LSUC to consider changes to contingency fees

LSUC to consider changes to contingency fees
Malcolm Mercer said the recommendations focus on transforming the way contingency fees work.

A cap on contingency fees is currently off the table for the Law Society of Upper Canada.

The provincial regulator released a number of proposed changes to contingency fee rules Friday morning in an attempt to make the fees more transparent, fair and reasonable, but a cap was not among the recommendations.

The law society’s Advertising and Fee Arrangements Issues working group had been looking at a possible cap on contingency fees, but it decided against it because of concerns it might deny some victims benefits and reduce claims in some cases.

“The empirical evidence from the U.S., where caps have been introduced in several states, indicates that lawyers who rely on contingency fees often stop representing certain clients and handle fewer cases generally,” said Bencher Malcolm Mercer, the chairman of the working group.

“If it is no longer viable from a practical or business standpoint to advance certain types of claims, these cases end up falling through the cracks, disproportionately impacting claims from lower income groups and access to justice for the middle class.”

The law society started looking at the issue of contingency fees after concerns were raised that there had been noncompliance with the part of the Solicitors Act that bars lawyers from taking fees from costs.

Lawyers currently assign a value to the costs element of a settlement or award when they come in a lump sum, but as the Solicitors Act bars them from taking fees out of costs, lawyers’ interests are better served by having small costs and higher compensation. This creates a conflict between their economic interests and those of their clients during settlement negotiation, lawyers say.

Among the recommendations is a proposal to ask provincial government to make legislative changes to tackle this conflict.

The proposed changes to the Solicitors Act would make it so that “recovered legal costs may be included together with all other amounts recovered in the total amount based on which the contingency fee is calculated.”

The recommendations also include introducing a mandatory standard contingency fee agreement and a “know your rights” guide for the public.

If approved, the new rules will also require lawyers to provide clients with a clear breakdown of the final settlement or award, net amount going to the client, disbursements costs, legal fees and taxes.

Licensees will also be required to publicly disclose the maximum contingency fee percentage they charge by practice area.

The changes would not apply to class action lawsuits, when clients are “sophisticated entities” such as large companies or when the court has approved the contingency fee.

The proposals are part of a larger initiative that has already brought new rules for referral fees and the way lawyers advertise their services.

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