Contingent Fee Agreements

What is a Contingent Fee Agreement?

A contingent fee agreement is one where your remuneration for services is contingent, in whole or in part, on the success of the matter (Rule 1901, Law Society Rules). Essentially, the lawyer agrees that they will charge no fees upfront and will work on the case until it is resolved. When the matter is resolved, then the lawyer takes a percentage of the settlement or judgment amount.

 

Requirements of Contingent Fee Agreement

According to Rule 1902, a contingent fee agreement must be in writing and be signed by and delivered to each party. It must also meet several other requirements under Rule 1902. If you enter into a contingent fee agreement with a client, it is your responsibility to ensure that the agreement meets these regulatory requirements.

The agreement must:

  • – be fair and the remuneration provided for in it must be reasonable in the circumstances as they exist at the time you enter into the agreement, and
  • – state that any party to the agreement may apply to the Court pursuant to s. 64(3) of The Legal Professions Act, 1990 for a determination as to whether the agreement is fair and reasonable.

The agreement must not purport to:

  • – exclude your liability for negligence,
  • – require your consent for the client to abandon, discontinue or settle the matter, or
  • – prevent the client from changing lawyers before the conclusion of the retainer.

You must also be mindful that the Rules prohibit contingent fee agreements in child custody and access matters. If your proposed contingent fee agreement pertains to any other type of family law matter, you must submit agreement to the Court for approval (Rule 1903).

When the time comes to prepare your invoice for fees, disbursements and expenses to your client, you must ensure that the total remuneration invoiced does not exceed what was provided for in the agreement and that it is reasonable under the circumstances existing at the time that you prepare the bill (Rule 1904). This rule acknowledges that circumstances may change between the opening and closing of a file – sometimes drastically – but both your contractual obligations and your ethical obligation to ensure that fees are fair and reasonable remain intact. See Section 3.6-1 of the Code regarding your ethical obligations respecting reasonable fees and disbursements.

The Code also speaks directly to the matter of contingent fees and contingent fee agreements. Section 3.6-2 of the Code echoes Rule 1901 of the Rules and its commentary outlines some of the factors to consider in determining the appropriate contingency fee. The commentary to Section 3.6-2 also cautions lawyers to consider including a right to terminate the retainer in any contingent fee agreement. If you fail to do so, you will not be able to withdraw from representation unless:

  • – you are discharged by the client,
  • – the client persists in instructing you to act contrary to professional ethics, or
  • – you are not competent to continue to handle the matter

 

Question: I drafted my contingent fee agreement in accordance with Rule 1902. Now my client wants to change lawyers or discontinue the action. How do I protect my fees?

Good question! In 2016, the Law Society of Saskatchewan Ethics Committee considered this very question. They looked at, inter alia:

  • – Rule 1902 (formerly Rule 1501) and its prohibitions against requiring a lawyer’s consent to discontinue and against preventing a change in counsel,
  • – Section 3.6-2 of the Code and its requirement that an appropriate fee be based on a number of factors, and
  • – Re Legal Profession Act, 1990 and Merchant Law Group, 2001 SKQB 311 (CanLII), wherein Pritchard, J. concluded that “until the matter commenced pursuant to a contingency fee arrangement has concluded, it is impossible for a taxing officer or the court to assess the reasonableness of fees that might be charged thereunder,” and “requiring a client who has retained a solicitor under a contingency fee agreement to pay that solicitor their reasonable fees before being able to transfer the file has the effect of restricting the client’s right to transfer the file.”

According to the Committee, the best approach will be dictated by the circumstances of each case.

In the case of changing lawyers, approaches may include such options as:

  • – reaching an agreement with successor counsel requiring notification of the litigation’s result prior to proceeds being paid to the client,
  • – agreeing to a fixed fee payable only after the action is complete, or
  • – implementation of a charging order.

When a client either abandons litigation or settles against his/her lawyer’s advice, the starting point will be negotiations between the client and lawyer as to proposed fees, likely based on terms of the contingency fee agreement that contemplate such circumstances. An account for time spent or a settlement percentage may be rendered at that time, to either be paid, litigated, or resolved in another way. Moreover, and beyond the language of the agreement, the court or a taxing officer may determine the matter.

See 2016 SKLSPC 5 for more detail.

 

Drafting Considerations

A contingent fee agreement is still a retainer agreement. It should include most, if not all, of the same types of clauses as any other retainer. You will still want to address matters such as scope of services, timelines, communication guidelines and client responsibilities. In fact, these may be even more important in a contingent fee agreement as a method of client relationship management.

It is also important that you turn your mind to the sorts of issues that can arise in a contingent fee agreement (such as how/when major disbursements are to be billed and paid, how costs orders will be handled), and craft a retainer that takes these matters into account.

 

Tips for Contingent Fee Agreements

  • – Specify the approach that will be taken should termination of either the action or the solicitor-client relationship occur before judgment.
  • – Disbursements are usually charged and collected from the client as the file proceeds, so it is good practice to create a mechanism that allows for this. Examples of disbursements on a personal injury contingency file include invoices for expert opinions, clinical records, or police files.
  • – Keep accurate records of your time spent on a file even though you have entered into a contingent fee arrangement—the reasonableness of your fee may still be challenged. Keeping accurate and detailed records of your time gives you the best chance to recover a reasonable fee for your labour.

For example: you have taken on a client on a contingent fee basis and have conducted the file past questioning for discovery. Your client becomes displeased with you and decides to change lawyers. You have released the file to the new lawyer on her undertaking to pay your fees for work you performed to date out of the eventual settlement or award in the case. You have not tracked any of your time on the file. This puts you in a difficult position if there is a taxation of the file (where a client challenges the amount of your fee before the Court), and to a certain extent puts you at the mercy of the new counsel. If it were to proceed to taxation and you kept little to no record of the work you did on the file and the time spent, it would be very difficult to provide affidavit evidence.