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LSUC contingency fee review should be measured, cautious: FOLA

The Federation of Ontario Law Associations (FOLA) is urging the Law Society of Upper Canada (LSUC) to exercise caution in its review of contingency fee agreements.  

Jaye Hooper, FOLA’s chair, says the federation supports the concept of a mandatory, easily understood contingency fee agreement (CFA), but has a number of concerns about some recommendations a law society working group made to their colleagues in Convocation on the issue.

The law society working group expressed unease about widespread noncompliance with the Solicitors Act when it comes to contingency fee arrangements and noted the need to address any such problems.

Mike Winward, FOLA’s first vice-chairman, says the law society was rightly concerned over a potential widespread noncompliance with regulatory requirements governing Ontario’s contingency fee regime, but in the meantime,  the issue has already been “definitively dealt with” by the Ontario Court of Appeal in its June ruling on a class-action matter.

In that decision, the OCA certified a class action where it was alleged that a lawyer’s contingency fee agreements failed to comply with the provisions of the Solicitors Act. The allegations haven’t been proven in court.

Still, FOLA contends that the court’s decision in the matter would virtually guarantee lawyers will be “extra vigilant” in ensuring their agreements are in full compliance with all regulatory requirements, including the Solicitors Act.  

In its submissions to LSUC on contingency fees, the federation suggests that “the horse pretty much bolted the barn” with the OCA’s certification of the class action.

“If there is anything that is going to compel a licensee to adhere to the regulatory requirements of the Solicitors Act in their contingency fee agreements, surely the prospect of becoming a defendant in a class-action proceeding brought by former clients is going to do the trick,” FOLA says.

Winward says it’s FOLA’s position that the “chilling effect” of the OCA decision in combination with the adoption of a mandatory standard form contingency fee agreement would “effectively address” the harm the law society was concerned about.

He notes, however, that a mandatory standardized form, to be effective, must retain some level of flexibility, particularly as it relates to how the fees are calculated. Capping the contingency fee would be problematic, he says.

“A potential problem with a rigid mandatory standard form CFA is that a one-size-fits-all fee agreement is not always workable in practice because of the myriad of facts, causes of action and litigation risks that can come into play,” FOLA outlines in its submissions.

“For example, in some cases, it may be most appropriate to charge a variable contingency fee rate, depending on the stage in the litigation at which the file was concluded. Different contingency fee rates may apply if the file is concluded prior to pleadings being completed, prior to discovery, after discovery, after mediation, after pre-trial, or after trial.”

FOLA disagrees with the working group’s consideration of introducing new client reporting requirements around contingency fees and has “significant concerns” around where this would lead. The federation says such requirements “go too far.”

“There is a fine line between advising a client of his/her right to have a licensee’s account assessed and actually encouraging the client to have the account assessed. Some of what the working group is considering is getting very close to that line,” FOLA says in its submission.  

“Additionally, why restrict enhanced client reporting requirements to lawyers working under CFA’s? Should not all clients have the same information, whether they retain their lawyer under a CFA or some other type of agreement?”

FOLA suggests that if, in the fullness of time, concerns remain over the fairness of standardized CFAs, enhanced client reporting can be revisited.

“Any enhanced client reporting requirements that are meant to fully inform a client of his/her rights to have an account assessed, should apply to all licensees and not just those who are retained under a CFA,” it says.

Winward says FOLA looks forward to further discussion and debate on contingency fees.

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