Contingency fees: Can you pay your lawyer a percentage?

Contingency fees are tied to the success or failure of your lawsuit or other transaction. If your lawyer is successful in winning your claim or negotiating a business deal, he or she receives a fee calculated as a percentage of what you are awarded in a court ruling or the value of what you gain in a deal. If the lawsuit or transaction fails, your lawyer may receive an agreed-upon flat fee or disbursements only or perhaps nothing at all.

Historically, lawmakers were reluctant to allow contingency fees because they feared it would encourage frivolous lawsuits since clients pay nothing at the start, and that some lawyers may only take on cases that they were reasonably certain would win. That said, paying for legal representation up-front can be prohibitive in many cases. By allowing contingency fees, people have greater access to justice, especially those who cannot afford a lawyer and those who do not qualify for legal aid.

Contingency fees can be a good thing for the client but this type of fee arrangement should be considered carefully. Under the law, in every province, contingency fee agreements must be in writing between the lawyer and client — with court approval required in some cases, such as large class action lawsuits. Also, contingency fees are not allowed in criminal, quasi-criminal or most family law matters. In New Brunswick, an agreement created by the law society must be used.

Among other things, the contingency fee rules state that the following be included in the agreement:

• if the lawyer’s fee is to be a percentage of the amount recovered, the agreement must specify the percentage and that it excludes any amount received in respect of costs and disbursements,
• the contingency upon which the fee is to be paid,
• allows the client to collect full payment for an award of costs, even if it exceeds the amount payable under a contingency fee agreement, if the award is used to pay the client’s solicitor,
• a statement that the client retains the right to make all critical decisions regarding the conduct of the matter,
• if the client is the plaintiff, a statement must be included stating that the lawyer shall not be paid more in fees than the client recovers in damages from the lawsuit,
• a simple example of how the contingency fee will be calculated,
• a description of disbursements, and a statement about whether the client is responsible for payment of the disbursements or taxes.

Also, the law precludes lawyers from collecting both the contingency fee and legal costs (unless approved by a judge), and gives the court the right to review contingency fee agreements.

If you and your lawyer are considering entering into a contingency fee arrangement, investigate whether it truly is the best deal. The typical contingency fee may be anywhere from about 10% to as much as 45% of what you may be awarded. Some provinces, such as British Columbia and New Brunswick set maximum percentages for contingency fees. In British Columbia the maximum is 33 1/3 % for personal injury or wrongful death in motor vehicle accident cases, 40% for other personal injury or wrongful death cases, and no maximum limit for cases not involving personal injury or wrongful death. In New Brunswick the percentage is 25%, but in some cases can be increased to 30%.

When making an agreement with your lawyer, you must decide if the percentage is appropriate. In deciding whether the percentage is acceptable, it is a good idea to consider:

• what the estimated costs would be based solely on an hourly rate or fixed fee,
• the complexity of the legal matter,
• who pays for any up-front expenses, and
• what, if anything, you may be required to pay if the case fails.

Always discuss what fees will be charged and how your case will be handled before entering into an agreement with your lawyer. For more information about contingency fees, visit your provincial law society website.

Why you might prefer contingency fee arrangements

Contingency fee arrangements allow a person to pursue legal action without having to pay the upfront costs. This may assist people facing financial difficulties get the access to justice that they need. Client experiences are recounted below:

Gerald R. (Husband and Father): “I was injured in a very bad car accident which left me unable to work. My family relied on me to pay the bills and this accident made it really hard for us to get by. If it wasn’t for my lawyer operating on a no win, no fee basis, there is no way we would have been able to afford the legal fees that were needed for us to get the compensation we deserved.”

Raquel B. (Single Mother): “My lawyer gave me the option to pay $600 an hour or at only at the end if she won. What an easy choice.”

Piers W. (Interior Designer): “My client owed me $3,000 but it would have cost nearly that to take it to court! It didn’t make sense to pursue until my lawyer offered to work for free if we lost.”