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OCA decision confirms contingency fees prohibited in family law

Family law lawyers would be wise to examine their retainer agreements with clients in light of an Ontario Court of Appeal ruling that found an extra fee charged by counsel who achieved a positive result was, in fact, a contingency fee, says Toronto family lawyer Jennifer Daudlin.

“The first thing I did when I saw this decision was to go through my retainer agreements to see if I have that clause,” Daudlin, founder and principal of Daudlin Law, tells AdvocateDaily.com.

“I think lawyers have to beware and take a look at retainer agreements because the reality is if you periodically or as a matter of course charge a premium when you are successful, your clients are now able to have their accounts assessed — relying on this decision that says any type of premium that they’re being charged, that is in whole or in part tied to the successful outcome of their case, is not permitted.”

The appeal court case involved a “results-achieved fee” charged by a family lawyer to a client after a successful outcome in a custody case. The client, who was granted sole custody of his six-year-old daughter, had signed a retainer agreement providing for hourly rates, daily fees for court appearances and an automatic annual increase of 15 per cent with respect to those fees.

The agreement also included “an increase in fees in the event of a positive result achieved (‘results achieved fee’),” which amounted to just over $72,400.

The client disputed the fee before an assessment officer, but because the issue was deemed to be a question of law, the matter was sent to an application judge. The judge found that the results achieved fee amounted to a contingency fee, which is prohibited for family law matters under the Solicitors Act, and the Court of Appeal agreed.

The Act also says, in s. 28.1(2),that a lawyer “may enter into a contingency fee agreement that provides that the remuneration paid to the solicitor for the legal services provided to or on behalf of the client is contingent, in whole or in part, on the successful disposition or completion of the matter in respect of which services are provided.”

The court noted that the words “contingent, in whole or in part,” were added to the legislation in 2004, and it paid particular attention to the phrase in reaching its decision.

Daudlin notes that there have been lower-court decisions since the Act was changed that found such fee arrangements were not contingency fees. But the Appeal Court said the new wording “appears to have gone unnoticed” in those rulings.

"The language was pretty clear that the fee charged was as a result of the success that the client had attained at trial. It was because of the wording in the retainer agreement that counsel may have been unsuccessful. Had the wording in this retainer agreement been slightly different, perhaps the Court of Appeal would have ruled differently,” she says.

Daudlin says while she knows some family lawyers don’t share her view, “I feel very uncomfortable with the idea of contingency fees in family law, particularly when it relates to cases of custody and access or child support. On cases such as spousal support or property division, I might be persuaded that there is a way to be able to move forward on a contingency fee, or at least a partial contingency fee.”

She says she agrees with the appeal court on the public policy issues that surround the prohibition of contingency fees in family law.

In discussing public policy concerns, the court wrote, “One of the unique aspects of family law is that monetary recovery does not occur in the same way in family law litigation as it does in civil litigation. ... In these circumstances, it is inappropriate for a lawyer’s fee to be contingent on the monetary result.

“It is also inappropriate for a lawyer’s fees to be contingent on success. ... A fee based on success risks detracting from, and indeed undermining, this emphasis,” the court said.

When it comes to custody, the court said, a contingency fee “is even less appropriate. There are no ‘winners’ and ‘losers.’ A custody decision by the court involves a determination of a child’s best interests. It cannot be scrutinized to determine which parent had the more ‘successful disposition.’”

Daudlin says while she agrees with the bulk of the court’s decision, “I understand there are situations where contingency fees can make justice more accessible for some people. But we have to be very, very careful about how we go about that.”

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