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• What is a Contingency fee?
  
• Should You Hire A Lawyer To Act On A Contingency Fee Basis?
  
• What Are Te Advantages And Disadvantages Of Contingency Fees?
  
• What Is The Best Contingency Fee Arrangement?
  
• What Is Our Firm's Policy On Contingency Fees?
  
• Top Ten Reasons Why a Case Might Be Suited for a Contingency Arrangement

At Hodder Barristers, we receive many queries about whether or not a case is suitable for a contingency fee arrangement. If you have a claim, and you wish to enter into a contingency agreement to prosecute that claim in Ontario, you should e-mail . We will then let you know, by e-mail, whether or not we are interested in proceeding to having a live discussion, either in person or by telephone, to learn more about your potential claim. When you complete the form, you may wish to see a list of Top Ten Reasons Why a Case Is Unsuited for a Contingency Arrangement.

WHAT IS A CONTINGENCY FEE?

A contingency fee is an agreement whereby the client pays no fees unless and until there is recovery in the lawsuit. Such fees are usually based on a percentage–often 20% to 45% of the proceeds. Such agreements may also be dependent upon various factors including the nature and complexity of the matter, the risk involved, the cost in pursuing the matter, and the likelihood of success.

SHOULD YOU HIRE A LAWYER TO ACT ON A CONTINGENCY FEE BASIS?

Some matters can only be dealt with on a contingency fee basis. Particularly, wrongful dismissal claims and serious injury claims typically involve plaintiffs who are not working and have little income. Lawyers are expensive, and many people cannot afford to fund claims in the courts. Also, there is comfort in knowing that your lawyer has enough faith in your case to put his fee on the line. However, there are certain disadvantages to contingency fees. You should be careful about the terms of your contingency fee agreement. While all contingency fee agreements are subject, ultimately, to a review by the courts, the fact that you signed an agreement will be taken as evidence of your intentions about fees. What you sign in your lawyer’s office makes a big difference. What should you do to keep legal fees to a minimum? Read on.

WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF CONTINGENCY FEES?

The obvious advantage is not having to pay a large monthly bill from your lawyer while your claim makes its way through the courts. The key disadvantage is less obvious. Generally speaking, a contingency fee will in the long run cost you more than if you were paying monthly as the matter progressed. Lawyers who act on a contingency fee basis must from time to time lose cases, and so their winning cases must cover the cost of the cases they lose. Also, lawyers have to finance the costs of litigation that can go on for years, and this cost of doing business is built into what they ultimately charge their contingency fee clients.

WHAT IS THE BEST CONTINGENCY FEE ARRANGEMENT?

1. Be wary of the “straight percentage.” Your claim may settle early on. This sometimes happens, even in circumstances where you and your lawyer anticipated a long, hard battle. Your lawyer will still expect his percentage. He (or she) may be thinking of those instances when his percentage fee after a long trial seemed like very poor compensation. You may resent the fact that your lawyer expects a large fee without having done much work. It is better to agree that an early settlement will command a lower percentage, which increases as the matter progresses.

You should try to arrange, therefore, what some lawyers call a “graduated” fee arrangement, whereby the percentage fee increases as the matter progresses.

2. Be wary of the “assignment of costs.” Be wary also of what the percentage applies to. Some lawyers quote a percentage for contingency fees but also include a provision in their fee agreements with clients that whatever legal costs are awarded in the lawsuit get paid to the lawyer over and above the percentage contingency fee. Moreover, some lawyers charge a contingency fee which is applied to all recovery, including costs. This can make a 20% contingency fee arrangement much more expensive to you than a 33% arrangement. For example, assume a total recovery at trial of $500,000.00, where the court orders the defendant to pay an additional $165,000.00 as a contribution to legal costs. A simple 33% arrangement yields a fee to the lawyer of 1/3 of the $500,000.00, which is $165,000.00, which is exactly equal to the $165,000.00 cost award. In that case, the costs award fully pays the lawyer, and the client’s net recovery is $500,000.00. By contrast, imagine a 20% arrangement that applies the percentage to the total recovery (including costs) and also “assigns” the cost recovery to the lawyer. In that case, the lawyer’s fee is $298,000.00 (20% x $665,000.00 plus $165,000.00), and the client’s net recovery is $367,000.00.

You should insist that whatever legal costs are awarded reduces your legal bill otherwise calculated. The percentage should apply to recovery net of costs awards. Furthermore, if there is already an offer to settle in place at the time you hire your lawyer, the percentage should apply only to whatever increase ultimately occurs above the existing offer.

3. Ask if your lawyer has experience charging contingency fees. In other words, you need to know that your lawyer has experience waiting for his or her fees and has built up a track record of success. It is a good sign if he or she earns his living by succeeding in court.

Make sure your lawyer has experience picking winning cases.

4. Ask your lawyer if he or she is paying a referral fee to anyone for having referred you. You are entitled to know everything about your economic relationship with your lawyer, and there should be no hidden costs. There should be a referral fee only if you agree to it, and you should be sure that it is the lawyer, and not you, who is paying it.

You may wish to avoid retaining a lawyer who has agreed to pay someone a referral fee. In our view, it is far better that you should be referred to a lawyer purely because of that lawyer’s competence rather than a willingness to “buy” your file from someone who has steered you in his or her direction.

5. Make sure your contingency fee agreement contains a provision that you are entitled to have the lawyer’s fee reviewed by a Superior Court judge to ensure that the agreement is fair and reasonable and is void of improper motive or conduct by the lawyer involved.

You should insist on this provision. Try to get your lawyer to agree that he or she will make this application if you require it and that he or she will pay the cost of doing so–not you!

6. Consider alternatives to contingency agreements. Depending on the nature of your case, other types of arrangements may save you a lot of money, especially if you are prepared to share in at least some risk as to the outcome. For instance a simple deferral of the lawyer’s expectation for payment until the conclusion of the matter can ensure that your lawyer gets paid on your file only for work actually done–and without creating artificial incentives. There is also a hybrid arrangement, popular in England, called a “conditional fee.” This fee arrangement anticipates that your lawyer will receive a portion of his or her fee strictly conditional on success. This is really only a formalization of the rule that a lawyer’s fee should bear some relation to the outcome of the matter.

You may want to be wary of signing a standard form contingency agreement which does not answer your individual concerns and needs.

7. Negotiate with your lawyer. It may well be advisable to pay a separate, independent lawyer to negotiate the contingency agreement with the lawyer who is taking your case. Don’t laugh. If a small up front fee saves you $100,000.00 in fees down the road, it is money well spent.

It is crucial to the success of your claim that you and your lawyer function as an effective team. A contingency fee agreement creates a community of economic interest between you and your lawyer, and you should avoid all possible sources of friction in that relationship. Also, your lawyer should be willing to commit to writing anything he or she says at the time you hire him or her.

WHAT IS OUR FIRM’S POLICY ON CONTINGENCY FEES?

At Hodder Barristers, we sometimes act on the basis of contingency fees, deferred fees, or conditional fees, depending on our clients’ needs and preferences. The most important consideration at the beginning of a lawsuit is whether it will be possible to see it to a conclusion.

Top Ten Reasons Why a Case Might Be Suited for a Contingency Arrangement

Here are 10 reasons why Hodder Barristers might be interested in pursuing your claim on a contingency fee basis.

1. Your proposed defendant will likely be able to pay a court judgment against it.

2. Your proposed defendant has no counterclaim which has the potential of succeeding.

3. You, as the client, can participate in funding the out of pocket disbursements for the file. Sometimes these disbursements are not particularly large, but in our experience a client who is participating and funding the lawsuit, at least to this extent, is a more reliable participant in other ways.

4. The claim will not founder because of your inability to post security for costs. That is, if you propose to sue in the name of a company that has no assets in Ontario, or if you are resident outside of Ontario, then the court may order that you post security with the court that would be answerable to pay the proposed defendant's legal costs in the event that you are unsuccessful in your lawsuit.

5. You have already retained counsel previously, or perhaps you already have litigation counsel in place, and that counsel is a lively participant in the transfer of the file to our office.

6. Your claim is large enough to merit a contingency fee arrangement. With the exception of employment law cases (wrongful dismissal), it is unusual for a commercial claim under $500,000.00 to be taken on by our office on a contingency fee arrangement.

7. You have realistic expectations. That is, your sense of the monetary worth of your claim is not clouded by extraneous considerations such as seeking revenge, protecting the public good, making a point or taking a big gamble just to see if it will work.

8. You can articulate the facts of your case. This does not mean you need to be your own lawyer. However, clients who are able to explain their case in an orderly, detailed, and chronological way, with supporting documentation, are far more likely to have their case taken on.

9. There are not too many variables to permit any realistic assessment of probable outcomes of the litigation. Sometimes a fact situation can be so complicated, potentially involving multiple parties, that your prospects of success might not become evident until vast amounts of time and effort have been expended on the case, including the conduct of examination for discovery (depositions), etc.

10. The real reason that you want the matter to be taken on a contingency basis is that you cannot afford a lawyer, rather than that you simply wish to minimize risk and exposure to legal fees.