It’s been a few months since the Law Society of Ontario’s (LSO) new requirements for contingency fees came into force, and we’re already seeing a marked improvement in client communications — less time spent defining legal concepts and more time addressing their specific concerns.
The new consumer protection requirements took effect July 1, and require any lawyer or paralegal working on a contingency basis to provide potential clients with a copy of the LSO’s consumer guide and provide a standard, plain-language Contingency Fee Agreement.
Although our firm’s previous retainer agreement already included many of the items now mandated by the LSO, the standard agreement and accompanying guide will help lawyers manage client expectations, define the scope of work and clearly explain the fee structure in simple terms. By levelling the playing field among firms, clients can easily compare lawyers and make more informed decisions.
The 15-page guide contains definitions of legal terms and concepts and provides several detailed breakdowns of how contingency fees would be calculated on sample awards/settlements. It also has a list of questions should ask during initial consultations with lawyers, including:
- What legal services does the contingency fee cover?
- Who will be paying for disbursements?
- Based on your experience, how much in costs will I have to pay to the other side if I lose?
- Will a deductible apply to my motor vehicle accident case?
The language in the concise agreement is easy to understand. By removing most of the legalese typically used in contracts, there’s no real sophistication required to know what you’re signing. Of course, just because the guide is helpful, and the retainer is simplified doesn’t mean lawyers no longer have to explain all the steps involved.
Costs and disbursements
The LSO has amended the regulation so that costs can be included in the contingency fee. By highlighting how costs are calculated, it’s clear to the client what’s going into their pocket at the end of the day. It also makes it easier for lawyers to calculate what an exact settlement offer is, for example, and give the client their bottom-line number so they can make an informed decision.
Unless the client has previously dealt with a profession that charges disbursements, most people aren’t aware of what they are. If you visit a mechanic, for example, the service provider either builds these charges into their hourly rate or carves out the parts and how much they cost. With the LSO’s changes, the agreement clearly states when and how a client agrees to pay for disbursements.
Scope of work
When I send a retainer agreement and guide to a client, I ask them to review, write down any questions, and schedule a meeting to discuss. When we meet, we go through the agreement, piece by piece, and I’m finding I don’t have to define and explain language the way I did before. Now, we have more time to discuss what matters to the client, such as what is included under the retainer.
Item three in the retainer gets into the services not covered by the agreement, which is essential when managing expectations. Depending on the client’s specific circumstances, you can outline what won’t be covered or modify the agreement to include the additional work. For instance, if I know an Accident Benefits file will be a significant component of the lawsuit, I’ll be sure to include it in the agreement.
Room for improvement
While the new agreement has proven itself helpful, I see potential issues with the wording around how disbursements are paid if a client changes lawyers. For example, the industry practice was that if a client switches lawyers, the new lawyer reimburses the former lawyer for any outstanding disbursements in exchange for the file. This way, the former lawyer is no longer absorbing the disbursement costs for a lawsuit to settle. The new wording suggests that disbursements are to be paid at the conclusion of a file.
Considering the pandemic-related delays and backlog, a lawyer could be out tens of thousands of dollars with no recourse under this contract. Because this new agreement has only been in use since the summer, I suspect the LSO may review the language and make practical changes.
Levelling the playing field
As mentioned, a standardized retainer makes the comparison between lawyers a lot easier for clients. In addition, it removes some of the confusion around how fees are calculated and what they include.
Prospective clients can now go to similar documents and make a much better comparison around the percentage, the scope of the work, and what’s not included. Before these changes, other lawyers may say they charge a lower rate but fail to account for other factors — making their quote appear much cheaper than it is. With the new retainer, there’s no room for wording things differently.
Clients need to know what they’re signing, and the standardized, plain-language agreement makes it easier for them to understand. Although this appears to be a consumer protection move, these changes are also fair to lawyers because it takes away some of the confusion around calculating costs. Although it’s a bit of a work in progress, these reforms are long overdue.
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