In Ottawa and across Ontario, when you read an injury lawyer’s advertisement stating there are “No Fees Unless You Win!” the concept seems pretty straightforward. If you don’t win your injury case, you don’t have to pay. But what sounds simple on its face, may not be. What about disbursements (the money spent by your law firm on experts’ reports, filing fees, etc.)? Do these have to be paid if you lose? Do they need to be paid up front? And how are the fees calculated? If I get a lump sum settlement for my injuries in a car accident case totalling $100,000.00 and the fees are 30%, why don’t I get $70,000? These are some of the questions that will be answered below.
The first concept that must be understood is exactly what is involved in a contingency agreement. This is an agreement between the lawyer and client that the payment of legal fees are conditional (contingent) on the claim being successfully resolved, whether through settlement or Judgment following a trial. If the claim is not successfully resolved, then the client is not charged any legal fees.
Separate from legal fees are disbursements, or money spent by your lawyer to build and advance your case. These could include things like court filing fees, postage and expert opinions. If your lawyer sends you to an orthopaedic surgeon or any other expert for an assessment, and if that expert testifies for you at trial, there will be expenses associated with both the assessment as well as his or her attendance at trial. In a personal injury trial, disbursements can get as high as $50,000 to $100,000 and beyond.
Most contingency agreements in Ottawa and across Ontario provide that there are no fees charged unless you are successful. However, the client is still on the hook for disbursements and must pay these, regardless of the outcome. On top of this, some injury lawyers ask for the payment of disbursements up front. Other law firms will pay your disbursements without interest until settlement. However, if the client loses the case, he or she must pay these personally.
The last important point to consider is what you will actually receive on settlement. If the total amount of your settlement is $100,000.00 and your fees are 30%, you will not receive $70,000.00. The amount you receive is reduced by the HST (13%) on fees, as well as disbursements. However, when you settle your case or get a Judgment at trial, the defendant will typically have to pay a portion of your legal fees and most of your disbursements. There are no fees charged on these sums. The contingency fee is only charged on damages and a lawyer is not permitted to charge fees on the costs contribution or to take those costs for him or herself (absent a motion to the court requesting this).
By way of example, if the contingency fee is 30% and your case settles for damages of $100,000.00, plus a contribution of $15,000.00 by the defendant toward your costs, plus HST and a contribution of $2,500.00 which covers all of your disbursements, then the fees are calculated as follows:
Contribution by Defendant to Costs: $15,000.00
Contributions by Defendant to HST: $1,950.00
Contribution by Defendant to Disbursements: $2,500.00
Actual Legal Fees: $30,000.00
HST on Fees: $3,900.00
In this example, the client would receive $83,050.00 on a settlement for net damages of $100,000.00 and a global lump sum settlement of $119,450.00. The fees are only calculated on the damages. One hundred percent of the costs, disbursement and HST contribution by the defendant go to the client.
At SG Injury Law, our personal injury and long term disability lawyers are pleased to offer our clients an option of a contingency fee agreement with no fees until you win at trial or settle your case, or the option of paying on an hourly rate with payment deferred until settlement or judgment. We do not require advance payment for disbursements and fully fund our clients’ cases to settlement or trial.
If you have any questions about how contingency fee agreements work in a personal injury or insurance claim, please feel free to contact one of our lawyers: