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Frequently Asked Questions about Contingency Fees

The Law Society of Ontario has developed these Frequently Asked Questions to support lawyers and paralegals with understanding and implementing the requirements of Ontario’s contingency fee regime. 

Guidance is grouped by topic:

  1. Overview and Purpose
  2. Contingency Fees
  3. Contingency Fee Agreements
  4. Client Disclosure Requirements
  5. Marketing Requirements
  6. Statement of Account
  7. Record Keeping and Reporting Requirements
  8. Resources and Supports

Overview and Purpose

  • 1. What are the most significant changes to the contingency fee requirements?
    Below is a summary of the key legislative and regulatory changes to the contingency fee requirements in Ontario.
    • a) Reforms by the Ontario government
      Amendments to the contingency fee regime came into force on July 1, 2021. These amendments impacted the Solicitors Act and its regulations in the following ways:
       
      • Repealing Section 28.1(8) of the Solicitors Act which prohibited the inclusion of costs in the amount on which a contingency fee is based 
      • Revoking O. Reg. 195/04, which previously governed contingency fee agreements
      • Adopting a new regulation, O. Reg. 563/20, Contingency Fee Agreements (“O. Reg. 563/20”) which required licensees to use a Standard Form Contingency Fee Agreement dated February 18, 2020 for all contingency fee arrangements.
      • Exempting the use of this version of the standard form where the contingency fee or the contingency fee agreement is approved by the court or where the client is a business as defined in Section 7 of O. Reg. 563/20 as it read on July 1, 2021, but requiring that such contingency fee agreements include certain prescribed statements and not contain impermissible terms.
      • Extending the provisions on contingency fee agreements in the Solicitors Act and O. Reg. 563/20 to paralegals.
       
      The following further amendments came into force on January 1, 2022:
       
      • Amending O. Reg. 563/20 to require licensees to use a revised Standard Form Contingency Fee Agreement dated November 18, 2021 (“Standard Form CFA”) where legal services are being provided wholly or partly in exchange for a percentage or proportion of the amount or value of the property recovered under an award or settlement
      • Exempting the use of the Standard Form CFA and the inclusion of certain prescribed statements where the contingency fee or the contingency fee agreement is approved by the court or where the client or any person or entity responsible for payment of a client’s legal fees in the matter is an organization as defined in Section 7 of O. Reg. 563/20
      • For all other agreements that are contingent on the successful disposition or completion of a matter, requiring that the agreement be in writing and include certain prescribed statements in the contingency fee agreement and ensuring the agreement does not contain impermissible terms.
    • b) Reforms by the Law Society
      The Law Society’s Rules of Professional Conduct (“Rules”)Paralegal Rules of Conduct (“Paralegal Rules”)and Paralegal Professional Conduct Guidelines (“Paralegal Guidelines”) (collectively, the “Law Society’s Rules”) were amended in July 2021 to include the following transparency and disclosure requirements for contingency fee arrangements:  
       
      • requiring lawyers and paralegals to
        • disclose the maximum contingency fee percentage charged
          • provide potential clients with the standard form consumer guide entitled Contingency Fees: What you need to know ("Consumer Guide") before they enter into a contingency fee agreement, and
          • report certain fee-related information to clients on completion of the contingency fee agreement.
      • Exempting lawyers from the above transparency and disclosure requirements where they have been retained to represent one or more persons in a proceeding commenced under the Class Proceedings Act, 1992 (“Class Proceedings Act”).
       
      On February 24, 2022, these requirements were amended as follows to align with the above January 1, 2022 legislative changes:
       
      • Exempting lawyers and paralegals from the Law Society’s transparency and disclosure requirements where the client or any person or entity responsible for payment of the client’s legal fees in the matter is an organization as defined in Section 7(3) of O. Reg. 563/20.

      For information on the requirements for contingency fee arrangements entered into before the above reforms were enacted, see the question “What are the requirements for contingency fee agreements entered into before the amendments came into force?, below.
  • 2. Where can I find the current contingency fee requirements?
    The following documents work together to establish the current requirements for contingency fee arrangements
     
  • 3. To whom do these requirements apply?
    The contingency fee requirements under the Solicitors Act and O. Reg. 563/20 apply to both lawyers and paralegals. Paralegals should note that while these legislative changes permit paralegals to charge contingency fees, these changes do not alter the permitted scope of practice for paralegals.

    Subject to limited exceptions, lawyers and paralegals must also comply with the transparency and disclosure requirements under the Law Society’s Rules relating to contingency fees. For a summary of these requirements, see the question What are the most significant changes to the contingency fee requirements? above.
  • 4. Why are these changes being made to the contingency fee regime?
    The contingency fee reforms that came into force on July 1, 2021 seek to address longstanding issues with the previous contingency fee regime by enhancing consumer protection, improving transparency and fairness for clients, and facilitating access to justice. The additional legislative changes that came into effect on January 1, 2022, and the related amendments to the Law Society’s Rules on February 24, 2022, were made to provide additional clarity and flexibility to licensees and their clients.
  • 5. What were the requirements for contingency fee agreements entered into before the most recent amendments came into force?
    Contingency fee agreements entered into between July 1, 2021 and December 31, 2021 were governed by the Solicitors ActO. Reg. 563/20 in effect on July 1, 2021, and the transparency and disclosure requirements set out in rules 3.6-2 to 3.6-2.2 of the Rules or rules 5.01(8) to (9) of the Paralegal Rules. Subject to limited exceptions, licensees who entered into a contingency fee agreement during this timeframe were required to have used the Standard Form Contingency Fee Agreement dated February 18, 2020.

    Contingency fee agreements entered into before July 1, 2021 are governed by the previous Solicitors Act, and the now revoked O. Reg. 195/04. The transparency and disclosure requirements set out in rules 3.6-2.1 and 3.6-2.2 of the Rules or rules 5.01(8) to (9) of the Paralegal Rules do not apply to contingency fee agreements entered into before July 1, 2021. There was also no requirement to use a standard form for these contingency fee arrangements.
  • 6. I entered into a contingency fee agreement with my client before July 1, 2021, and the matter is ongoing. What do I need to do?
    If you complied with the contingency fee requirements that were in effect at the time, you are not required to take any further steps, regardless of whether your matter is ongoing.
  • 7. What steps should I take in light of the amendments?
    You may wish to consider taking the following steps:
     
    • Reviewing the new contingency fee requirements
    • Consulting the Law Society’s contingency fees resources and supports
    • Ensuring all lawyers, paralegals, or staff you employ understand the new contingency fee requirements and what steps to take to ensure compliance with these requirements
    • Downloading and saving a copy of the Standard Form CFA for use by all lawyers and paralegals in your firm
    • Reviewing the Standard Form CFA
    • Downloading and saving a copy of the Law Society’s Consumer Guide, and
    • Reviewing your firm website to identify changes that need to be made to ensure compliance with the Law Society’s marketing requirements

Contingency Fees

  • 8. What is a contingency fee?
    A contingency fee under the Solicitors Act is one in which any part of the lawyer or paralegal’s fees for legal services is contingent or dependent on the successful disposition or completion of the matter for which the lawyer or paralegal is retained.
     
  • 9. When can I charge a contingency fee?
    Lawyers can charge a contingency fee in any matter except for family law, Criminal Code (Canada), or any other criminal or quasi-criminal matters.

    Paralegals can charge a contingency fee in any matter within their permitted scope of practice except Criminal Code (Canada) or any other criminal or quasi-criminal matters. The application of the contingency fee provisions of the Solicitors Act and its regulations to paralegals does not alter paralegals’ permitted scope of practice.
  • 10. How can contingency fees be structured?
    Contingency fee arrangements can be structured in different ways, including
     
    • Fixed percentage: The percentage that the lawyer or paralegal receives remains the same throughout the matter.
    • Staged or graduated: The percentage that the lawyer or paralegal receives changes depending on the stage at which the matter is resolved. If it is resolved at an early stage, the percentage is lower. In later stages, the percentage goes up.
    • Partial: The client pays for some legal services at the outset of the matter or as it proceeds, plus a contingency fee if the client settles or is successful at trial. With a partial contingency fee arrangement, the percentage may be lower.
    • Bonus or premium: The client pays a bonus, premium, or other amount in addition to the lawyer or paralegal’s legal fees if a positive result is achieved in the matter.

    For more information about requirements relating to maximum contingency fees, determining the contingency fee for a matter, and how contingency fees may be calculated, see the questions that follow.
     
  • 11. Is there a maximum contingency fee I can charge?
    No maximum percentage has been prescribed by regulation.

    However, lawyers and paralegals are prohibited from charging a contingency fee that exceeds the amount the client receives under an award for damages or by way of settlement, including any costs but excluding disbursements and taxes.  Lawyers and paralegals must also ensure the contingency fee is fair and reasonable and disclosed to the client in a timely fashion. The factors for lawyers and paralegals to consider in determining whether a contingency fee is fair and reasonable for a particular matter are described below.

    For information about the requirement to post or disclose the maximum contingency fee charged when advertising fees, see the question Are there requirements specific to marketing legal services where clients may be charged on a contingency fee basis?
  • 12. How do I determine the appropriate percentage or other basis for the contingency fee?
    Lawyers and paralegals must ensure the contingency fee is fair and reasonable and disclosed to the client in a timely fashion. In determining what is fair and reasonable, lawyers and paralegals must consider several factors, including
     
    • the likelihood of success
    • the nature and complexity of the claim
    • the expense and risk of pursuing the claim
    • the amount of the expected recovery, and
    • who is to receive an award of costs.

    As part of the new transparency and disclosure requirements, lawyers and paralegals must also advise clients of the factors they took into consideration in determining that the contingency fee is fair and reasonable. For more information, see the Client Disclosure Requirements section below.
     
  • 13. Can I include disbursements and taxes when calculating a contingency fee?
    No. If the contingency fee agreement provides that the fee is a percentage of the amount recovered by the client under an award or settlement, then the lawyer or paralegal must exclude any amount that is specified as being in respect of disbursements or taxes from the calculation. 

    However, if the contingency fee agreement makes clear that the client is responsible for paying such disbursements or taxes and the lawyer or paralegal paid them during the course of the matter, the lawyer or paralegal is entitled to be reimbursed for them from any amount recovered by the client under an award or settlement. Except as provided under Section 13 of the Legal Aid Services Act, 2020, the amount to be reimbursed is a first charge on the amount recovered under the award or settlement.
     
  • 14. Can I include a costs award in the amount on which a contingency fee is calculated?
    Yes. The Solicitors Act no longer prohibits a lawyer or paralegal from including costs in the amount on which a contingency fee is based.
     
  • 15. Where can I find examples of how to calculate contingency fees?
    Lawyers and paralegals may wish to consult the Standard Form CFA and Consumer Guide for examples of how to calculate contingency fees. 
     
  • 16. How do the new contingency fee rules apply to class proceedings?
    The Class Proceedings Act governs the use of contingency fees in Ontario class actions. Under the Class Proceedings Act, a contingency fee agreement between a lawyer and the representative plaintiff in a class action requires approval of the court.

    As a result, contingency fee agreements in class proceedings are exempt from use of the Standard Form CFA. There is also no requirement that the contingency fee agreement include the statements prescribed in section 7(2) of O. Reg. 563/20. In addition, these matters are exempt from the Law Society’s client disclosure, marketing, and fee-related reporting requirementsFor more information, see the question “Are there exceptions to the client disclosure requirements? below.
  • 17. How do the new contingency fee rules apply to organizations?
    Where either the lawyer or paralegal’s client or the person or entity responsible for payment of the client’s legal fees is an organization as defined in section 7(3)(a) of O. Reg. 563/20, for that matter the lawyer or paralegal is exempt from
     
    • using the Standard Form CFA
    • including in their contingency fee agreement the statements prescribed in section 7(2) of O. Reg. 563/20, and
    • the client disclosure, marketing, and fee-related reporting requirements under the Law Society’s Rules.

    Note, notwithstanding the above, lawyers and paralegals who represent or whose fees are paid by an organization must still consider the factors listed in Rule 3.6-2.1(1) of the Rules or Rule 5.01(8) of the Paralegal Rules when determining the appropriate percentage or basis of the contingency fee, and  advise the client of these factors. For more information, see the question How do I determine the appropriate percentage or other basis for the contingency fee?. They must also comply with their professional obligations under the Law Society’s Rules relating to fees and disbursements and statements of account.

Contingency Fee Agreements

  • 18. What is a contingency fee agreement?
    A contingency fee agreement is a retainer agreement under which payment is dependent on the successful disposition or completion of a client’s matter. In Ontario, O. Reg. 563/20 prescribes the required form and content of contingency fee agreements and sets out impermissible terms.
     
  • 19. Do I have to use the Standard Form CFA posted on the Law Society’s website?
    Lawyers and paralegals must use the Standard Form CFA in every situation where legal services will be provided wholly or partly in exchange for a percentage or proportion of the amount or the value of the property recovered under an award or settlement unless:
     
    • The court has approved the contingency fee agreement, or the contingency fee set out in the agreement, or
    • Either the client or any person or entity responsible for the payment of the client’s legal fees in the matter that is the subject of the agreement is an organization (together with any affiliates, members of the same joint venture or any other related persons or entities) that: (i) employs more than 25 individuals, (ii) employs a lawyer on a full-time basis, or (iii) has assets or gross annual revenues exceeding $10 million (an “organizational client”).
  • 20. If I am required to use the Standard Form CFA, am I permitted to modify it?
    The Standard Form CFA can only be modified in the following ways: 
     
    • filling in relevant information for the matter
    • removing or tailoring optional language as appropriate for the matter, and
    • aligning the Standard Form CFA with law firm branding (e.g., putting the Standard Form CFA on the firm’s letterhead); and
    • removing the “Example based on a partial award for costs” if the agreement does not include a partial costs provision or it is otherwise not applicable
  • 21. What should I do if there is additional relevant information not included in the Standard Form CFA?
    Lawyers and paralegals must be honest and candid with their clients, communicating with them at all relevant stages of a matter in a timely and effective manner. These duties require that lawyers and paralegals inform their clients in a timely manner of information known to them that may affect the clients’ interests in the matter. In the context of contingency fees, these duties include providing clients with any additional information specific to their matters or situations not captured in the Standard Form CFA. Lawyers and paralegals may consider explaining to clients that the Standard Form CFA applies to many areas of law and, as a result, may not completely align with or address all the specific facts or circumstances of their matter.
     
    Notwithstanding the above, lawyers and paralegals must comply with the contingency fee requirements and must not modify the Standard Form CFA, except as noted in “If I am required to use the Standard Form CFA, am I permitted to modify it?”
  • 22. What should I do if my client is offered a structured settlement and we have signed a Standard Form CFA?
    A structured settlement is one in which some or all of the settlement is paid to the client at intervals over a specified period, rather than in one lump sum. Structured settlements are appropriate and beneficial for clients in some cases.

    The Consumer Guide and Standard Form CFA are client-focused documents that apply to various practice areas and address the most common situations. They do not address structured settlements.

    As a result, in this situation, you must
    • explain to your client how the structured settlement works
    • advise the client how the contingency fee will be calculated (e.g., it will likely be calculated based on the total amount of the settlement)
    • inform the client that the amount they receive from a structured settlement may be more or less than what they might receive as a lump sum, depending on how it is structured and the period over which it is paid, and
    • take extra care to highlight for your client information not captured in or that differs from the information presented in the Consumer Guide and Standard Form CFA.

    These obligations arise from your duty of honesty and candour. You should confirm these explanations with your client in writing and provide a written estimate of the approximate net amount the client is to receive from the settlement.

    Note, that you are prohibited from modifying the Consumer Guide or the Standard Form CFA and must comply with all other contingency fee requirements. For more information, see “If I am required to use the Standard Form CFA, am I permitted to modify it?”.
  • 23. My fee for legal services is contingent on the successful disposition or completion of my client’s matter, but it is not a percentage or proportion of an award or settlement. Do I have to use the Standard Form CFA?
  • 24. My client or the person or entity paying my client’s legal fees in the matter is an organization as defined in O. Reg. 563/20. I am not required to use the Standard Form CFA. What contingency fee obligations, if any, do I have?
  • 25. What terms are not permitted in a contingency fee agreement?
    Lawyers and paralegals are prohibited from including in a contingency fee agreement a provision that
     
    • requires the lawyer or paralegal’s consent before a claim may be abandoned, discontinued, or settled at the instructions of the client
    • prevents the client from terminating the contingency fee agreement with the lawyer or paralegal or from changing legal representation, or
    • permits the lawyer or paralegal to split their fee with any other person, except as provided by the Rules or Paralegal Rules.
  • 26. My client is an individual but the person paying for the legal services on behalf of my client is an organization. Given the contingency fee agreement is between myself and the individual client, am I required to use the Standard Form CFA?
  • 27. How are fees to be calculated in a situation where the retainer is terminated early either by the client or by the licensee?
    The Standard Form CFA includes information regarding the calculation of fees if the agreement is terminated before the case concludes. Lawyers and paralegals must comply with these terms.

    Even where a Standard Form CFA is not required, lawyers and paralegals must include in the contingency fee agreement a statement outlining the manner in which the lawyer or paralegal’s fee is to be calculated if the agreement is ended before the matter concludes.

    Note, while this requirement does not apply to contingency fee agreements where the client or the person or entity responsible for paying the client’s legal fees is an organization or where the contingency fee agreement is approved by the court, as part of their duty of honesty and candour, lawyers and paralegals should advise clients of the consequences of terminating a contingency fee agreement.
  • 28. Are there any additional requirements if my client is a person under disability?
    Yes. If you want to enter into a contingency fee agreement with a person under disability who is represented by a litigation guardian, you must either
     
    • apply to a judge for approval of the contingency fee agreement before the agreement is finalized, or
    • include the contingency fee agreement as part of the motion or application for approval of a settlement or a consent judgment under Rule 7.08 of the Rules of Civil Procedure.

Client Disclosure Requirements

  • 29. What information do I have to provide clients before entering into a contingency fee agreement?
    Subject to limited exceptions, lawyers and paralegals must comply with the following client disclosure requirements:
     
    • Advise each client of the factors considered in determining the appropriate contingency fee. These factors must include:
      • the likelihood of success
      • the nature and complexity of the claim
      • the expense and risk of pursuing it
      • the amount of the expected recovery, and
      • who is to receive an award of costs.
    • Provide each client with a copy of the Law Society’s Consumer Guide and give the client a reasonable opportunity to review and consider the information in the guide before entering into the contingency fee agreement.

    If the lawyer or paralegal markets legal services on the basis that clients may be charged a contingency fee, there are additional disclosures that must be made. For more information, see the Marketing Requirements section below.
     
  • 30. What information do I have to provide clients after completing a contingency fee agreement?
    Upon completion of a contingency fee agreement, lawyers and paralegals must provide the following fee-related disclosure in the statement of account they prepare and deliver to the client:
     
    • A clear breakdown of the award or settlement (including the net amount that the client will receive, and an itemized list of the disbursements, legal fees, and taxes charged to the client)
    • An explanation of the reasonableness of the contingency fee with reference to the following factors: the time expended, the legal complexity of the matter, the results achieved, and the risks assumed. This requirement does not apply where a court has approved the contingency fee, and
    • A statement that the client has the right to apply to the Superior Court of Justice for an assessment of the lawyer or paralegal’s bill in accordance with Section 28.1 of the Solicitors Act and specifies the latest date for doing so. This requirement does not apply where the court has approved the contingency fee.

    Note, the above requirements do not apply to a contingency fee agreement where the client or the person or entity responsible for the payment of the client’s legal fees in the matter is an organization or where the lawyer is retained to represent one or more persons in a proceeding commenced under the Class Proceedings Act. However, in these cases, lawyers and paralegals must still comply with their professional obligations under the Law Society’s Rules relating to fees and disbursements and statements of account.

    For more information, see the question What information must I include in my statement of account? below.
     
  • 31. How should I document compliance with the client disclosure requirements?
    To assist in documenting compliance with the contingency fee requirements, lawyers and paralegals should consider using the Law Society’s Standard Form Contingency Fee Agreement Checklist, if applicable (see the question Do I have to use the Standard Form CFA?”).  
     
  • 32. Are there exceptions to the client disclosure requirements?
    Yes. The exceptions are as follows:
     
    • Where either the client or any person or entity responsible for the payment of the client’s legal fees in the matters is an organization or where a lawyer is retained to represent one or more persons in relation to a proceeding commenced under the Class Proceedings Act, lawyers and paralegals are not required to
      • provide their client with the Consumer Guide
      • include in their statement of account the information identified in Rule 3.6-2.1(2)(b) of the Rules or Rule 5.01(8.1)(b) of the Paralegal Rules.
    • Where the court has approved a contingency fee, lawyers and paralegals are not required to provide clients with an explanation of the reasonableness of the contingency fee or advise the client of their right to assess the lawyer or paralegal’s statement of account.

    For more information, lawyers and paralegals should consult Rules 3.6-2.1(2) and (3) of the Rules and Rules 5.01(8.1) to (9.1) of the Paralegal Rules.

    Note, that in all cases lawyers and paralegals are required to consider the factors listed in the Law Society’s Rules when determining the appropriate percentage or basis of the contingency fee and advise the client of these factors (see the question, How do I determine the appropriate percentage or other basis for the contingency fee?”, above).
     

Marketing Requirements

  • 33. Are there requirements specific to marketing legal services where clients may be charged on a contingency fee basis?
  • 34. Are there exceptions to the marketing requirement to publish a general maximum contingency fee percentage?
    Yes. Lawyers and paralegals do not have to publish a general maximum contingency fee percentage where
     
    • they do not market legal services on the basis that clients may be charged contingency fees
    • the client or any person or entity responsible for the payment of the client’s legal fees in the matter is an organization, or
    • they represent or one or more persons in relation to a proceeding commenced under the Class Proceedings Act.

    Note, however, that unless the lawyer or paralegal markets legal services on a contingency fee basis exclusively in relation to organizational clients or to class proceedings matters, the lawyer or paralegal is required to disclose their general maximum contingency fee percentage to all non-organizational or non-class proceeding clients.
     
  • 35. If I charge clients on a contingency fee basis, do I have to advertise that on my firm website?
    No. However, if you market legal services on the basis that clients may be charged a contingency fee you must, subject to limited exceptions, publish a general maximum contingency fee percentage on your website. This information should be easily accessible. If you do not have a website, you must provide the maximum percentage to potential clients at the time the client first contacts you.
     
  • 36. Can I charge more than the maximum contingency fee percentage posted on my website?
    Yes. Lawyers and paralegals may enter into an agreement under which the contingency fee rate is higher than their published maximum rate if the lawyer or paralegal:
     
    • informs the client that the percentage fee exceeds the lawyer or paralegal’s disclosed maximum contingency fee rate, and
    • publishes the higher rate as the lawyer or paralegal’s maximum rate.

Statement of Account

  • 37. What information must I include in my statement of account?
    When billing for a contingency fee, lawyers and paralegals are required to provide the following information on the statement of account delivered to the client:
     
    • total amount of the settlement or award and the net amount the client receives
    • disbursement costs, legal fees and taxes charged to the client, and
    • unless the court has approved the contingency fee,
      • an explanation of the reasonableness of the contingency fee with reference to specific factors,and
      • a statement that the client has the right to apply to the court for an assessment of the statement of account and specifies the latest date for doing so.

    Note, this requirement does not apply where either the client or any person or entity responsible for the payment of the client’s legal fees in the matter is an organization or in relation to a proceeding commenced under the Class Proceedings Act.
     

Record Keeping and Reporting Requirements


Resources and Supports

Last Updated: April 8, 2022
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