The Ontario public has recently been faced with a veritable flood of advertising from personal injury firms, many claiming to be the best. Clearly everyone cannot be the best. Most personal injury firms advertise that you only pay if they recover money for you. This is accomplished by the law firm taking a percentage of all moneys recovered. This type of agreement is called a contingency agreement.
Contingency agreements can be advantageous for plaintiffs (injured persons) who cannot afford a lawyer otherwise. However, all consumers of litigation services should be aware that fee for service remains an option.
At 30%, the contingency fees on a $250,000.00 settlement would be $75,000.00. If the case is fairly straightforward, the hourly fees on a fee for service basis could be half that amount.
The consumer is paying a higher fee to the lawyer because the lawyer assumes the risk of not getting paid in the event of a loss. The lawyer also assumes the risk of getting underpaid in the event of a poor result. In a contingency practice, the good files have to pay for the bad files.
Where the plaintiff (injured person) can afford to do so, they may wish to consider all possible fee arrangements. Consumers should be aware that the law in Ontario provides that "A contingency fee agreement shall be in writing". If you have entered into a contingency fee agreement, it should clearly set out the fees that will be charged, and who is responsible for disbursements.
It is common after winning at trial, or on settling a claim, for the plaintiff (injured person) to recover one amount for their damages (injuries) plus an additional amount for costs.
Example: A case settles for $250,000.00 plus $35,000 for costs. The total recovery is $285,000.s.28.1(2) of the Solictors Act provides that costs awarded belong to the client, not the lawyer, and are to be applied to the contingency fee owed.
The Solicitors Act implies that the correct fee [assuming 30% is the agreed rate] is $75,000. $35,000 is paid from the costs award, $40,000 is paid from the settlement, and the client keeps $210,000.
Your lawyer requires your consent and court approval if he/she wants to keep all or part of the $35,000 costs award on top of collecting the $75,000 contingency fee.
The Solicitors Act requires that a judge of the Superior Court of Justice must approve any agreement or attempt to include the costs, or part of the costs, in the contingency fee agreement. Approval can only be granted where both the client and the lawyer request it jointly. Moreover, such approval is given "because of exceptional circumstances".
Eli Pullan is available to consult with plaintiffs who are having difficulty choosing a lawyer, difficulty understanding a contract they have signed with a lawyer, or believe a second opinion is required.