In Re Cogan, the Ontario Superior Court of Justice addressed the issue of contingency legal fees. The lawsuit involved the claim of a minor suffering from cerebral palsy, with the plaintiffs alleging that the obstetrician and nurses attending at the child’s birth were negligent.
The case settled for the sum of $12,543,750. The lawyers for the plaintiffs wanted to be paid $4,174,928.45, or roughly 33.33%, on the basis of a contingency fee agreement between them and the minor’s litigation guardian. A contingency fee agreement is an arrangement whereby a lawyer agrees to be paid a percentage of recovery in the lawsuit. Where there is no recovery, the lawyer works for free. Where there is a substantial recovery, the lawyer benefits accordingly.
The Court was asked to rule on whether the contingency fee agreement should be allowed. In its lengthy weighing of both sides, the Court found, among other things, that: The agreement was obtained in a fair way; 2. The agreement was reasonable; 3. The risk to the lawyer of not getting paid and not getting reimbursed for disbursements was high; 4. The case was complex and required significant time commitment and delayed payment; and 5. The result achieved by the lawyer was exceptional.
The Court also commented on the importance of access to justice for vulnerable plaintiffs like the minor and the role contingency agreements can play in fostering that goal.
Therefore, the Court upheld the agreement.
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Contingency fees are new in the Province of Ontario and particularly new in the field of Estate Litigation. The extent of the regulation of these fee arrangements reflects the unease with which the Province’s legal community regards them.
Regardless of this apparent unease, on issues of the validity of a Will or a person’s interest in or claim against an Estate, some clients are increasingly tending to favour contingency arrangements.
Where the legal issue at stake is the validity or otherwise of a Will, then a litigation result will often be an all-or-nothing proposition. Such an issue is well-suited to contingency fees.
Some of the practical issues raised by the arrival of contingency fees at this early stage are:
1. These cases are not immediately profitable, so any law firm wanting to explore contingency opportunities ought to be prepared to wait a few years to see substantial return;
2. Lawyers must allow the client to make all major decisions, knowing that some of those decisions may be unreasonable or risky, thereby lessening the possibility or value after costs of recovery, thereby lessening what the lawyer will be paid in case of success, and this business frustration cannot be allowed to interfere in the lawyer’s function as advocate and legal service provider. The lawyer is still restricted to giving advice, taking instructions and fulfilling them even if those instructions impact on the chances of getting paid;
3. Lawyers ought to be very clear with clients at the outset that they may obtain a windfall in case of early settlement, even to the extent of putting those very words to the client in writing.
Early indications are that contingency fees in litigation offer a further avenue for lawyers to take on otherwise marginal cases from a business perspective, and an avenue for access to justice for clients of lesser means, albeit lawyers must take care not to allow the fee arrangement to interfere with their fundamental role as advocating, advising and fulfilling the client’s legitimate instructions, however that may impact on the chances of getting paid.
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For the coming week my blog will deal with the topic of contingency fees in estate litigation. This is a relatively new topic in the Province of Ontario. Contingency fees were only recently allowed, raising interesting issues in terms of the lawyer-client relationship and access to justice.
In the context of tort law (private injury), contingency fees are fairly well understood by the public in most North American jurisdictions. Although these fees were not allowed in the Province of Ontario until recently, certainly the public perception is that in private injury cases very often contingency fee arrangements, even in Ontario, have been formally or informally in practice for some time.
In any case, the Law Society of Upper Canada and the Provincial Legislature have now decided that contingency fees are acceptable in Ontario making it the last Canadian Province, and one of if not the last jurisdictions in North America to allow the practice.