Personal Injury

Clients not impacted by law society cap on referral fees

By Staff

Although the Law Society of Upper Canada recently announced plans to cap lawyer referral fees, this will have no impact on clients or the fees that they pay their counsel, Toronto personal injury lawyer Darryl Singer tells The Night Side on Newstalk 1010.

The Canadian Press reports that the Law Society recently voted to cap the referral fees that lawyers pay to other lawyers for sending clients their way. The regulator has also barred lawyers and paralegals from advertising for work they are not licensed, competent, or intend, to do.

Singer, principal of Singer Barristers Professional Corporation, tells listeners the cap on referral fees would have been a more significant story had the Law Society voted to outlaw referral fees altogether. He estimates the cap will likely be in the range of 15 to 20 per cent.

The referral fee issue, he says, does not just affect the personal injury bar.

“Lawyers aren’t supposed to not do work that they’re not competent to do, and by competent, it means not in an area that you do. I both give referral fees to lawyers who refer work to me, personal injury files for example. I also receive referral fees. I don’t do family law matters and if somebody calls me about it, I might refer it out to a family lawyer and I may or may not, depending on my relationship with that lawyer, receive a referral fee,” Singer explains.

What needs to be understood, he says, is that no matter the referral fee, the client’s fee remains unchanged.

“The clients are not impacted. If you, as a lawyer, refer me a file and I agree to pay you 20 per cent as a referral fee, that doesn’t increase the fee of my client.

“If I settle a file for $9,000 and I take a $3,000 fee, I pay that referral fee out of my $3,000, it doesn’t impact the client’s fee. And whether there’s no referral fee or there’s a 10 per cent referral fee or a 30 per cent referral fee, the client’s fee is the same in any event.”

Although there may be cases where some lawyers may be billing the referral fee to the client, Singer says he is not aware of any such instances.

“The 30 to 33 per cent is sort of the standard across–the-board fee in personal injury actions anywhere in the province of Ontario, and so you’re not really building it in.

“I charge the same fee, and I think most lawyers do, whether or not there is a referral fee. And the Law Society says we’re not allowed to increase our fee to take the referral fee into account. We have to, we are allowed presently to give and receive referral fees, but only — this is the key that people need to understand as well — only amongst lawyers and paralegals who are licensed in good standing with the Law Society. So I cannot give a referral fee to a family doctor who refers a personal injury client,” he explains.

Singer also calls the new ban on ‘bait and switch’ marketing “much ado about nothing,” as he says the Law Society Rules of Professional Conduct already require that lawyer’s advertising be truthful and not misleading.

“Bait and switch is essentially where they’re saying, ‘I’m not a law firm, I’m masquerading as a firm that’s going to do work, but really, I’m just looking — I’m essentially acting as a broker.’ Now, that’s a very, very big thing in the United States. There are firms that do nothing in medical malpractice, in personal injury cases, that are essentially brokers,” he explains.

However, adds Singer: “The firms here, even the firms that have been targeted and named in certain media as ‘brokers,’ all of those firms have very large teams of lawyers internally, and although they may refer out a significant amount of work, there’s also a significant amount of work that’s done there.”

Ultimately, he tells listeners, media stories that discuss the amount of a personal injury settlement versus the amount of money an individual receives often fail to mention out-of-pocket expenses paid by the lawyer, such as HST and disbursements

“So, if you have a car accident and you come to my office, I pay the court filing fees to issue the claim, I pay the doctors $3-, $4-, $5,000 for every expert report that I need in order to build your case. And so when you hear about somebody getting less than 50 per cent of the settlement, it’s not often that the lawyer is taking it all as a fee — the lawyer may only be taking 30 or 33 per cent, but when you add on the out-of-pocket disbursements that the lawyer has put out over several years and the HST, it, quite frankly, is not uncommon that the client may only net 50 per cent, but there’s nothing bad going on, it’s just the way the math works.”

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