The information and examples contained in this Document are provided for general informational purposes only. In the case of any uncertainly, inaccuracy or inconsistency between this Know Your Rights document and the Law Society Act, 1996 and Rules, or the contractual wording in the preceding portion of Form 1, the actual wording in those other documents and the laws of the Province of New Brunswick shall govern.
What Clients Need to Know
Hiring a lawyer is an important decision. Before hiring a lawyer on a contingent fee basis, there is information that you need to know.
To ensure transparency and to protect the public, the Law Society requires that lawyers provide their clients with this document. The information that you need to know is set out in four sections:
- Learning the basic terms
- Deciding whether contingent fees are right for you
- Hiring a lawyer on a contingent fee basis
- Ending a lawyer-client contingent fee agreement
1. Learning the basic terms
What are hourly rates and fixed fees?
An hourly rate is a fee arrangement where a lawyer charges for each hour (or portion of an hour) that the lawyer works on the client’s case. For example, if the lawyer’s regular rate is $200 per hour and the lawyer works 5 hours, the fee will be $1,000, plus HST. Lawyers typically have different fee scales with more senior lawyers charging a higher hourly rate than those who are less experienced. Typically, the lawyer would bill the client on an ongoing basis and the client would be required to pay these bills regularly. The client would also be required to pay regardless of whether or not the client received a settlement or was successful at a proceeding, such as a trial or hearing.
A fixed fee (or a flat fee) is a fee arrangement where a lawyer charges a specific, total fee, plus HST, regardless of the amount of time that the lawyer spends working on the case. Usually a fixed fee is paid by the client to the lawyer before the lawyer begins the legal work.
What are contingent fees?
Contingent fees are fees for a lawyer’s services that are charged to and payable by a client only if you receive money. That is, if the matter is settled or there is a final judgment. Payment of the fee depends on or is contingent upon the outcome.
Contingent fees are most often calculated as a percentage of the total amount of damages and costs recovered in a settlement or awarded at a proceeding, plus disbursements and HST. Disbursements and HST are typically paid by the client in addition to the contingent fee.
What is a contingent fee agreement?
A contingent fee retainer agreement is a legal document that sets out the terms and conditions of the relationship between the client and the lawyer when the lawyer is charging the client on a contingent fee basis (i.e. when the fee paid to the lawyer is a percentage of the amount recovered for the client).
What are disbursements?
Disbursements are expenses that a lawyer has paid on a client’s behalf to others who have provided services in support of the case. Disbursements are not included as part of an hourly rate or a contingent fee but may be included in a fixed fee. Examples of disbursements are hiring court reporters, expert witnesses, accountants or property appraisers. Lawyers are also permitted to charge clients for other ongoing disbursements such as photocopying costs to provide documents for use by a court and supplied to the opposite party, copies of records, costs of transcripts and court filing fees.
What are costs?
Costs are an amount that the Court may add to a judgment to partially reimburse the successful party for the expense of hiring a lawyer. Costs are generally an amount based on the amount of the judgment, as prescribed by a Tariff in the Rules of Court. Costs are generally much less than the actual amount you will pay your lawyer.
If you are successful in your case, costs will be included the settlement or judgment, and the contingent fee percentage will be applied to the costs.
If you are not successful in your case, the Court could order you to pay the Defendant’s costs. These are your responsibility to pay, not your lawyer’s.
What is a settlement?
A settlement is an agreement to resolve a dispute where one person pays an amount and/or does something that satisfies the person making the claim. A settlement is an agreement between the parties while an ‘award’ is an amount determined by a Court or arbitration panel.
2. Deciding whether contingent fees are right for you
For what matters are contingent fees permitted?
Contingent fees are permitted for all matters except for family law and criminal or quasi-criminal matters. If your matter relates to family or criminal law, a lawyer is not permitted to charge you a contingent fee. For such matters, lawyers charge clients on a fixed-fee or an hourly basis.
Do I have to pay for legal fees on a contingent fee basis?
No, there are other options and your lawyer is required to tell you about them. One option is for a lawyer to charge you for the time that they spend working on your case at an hourly rate plus disbursements. Another less common option is a fixed-fee arrangement.
What legal services are covered by a contingent fee retainer agreement?
The legal services that are covered will be described in the contingent fee agreement. If you cannot determine what services are included after reading the contingent fee agreement, you should ask the lawyer what legal services are included and excluded. You should ask these questions and ensure the agreement is clear before signing the agreement.
How do lawyers determine the percentage or other basis for the contingent fee?
Lawyers consider a number of factors in determining the appropriate percentage or other basis for a contingent fee. These factors include:
- 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;
- Who may receive an award of costs.
Is there a maximum that a lawyer can charge as a contingent fee?
Yes. In New Brunswick, a lawyer may retain 33%, at most, of the amount recovered for the client, including costs, interest and HST but excluding disbursements. However, if the matter proceeds to an appeal, the maximum percentage increases to 38%, including costs, interest and HST and excluding disbursements incurred on behalf of the client. That is, the disbursements (and HST on disbursements) are paid first, and the lawyer receives the agreed percentage of whatever is left.
Sometimes a lawyer and his or her client will both agree they would like to either increase the percentage to be paid to the lawyer or change some other aspect of the standard agreement. There are various reasons why this might be reasonable, and it is therefore allowed in some cases, but such agreements must be pre-approved. Lawyers and clients who wish to agree to a percentage greater than the 33% / 38% allowed, or who wish to change some other part of the agreement itself, must apply to the Law Society to have their particular contingent fee agreement approved by a ‘reviewing officer’. A reviewing officer is appointed by the Law Society and the lawyer is required to pay a fee to the reviewing officer.
Who is responsible for paying for disbursements?
The client may be responsible to pay for the disbursements. There are four payment options:
- The client pays for all disbursements, as they are incurred and billed, regardless of the amount recovered, if any;
- The client pays for all disbursements, regardless of the amount recovered, but not until the file is concluded either by settlement or judgment;
- The client pays for disbursements, but only up to the limit of the amount recovered (in other words, you will not pay for any disbursements that exceed the amount recovered at the conclusion of your matter);
- The client pays for some disbursements, and the lawyer pays for others, as specifically agreed upon by the client and the lawyer and set out in the contingent fee agreement.
If you cannot determine which payment option applies to you after reading the contingent fee agreement, you should ask the lawyer about this and ensure the agreement is clear before signing it.
It is important to note that some disbursements, for example, experts’ reports, may be very costly so it is important that you understand what you are agreeing to pay.
How and when are contingent fees payable?
Contingent fees are payable from any amount recovered, whether the amount is recovered by settlement or after a trial. In some cases, your lawyer may be able to arrange for you to receive part of the settlement in advance before the case settles or before trial. Your lawyer would discuss that procedure with you. Contingent fees are payable to the lawyer from any advance payment or interim settlement agreement, unless the payment has been agreed to be for a designated purpose or payable to someone other than the client.
Funds will be paid to your lawyer. Your lawyer will then deduct the contingent fee (and, if agreed, disbursements) plus any HST. The lawyer will give you the balance, unless the contingent fee retainer agreement states otherwise or unless the lawyer is required by law to pay some other person (for example, the Canada Revenue Agency). You must receive an invoice from your lawyer, and also a statement showing the distribution by the lawyer of the total amount received.
If I receive a settlement or win at a proceeding, will the other side pay my costs?
If the other person agrees to pay and you get a settlement or you win at a proceeding in Court, in most cases your lawyer will seek costs on your behalf.
The New Brunswick Rules of Court do not provide for high costs awards and even when a Court awards costs to you, they will not cover the actual legal costs / fees that have been incurred.
Where your lawyer recovers costs on your behalf, typically, the contingent fee will be calculated as a percentage of the total of the damages and costs awarded to you. You should carefully review your contingent fee agreement to confirm this.
Is there a financial downside to me if I lose at a proceeding?
If you lose in court, you may have to pay a portion of the other side’s legal costs. If costs are awarded against you (i.e. in favour of the other party), you and not the lawyer will be responsible for the payment of such costs.
What is a disadvantage of contingent fees for clients?
A disadvantage of choosing a contingent fee agreement is that you may end up paying your lawyer more in legal fees than if he/she were to charge you an hourly fee for work done. This could happen if your lawyer is able to settle your claim quickly.
What are some of the advantages of contingent fees for clients?
First, you will not have to pay any legal fees up front or on an ongoing basis. Second, if the lawyer cannot settle your case or if you lose at a proceeding in Court, then you would not have to pay your lawyer any fees and you may not have to pay any disbursements (depending on the payment option that was established). Third, if your matter goes to a proceeding and you win, the contingent fee may be less than an hourly fee if your lawyer has spent a significant amount of time on the proceeding.
3. Hiring a lawyer on a contingent fee basis
How do I hire a lawyer on a contingent fee basis?
Once you have read this document and the contingent fee agreement, if you decide to hire the lawyer, then you and the lawyer must sign and date the contingent fee agreement. By signing the agreement, you are confirming that you have sufficient information to enter into the lawyer- client relationship and that you agree to the terms, including the payment terms. The lawyer is required to provide you with a signed copy of the contingent fee agreement for your records. The lawyer will also keep a signed copy.
What are my responsibilities and rights as a client?
You are responsible for giving your lawyer all the facts and being completely honest with them. It is very important that you give your lawyer all information that you have or have access to about your claim. This includes copies of documents.
You have the right to information about your case. You should understand the range of outcomes for your case, including how likely you are to win or lose. If you have questions about your case, you should ask your lawyer.
Even though your lawyer will give you legal advice, you have the right to make all critical decisions about your matter.
What responsibilities does a lawyer have to me?
Your lawyer is required to keep you informed about matters that arise, discuss with you any significant decisions you must make and give you legal advice as the matter progresses. This includes letting you know if there are major expenses for your case and the impact these expenses will have on the total settlement or award you may receive.
When your lawyer is providing advice to you about settlement, the lawyer should provide you with a written estimate of the approximate net amount that you would receive based on the settlement offer. The estimate should include enough information so that you can make an informed decision and should include a breakdown of the lawyer’s fees, disbursements and any other charges that will be deducted from the amount that you will receive.
4. Ending a lawyer-client contingent fee agreement
If I am unhappy with my lawyer after signing a contingent fee agreement, do I have the right to dismiss them?
Yes, you have the right to dismiss your lawyer at any time. However, you should be aware that contingent fee retainer agreements typically have sections that come into effect if you end the relationship. For example, if you end the relationship with your lawyer without adequate reasons, you will have to pay your lawyer a fee based on the hours worked (i.e. an hourly rate). If you end the relationship for adequate cause, the lawyer may accept the termination without claiming a fee or may accept the termination but claim a fee. You may also have to pay the lawyer for all disbursements incurred with respect to your matter.
Can a lawyer end the contingent fee agreement with me?
Yes, but there are limitations on the lawyer’s ability to do so under the Law Society of New Brunswick Code of Professional Conduct. The only reasons the lawyer may terminate the relationship are:
- with the client’s consent;
- if a client persists in instructing the lawyer to act contrary to professional ethics; or
- other reasons that may be set out in the Contingent Fee Agreement.
How will I know when the contingent fee has been paid?
When you are ultimately charged the contingent fee, your lawyer is required to provide you with a Statement of Distribution of Amounts Recovered and an invoice, which is a written accounting that clearly sets out the total amount of the settlement or award and the amount that you will receive and clearly lists the disbursements, legal fees and taxes charged to you.
What can I do if I think my lawyer’s final bill is too high?
Once you have received your bill, if you think the bill is too high, you have two options. The first option is to talk to your lawyer about the bill to see if the lawyer is willing to reduce it. If not, the second option is for you to apply to have your bill reviewed. The review process allows the client (or the lawyer) to have a bill or a series of bills assessed by an independent third party called a “reviewing officer”. The reviewing officer has the authority to reduce the bill where appropriate or to confirm that the bill is fair and reasonable. Reviewing officers are lawyers appointed by the Law Society.
A person who wishes to have a lawyer’s bill reviewed should contact the Law Society immediately. If the review process is not begun within the time allowed, it may be impossible for the reviewing officer to complete the review. Clients requesting a review must start the process within 120 days after the date the bill is received. This period can only be extended if the reviewing officer finds there are “special circumstances” that justify and extension.
For more information with respect to this information, see Review of Lawyers’ Bills (Taxation).
Some examples of how contingent fees work
Jane was injured when she slipped and fell on water in an aisle at Walmart. She broke her leg resulting in surgery and a significant time away from work. She hired a lawyer to file a claim against Walmart. Her lawyer was able to negotiate a settlement with Walmart and they did not have to go to court. She received a settlement for loss of earnings from Walmart in the amount of $32,000.00.
Her lawyer’s contingent fee for service was 33%. Jane paid her lawyer for any disbursements that came up during the matter, such as photocopy costs. When lawyer received the funds for Jane, he prepared a final account statement:
Robert was fired from his job. He believes the firing was not fair and hired a lawyer to go to court to obtain compensation for lost wages. An action was filed, and the employer filed a defence. An Examination for Discovery was held and after this the employer offered to settle. This meant that they would not need to go to court.
Robert agreed to accept a settlement of $100,000.00 net of taxes. They did not negotiate any additional sums to cover legal fees or disbursements. So far in the file, Robert’s lawyer incurred disbursements in the amount of $2,125.00. Robert’s lawyer had agreed to take the file on a contingent fee of 25%.
The employer paid Robert’s lawyer the sum of $100,000.00 In Trust. Robert’s lawyer distributed the money in the following way:
(This document has been modified from a document prepared by the Law Society of Ontario entitled ‘Know Your Rights Guide for the Public’, with permission of the Law Society of Ontario).