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Contingency Fee Reforms

Important Update: 

On December 10, 2021, the Ontario government filed O. Reg. 836/21 amending O. Reg. 563/20 to the Solicitors Act, Contingency Fee Agreements.  These amendments, which come into force on January 1, 2022, modify some of the current contingency fee requirements and, subject to limited exceptions, require licensees to use a revised Standard Form Contingency Fee Agreement. These changes provide clarity and flexibility for licensees and their clients.

Changes include:

To O. Reg. 563/20

  • Confining the requirement to use the Standard Form Agreement to circumstances where a contingency fee agreement is in respect of legal services 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.
  • Requiring that licensees representing clients under a contingency fee agreement in matters that do not fall within those circumstances include prescribed information in their contingency fee agreements; and
  • Providing that neither the Standard Form Agreement or the prescribed information are required if the client is an organization (or an entity responsible for the payment of a client’s legal fees in the matter) that
    • Employs more than 25 individuals,
    • Employs a lawyer on a full-time basis, or
    • Has assets or gross annual revenues that exceed $10 million.


To the Standard Form Agreement:

  • Include fee options that could typically pertain to standard contingency fee arrangements but were not initially included:
    • Providing that a licensee’s fee may be the lesser of an hourly rate or a contingency fee; and
    • Providing for a contingency fee that applies only to an increase that the licensee negotiates or litigates on the client’s behalf.
  • Provide for more options to address dispute resolution processes.
  • Provide for the ability to delete the sections relating to costs if costs are not applicable to the matter, and changing the description of partial indemnity for costs from 60-80% of fees to a “certain percentage”.
  • Provide a new option regarding the direction of funds for legal fees, costs, taxes and disbursements to track the requirement in section 3 of the Regulation.   
 

Supports and Resources for Lawyers and Paralegals

Lawyers and paralegals with questions about the new contingency fee requirements, including the amendments that come into force on January 1, 2022, may contact the Law Society’s Practice Management Helpline at 416-947-3315 or toll free 1-800-668-7380 extension 3315 and select the Helpline option for guidance.  

The Law Society developed resources to support lawyers and paralegals with understanding and implementing the new contingency fee requirements in force on July 1, 2021. These resources are available here. The Law Society is currently updating these resources to reflect the amendments and the revised Standard Form Contingency Fee Agreement that come into force on January 1, 2022.

The Law Society will continue to provide updates and information to licensees through this page, the Contingency Fee resource page, and other Law Society communication channels.


Background

In 2017, Convocation approved a set of reforms to the contingency fee regime to enhance consumer protection, improve transparency and fairness for clients, and facilitate access to justiceAmendments to the Solicitors Act and regulations, as well amendments to the Law Society’s rules of conduct were required to fully implement the reforms.

In early 2018, Convocation adopted additional, related regulatory measures and held a call for comment on proposed rule amendments, a mandatory standard form contingency fee agreement and a ‘Know Your Rights’ guide (consumer guide) for clients.

The contingency fee reforms were recommended by the Advertising and Fee Arrangements Issues Working Group, which was formed in February 2016 to consider regulatory responses to issues related to advertising, referral, contingency and other fee practices. The working group held three calls for comment regarding contingency fees (see documents below). 

On October 22, 2020, Convocation approved amendments to the lawyer and paralegal conduct rules to implement certain transparency requirements, previously approved in principle by Convocation. 

On July 1, 2021, the following amendments to the lawyer and paralegal conduct rules came into effect:

  • requirement to disclose the maximum contingency fee percentage charged in certain circumstances
  • requirement to provide potential clients with the standard form consumer guide entitled Contingency Fees: What you need to know
  • requirement to provide certain fee-related reporting to clients on completion of the agreement.


Amendments to the Solicitors Act and new regulation O. Reg. 563/20 also came into force. The amendments to the Act:

  • repealed subsection 28.1(8), which prohibits the inclusion of costs in the amount on which a contingency fee calculation is based
  • extended the provisions on contingency fee agreements in the Solicitors Act and its regulation to paralegals (through new section 32.1).


O. Reg. 563/20 requires use of a new standard form Contingency Fee Agreement, incorporated by reference into the regulation.


Related documents

Report to Convocation – October 2020 – Rule amendments
Report to Convocation – October 2020 – Paralegal Professional Conduct Guideline amendments

Terms or Concepts Explained