Law society panel urges transparency on legal fees
Proposal would require lawyers in contingency cases to provide detailed breakdown of costs
Ontario’s lawyers will have to become a lot more transparent when they take a case on contingency — “you don’t pay unless we win” — and a lot more straightforward in their communications with clients.
They’ll have to give their clients a “know your rights guide” at the outset of a case and, when there’s a settlement, present them with a precise breakdown of expenses incurred while working on the case, their fees and a statement explaining why they’re reasonable.
These are among the latest recommendations in a series of moves by a Law Society of Upper Canada working group that has been studying legal fee issues and lawyers’ advertising practices for more than a year.
They are intended to reform the contingency fee system and protect consumers from what a law society press release calls “unscrupulous practices and unreasonable fees.”
The final decision on these recommendations will be put to a vote at the legal regulator’s convocation meeting Dec. 1.
If they are adopted, the province’s lawyers will also have to make public the maximum percentage they intend to charge when there’s a settlement.
“The recommendations we are proposing focus on transforming the way contingency fees work, providing equal access to justice for all individuals regardless of their ability to pay, while increasing clarity and visibility and consumer protection,” said Malcolm Mercer, chair of the law society’s Advertising and Fee Arrangements Issues working group.
Earlier this year, the working group debated capping contingency fees as a means to reform the problematic system.
Ultimately, the group concluded that doing so would create “significant barriers to the justice system, particularly for some of society’s most vulnerable people,” according to the 23-page report.
A “generic” cap, the report said, might make it harder for injured people with complex but low-value cases — cases that won’t garner a large settlement — to find a lawyer who will represent them.
Mercer said the new system will continue to allow access to justice while better assisting people in making decisions about whom to hire as their lawyer.
Publicizing fees, he said, will also foster competition between lawyers, which is a “good thing.”
“If you’ve got two different lawyers who have the same agreement, then what you’re choosing between is what you think of their skills and their pricing — and that’s a better place to be,” he said.
These newest recommendations come after a Star investigation into Ontario’s personal injury lawyers found that, for years, lawyers working on contingency have been “double-dipping” — taking more money from injured clients than the law allows.
The Star investigation found the practice to be widespread and as a result many Ontario residents have been overcharged thousands of dollars and likely do not know it.
In simple terms, a lawyer representing an accident victim on contingency gets paid only if he or she is successful. The lawyer’s fee is typically a percentage of the money awarded for damages, usually be- tween 15 and 35 per cent. But many lawyers, the Star found, routinely take — on top of their fee — a second payment called “costs” that under Ontario law belongs to the client.
The Star also exposed shady advertising and referral fee practices of many personal injury lawyers in the province. Shortly after, the law society introduced new rules capping the fees Ontario’s lawyers can take when they refer cases and prohibiting lawyers from advertising for services they don’t intend to provide.
Reforming the contingency-fee system was the last piece of the puzzle.
Claire Wilkinson, president of the Ontario Trial Lawyers Association, an organization representing more than 1,200 personal injury lawyers in the province, welcomed the recommendations. “We are confident that the law society proposals will increase transparency and consumer protection, while also ensuring continued access to justice through contingency fee arrangements,” she said in a press release.
According to a law society press release, these five recommendations are made in order to “protect access to justice for the public, while ensuring protection from unscrupulous practices and unreasonable fees.”
If the recommendations are adopted, lawyers working on contingency will also be obliged to use a standard form agreement — but the work of writing that agreement won’t begin until after the recommendations are accepted.
At the completion of a case, lawyers will have to provide their clients with a clear accounting of the final settlement or award. That includes how much the client will get, the legal fee, any disbursement costs (expenses such as photocopies, postage and medical reports) and taxes.
Clients would also be entitled to a statement from their lawyer explaining the “reasonableness” of the fee “in light of factors such as legal complexity, the results achieved and the risk assumed.”
Lawyers will also have to inform clients that they have the right to have their bill assessed by a separate arm of the judicial system.
And lawyers won’t just have to share their contingency fee with their clients — they’ll also have to report it annually to the law society.
Doing so, the report said, will allow policy-makers to “better inform future consumer choice and policy decisions.”