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Lawyers split on proposed contingency fee cap

Some lawyers say a proposed cap on contingency fees under consideration by the Law Society of Upper Canada could be problematic for access to justice.

Lawyers split on proposed contingency fee cap
Claire Wilkinson says limiting contingency fees to 15 per cent could create a tremendous access to justice problem in Ontario.
The LSUC’s Advertising and Fee Arrangements Issues Working Group released a number of proposals last week that the regulator is considering to simplify contingency fee agreements.

Among the safeguards the working group is considering is a cap, which lawyers say could hamper access to justice.

“Well intentioned as it may be, imposing an arbitrary cap could prove counter-productive, against the public interest and subvert the benefit of the access to justice that could otherwise be provided to many people,” says Claire Wilkinson, president of the Ontario Trial Lawyers Association. She says the OTLA remains unconvinced that imposing a cap would be advantageous to consumers.

Wilkinson says that the public would be better served by other proposals the law society is looking into to simplify contingency fees, such as introducing a standardized form for agreements and amending confusing parts of the Solicitors Act.

Steve Rastin, managing partner at Rastin & Associates, says there is a concern that a cap could affect more modest cases, given the risks taken by lawyers working on contingency agreements.

“I don’t think there is ever going to be a problem getting lawyers to take on a large case. I think that a cap may function as a disincentive in smaller cases as an access to justice issue to get people to take them on,” he says.

Bencher Malcolm Mercer, who is chairman of the working group, could not provide any specifics of what a cap might look like, as the group will be fleshing out the details of their recommendations in coming months after a consultation period.

The working group’s proposals included requesting amendments to the Solicitors Act that would make contingency fees based on the total amount of compensation, less disbursements.

Lawyers say this change would align the interests of practitioners and clients, as currently, lawyers are not allowed to take fees from costs.

“If the lawyer is allowed to take some portion of the costs, then everyone’s interests are aligned,” says Asher Honickman, a lawyer with Matthews Abogado LLP.

Honickman says the proposed amendments could also simplify retainers so that clients understand the fee structure and promote greater access to justice.

Honickman says he would be in favour of a 30-per-cent cap if the change is made to make contingency fees based on the total compensation or 35 per cent if costs are not included.

Rastin says the proposal to make fees based on a global settlement based on a fair percentage will greatly simplify the process for the public.

“And it relieves some of the possible avenues for abuse,” he says.

Wilkinson says the OTLA supports amending the Solicitors Act and introducing a standardized form for contingency fee agreements.

The law society started working on how it could further regulate advertising, referral fees and contingency fees in 2016. The LSUC has now approved changes to rules around advertising and referral fees, and it has its sights on contingency fee agreements.

The law society looked to tackle the issue because of worries that there has been widespread non-compliance with the regulations in the Solicitors Act that say lawyers cannot take fees out of costs.

Other proposals included in the working group’s interim report were enhanced client reporting requirements, a standardized form for contingency fee agreements and a requirement that clients obtain independent legal advice before signing on to a contingency fee agreement in certain circumstances. The working group is also looking at requiring lawyers to disclose the value of time spent on a matter at their hourly rates before the client pays legal fees.

The law society has not approved any of the proposals on contingency fees, and the regulator’s governing body, Convocation, will ultimately have the final say once the working group submits its recommendations.

The law society’s working group has requested public feedback on the proposals in the interim report by Sept. 29.

Earlier this year, MPP Mike Colle introduced a bill that would cap contingency fees at 15 per cent — a proposal lawyers said was too limiting and unnecessary because of the law society’s work.

“With due respect, I think the MPP’s proposal was much more of a blunt instrument approach to a problem that needs a very surgical response,” says Honickman.

Lawyers say the 15-per-cent cap in Colle’s bill would be too restrictive on contingency fees and would not be necessary to bring about the changes that are needed to make the fees fairer.

“His suggested cap of 15% is far too low, given that personal injury lawyers generally wait years to be paid and often fund all of the disbursements for the litigation on behalf of their clients,” says Wilkinson.

“Limiting legal fees to such a low percentage would in all likelihood create a tremendous access to justice problem in Ontario — a jurisdiction where there is currently no access to justice issue for innocent accident victims.”

The private member’s bill also proposes to ban referral fees in personal injury matters and a requirement that advertising in the area be approved by the law society. The bill has passed first reading.  

Wilkinson says she understands the concerns that prompted Colle’s bill, but even at the time it was introduced, the law society had already announced measures addressing advertising and referral fees. Despite this, the bill did not seem to recognize these steps the law society was taking, she says.

“[The] OTLA greatly welcomed the measures already announced by the law society involving the rules pertaining to advertising, and we have called for much more vigorous enforcement of the rules to ensure compliance,” she says.

Colle’s office did not respond to a request for comment before deadline.

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