, discontinued, or settled at the instructions of the client;
    • prevents the client from terminating the contingency fee agreement with the lawyer or paralegal or from changing legal representation; or
    • permits the lawyer or paralegal to split their fee with any other person, except as provided by the Rules or Paralegal Rules.
  • 24. Are there any additional requirements if my client is a person under disability?
    Yes. If you want to enter into a contingency fee agreement with a person under disability and who is represented by a litigation guardian, you must either
     
    • apply to a judge for approval of the contingency fee agreement before the agreement is finalized, or
    • include the contingency fee agreement as part of the motion or application for approval of a settlement or a consent judgment under Rule 7.08 of the Rules of Civil Procedure.

Client Disclosure Requirements

  • 25. What information do I have to provide clients before entering into a contingency fee agreement?
    Subject to limited exceptions, lawyers and paralegals must comply with the following client disclosure requirements prior to entering into a contingency fee agreement:
     
    • Advise each client of the factors considered in determining the appropriate contingency fee. These factors must include:
      • the likelihood of success;
      • the nature and complexity of the claim;
      • the expense and risk of pursuing it;
      • the amount of the expected recovery; and
      • who is to receive an award of costs.
    • Provide each client with a copy of the Law Society’s Contingency fees: What you need to know consumer guide and give the client a reasonable opportunity to review and consider the information in the guide.
      • Note: Lawyers and paralegals should review the consumer guide and advise clients of any gaps or differences between the consumer guide and the specific facts and circumstances of the client’s contingency fee arrangement or outcome of their matter. Lawyers and paralegals should confirm this discussion in writing.  

    If the lawyer or paralegal markets legal services on the basis that clients may be charged a contingency fee, there are additional disclosures that must be made. For more information, see the Marketing Requirements section below.
     
  • 26. What information do I have to provide clients after completing a contingency fee agreement?
    Upon completion of a contingency fee agreement, lawyers and paralegals must provide the following fee-related disclosure in the statement of account they prepare and deliver to the client:
     
    • A clear breakdown of the award or settlement (including the net amount that the client will receive, and an itemized list of the disbursements, legal fees, and taxes charged to the client). 
    • An explanation of the reasonableness of the contingency fee with reference to the following factors: the time expended, the legal complexity of the matter, the results achieved, and the risks assumed. This requirement does not apply where a court has approved the contingency fee.
    • A statement that the client has the right to apply to the Superior Court of Justice for an assessment of the lawyer or paralegal’s bill in accordance with Section 28.1 of the Solicitors Act and specifies the latest date for doing so. This requirement does not apply where the court has approved the contingency fee.

    The above requirements do not apply to contingency fee agreements entered into before July 1, 2021.

    For more information, see the question What are the billing requirements for contingency fees?” below.
     
  • 27. How should I document compliance with the client disclosure requirements?
    To assist in documenting compliance with the contingency fee requirements, lawyers and paralegals should consider using the Law Society’s Standard Form Contingency Fee Agreement Checklist or Non-Standard Form Contingency Fee Agreement Checklist, if applicable (see the question Do I have to use the Standard Form CFA?”).  
     
  • 28. Are there exceptions to the client disclosure requirements?
    Yes. For contingency fee arrangements entered into on or after July 1, 2021, there are two exceptions:
     
    • The requirement to publish a general maximum contingency fee percentage does not apply in relation to a proceeding commenced under the Class Proceedings Act, 1992.
    • Where the court has approved a contingency fee, lawyers and paralegals are not required to provide clients with an explanation of the reasonableness of the contingency fee or advise the client of their right to assess the lawyer or paralegal’s statement of account.

    For more information, lawyers and paralegals should consult Rules 3.6-2.1(3) to (4) and 3.6-2.2 to 3.6-2.3 of the Rules and Rules 5.08(8.2) and (9.1) of the Paralegal Rules.
     

Marketing Requirements

  • 29. Are there requirements specific to marketing legal services where clients may be charged on a contingency fee basis?
  • 30. If I charge clients on a contingency fee basis, do I have to advertise that on my firm website?
    No. However, if you market legal services on the basis that clients may be charged a contingency fee you must publish a general maximum contingency fee percentage on your website. This information should be easily accessible. If you do not have a website, you must provide the maximum percentage to potential clients at the time the client first contacts you.
     
  • 31. Can I charge more than the maximum contingency fee percentage posted on my website?
    Yes. Lawyers and paralegals may enter into an agreement under which the contingency fee rate is higher than their published maximum rate if the lawyer or paralegal:
     
    • informs the client that the percentage fee exceeds the lawyer or paralegal’s disclosed maximum contingency fee rate, and
    • publishes the higher rate as the lawyer or paralegal’s maximum rate.

Statement of Account

  • 32. What are the billing requirements for contingency fees?
    When billing for a contingency fee, lawyers and paralegals are required to provide the following information on the statement of account delivered to the client:
     
    • total amount of the settlement or award and the net amount the client receives;
    • disbursement costs, legal fees and taxes charged to the client;
    • unless the court has approved the contingency fee,
      • an explanation of the reasonableness of the contingency fee with reference to specific factors.
      • a statement that the client has the right to apply to the court for an assessment of the statement of account and specifies the latest date for doing so.

Record Keeping and Reporting Requirements


Resources and Supports

Last Updated: June 16, 2021
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