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Contingency fee changes to be hammered out

Focus on: Personal Injury Law
|Written By Shannon Kari
Contingency fee changes to be hammered out
Steve Rastin says he welcomes the push for a standard form contingency fee agreement.

The benchers of the Law Society of Upper Canada are scheduled to vote this week on whether to approve proposed changes aimed at streamlining contingency fee retainer agreements and also increasing protection for consumers who enter into these contracts with lawyers.

The recommendations of an LSUC working group include a call to craft a standard contingency fee agreement, more disclosure to clients about all fees and expenses and amendments to the Solicitors Act to permit costs to be included as part of a settlement.

The working group decided not to recommend a cap on the percentage contingency fee that can be charged. However, it says that lawyers should be required to post the maximum percentage fee they charge on their website or disclose it to potential clients when they first meet.

For the most part, the proposed changes have been received positively by lawyers in the personal injury field, since they were introduced earlier this month in advance of the Dec. 1 benchers meeting.

Claire Wilkinson, president of the Ontario Trial Lawyers Association, says the organization has been in favour of a standard and simpler agreement template for some time. 

“Presently, it is very difficult for consumers to ‘lawyer shop,’ as there is a lot of variety in the manner in which contingency fee agreements are presented and, thus, an ‘apples to apples’ comparison is very challenging for the client to undertake. However, if a standardized agreement is developed, then it will be much easier for a prospective client to compare lawyers and consider if the percentage the lawyer is proposing to charge is acceptable,” says Wilkinson, a lawyer at Martin & Hillyer Associates in Burlington, Ont.

Steve Rastin, who heads Rastin & Associates in Barrie, Ont., also welcomes the push for a standard form contingency fee agreement. 

“The concept of a simple retainer agreement is a good idea. The public finds these discussions confusing,” says Rastin, who is also a former president of the trial lawyers’ organization.

Both lawyers agree that it would be in the public interest for the province to move quickly to amend sections of the Solicitors Act, as recommended by the working group. 

“Until the Solicitors Act is amended, the status quo will remain, notwithstanding the recommendations of the law society. Everyone is still required to use the lengthy and somewhat confusing retainer agreements that include all of the requirements of the act,” says Wilkinson.

“The Solicitors Act is flawed. It needs to be changed,” says Rastin.

The most pressing issue, he says, has to do with the incorporation of costs in a contingency fee agreement.

“I think it is about form over substance,” says Rastin and not about personal injury lawyers double dipping, as some media reports have suggested.

A provision in s. 28 of the act does not permit a contingency fee agreement to include costs as part of the payment in a settlement, unless both the client and lawyer bring an application to the Superior Court for approval or if the court finds extraordinary circumstances. Another section of the act requires only that the overall fee charged by the lawyer is “fair and reasonable.”

“When I am in a room with potential clients, I explain my billing practices,” says Rastin.

Some personal lawyers would charge a lower-percentage contingency fee as well as a percentage of costs, he explains. This makes it economically feasible to take on an average case, which may result in a damages award of $50,000 or $60,000, he says.

“The real problem is the lawyer who is out there billing 30 per cent and taking costs,” says Rastin.

The issue of costs in a contingency fee agreement was highlighted in an ongoing class action case against the Toronto-based Neinstein and Associates law firm.

The Court of Appeal in Hodge v. Neinstein upheld this year a Divisional Court decision certifying a class action lawsuit against the firm over its billing practices with personal injury clients. The court heard that the representative plaintiff, Cassie Hodge, received just less than  $42,000 of an “all-in” settlement of $150,000, with no specific itemization of how much was for legal costs. The firm made its own decision to allocate $50,000 of its bill for costs. Its standard agreement with clients was to charge 25 per cent of any damages award as well as any partial indemnity costs that are recovered.

The law firm is seeking leave to appeal the decision to the Supreme Court of Canada. All documents in the leave application were filed as of Oct. 30, although, as of press time, the Supreme Court had not made a decision on whether to hear the appeal.

The law society working group pointed out that when there are settlements a lawyer is potentially put in a conflict of interest when costs belong solely to the client.

“There is unnecessary risk that fees will not be fair and reasonable, unfairly compensating a licensee at the expense of the net amount recoverable by a client; and there is also an unnecessary risk that a client may receive a windfall for legal costs reflecting work done by a licensee,” the working group stated in its report.

As well, in cases where there is likely to be low to mid-level damages awarded, the current system provides a disincentive for a plaintiff’s lawyer to take the matter to trial, even if required, the working group noted.

“This raises significant access to justice concerns,” it wrote.          

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