This case involved a young man who became quadriplegic following an injury suffered in an unsupervised judo class at the University of Windsor. The case settled at mediation for 2.5 million dollars.

The retainer, in my view, called for relatively modest compensation for counsel, 15% on the first million dollars, and 10% for each million thereafter.

The factors considered by the Court of Appeal, included the time spent, complexity of the file, and the result achieved. It was noted, that the solicitors funded all disbursements and ran a legitimate risk of non-payment, had they failed on the issue of liability. Further in the reasons, it was clearly noted that the fee was not dependent on the time spent by the solicitors, but rather, the amount recovered. The Court of Appeal noted that contingency agreements have a positive influence on access to justice. The fact that early achievement of a beneficial result occurred was also seen as a favourable factor – as opposed to charging this fee after a trial.

As a matter of interest, the docketed time on the file, though incomplete, was close to $97,000.00. Indeed, the Court calculated that the fee amounted to 18.5% of the amount recovered, inclusive of the party and party fee of $200,000.00.

CAN THERE BE DIFFERENT TYPES OF CONTINGENCY RETAINER AGREEMENTS?

In my view, the form of retainer used in “Raphael Partners” is inappropriate for cases where recovery is going to be less than $1,000,000.00 (predicated on the defendant’s policy limits).

I know of many plaintiffs’ counsel who charge 33% of the entire recovery.

In this case, 33% would have resulted in a fee of $891,000.00, which would probably be excessive. If the fee had been 25% of the recovery, plus costs, the fee would have been $825,000.00, and again probably excessive.

The approach I would have used, is 25% of the first $1,000,000.00, plus 10% on any amount over and above, plus costs, which would amount to a fee of $600,000.00 in the “Raphael Partners” case, which, in my view, is totally reasonable.

I therefore conclude that all retainer agreements must not be identical.

HOURLY RATE

Much of what goes into retainer agreements, occur by reason of experience. We all face the prospect of an unhappy client during the course of the litigation – unhappy enough that the client instructs us to transfer the file to another counsel.

At that point, the contingency nature of the agreement is no longer relevant, and absent an agreement in the retainer as to hourly rates for counsel and others who may docket time on the file, enforcement of one’s fee becomes far more difficult and wide open to question.

An interesting question arises where, God forbid, the defendant’s offer prevails and, pursuant to Rule 49, the Court awards costs to the defendant from the date of the offer.

Assume a case you have evaluated at $200,000.00, and made an offer to settle in that amount. The defendant offers $150,000.00 and judgment is $125,000.00. Clearly, the defendant’s costs at trial, and perhaps substantial preparation time beforehand (assuming a two week trial), will amount to, say, $80,000.00, leaving the plaintiff with a gross recovery of $45,000.00, plus modest costs assessable up to the date of the offer. Even at 33%, this results in a fee of slightly over $15,000.00. Again, absent a paragraph in the retainer calling for hourly rates in this situation, the fee is nothing short of disastrous.

My firm has incorporated a paragraph in our contingency agreements, which reads as follows:
“In the event the defendant makes an offer to settle, that is recommended by the lawyer and rejected by the client, this retainer agreement is no longer applicable as to legal fees and will have to be renegotiated.”

At least under these circumstances, using the example above, the fee will be closer to reasonable.

I find with some clients, that as long as they are virtually risk-free in going to trial, they can become most unreasonable. The addition of this clause, at the very least, leads to a sharing of the risk where the client rejects an offer.

One other clause I recommend for inclusion in a retainer (again learned through past experience), contemplates a very common situation where the file has been transferred to you, after another lawyer was originally retained and worked the file.

This paragraph reads as follows:
“The client acknowledges that where they have previously retained a lawyer, who has rendered an account for services, the client shall remain responsible for payment of the account out of their recovery, throughout the term of this retainer. This can only be altered by an agreement in writing signed by the lawyer.”

WHAT SHOULD THE CLIENT KNOW ABOUT THE VALUE OF THEIR CASE AND WHEN SHOULD THEY KNOW IT?

The simple answer is, as soon as possible.

One of the lessons learned from “Raphael Partners”, is that the Court felt it necessary that at the very start, the client was made aware of what the maximum fee would be.

Obviously, it is often difficult to give a client a precise evaluation of their claim. On the other hand, none of us should find it very difficult to suggest a potential range for an award under the various categories.

For example, in the case of an injury to a joint, which will lead to joint replacement surgery 15 years into the future, we can estimate general damages at anywhere between $125,000.00 and $175,000.00. Let us assume, as well, a range of economic loss of, say $300,000.00 to $500,000.00.

We can then explain, early on to the client, what the potential range of fees will be, after adding an additional 10 to 15% for costs. (The “Raphael Partners” case also confirms the wisdom of setting this out in a letter to the client.)

We then avoid the suggestion by the motion’s Judge in “Raphael Partners”, that by presenting the fee for the first time at a mediation, that there was undue pressure placed on the client to sign a net recovery agreement.

DOES THE CONTINGENCY AGREEMENT COVER ALL CONTINGENCIES?

The glaring omission in most retainer agreements I have read, including our own, is the absence of a paragraph to cover the potential for appeal from the trial judgment.

I recently read an agreement drawn in the State of Nevada. It contained the usual agreement through trial (in that case 35% of the recovery). However, it went on to add an additional paragraph calling for 10% more to the lawyer, should the case proceed through an appeal.

If we return to my example of a recovery of $125,000.00 at trial, with the appeal successfully substituting a verdict of $199,999.00 ($1.00 less than the plaintiff’s offer), the fee would be 35% of the final judgment, or $70,000.00, plus the costs awarded both at trial and on appeal, as opposed to $50,000.00, plus fees paid by the defendant, absent the 10% bump for appeal.

We are all making our way through a steep learning curve in dealing with contingency fee agreements. However, the one thing we should all know, is that assuming a fee that is fair, the balance of the agreement can be as broad as our own imaginations.

DISBURSEMENTS

All agreements should set out that disbursements remain the responsibility of the client, although they will be funded in the first instance by the law firm.

Again, through trial and error, we have learned that some things can fall between the cracks. Assume an offer to settle midway through the litigation that, at the time, does not look attractive. We then go on in the lawsuit and receive some defence expert reports that make us re-examine that offer. We then decide to recommend it to our client. However, as is usual, disbursements may well be expended between the time of the original defendant’s offer and the plaintiff’s decision to accept it. Absent any agreement that indicates disbursements remain the responsibility of the client, your fee may well be reduced by the disbursements incurred, between the date of the offer and the date of acceptance.

By way of conclusion, it is difficult to give you any measuring stick for placing a percentage on the fee recovery. However, it does seem clear, that in a case where liability is a difficult problem and difficult to establish, for example a medical malpractice case, that the Courts may well accept a higher percentage. At one time in Ontario, they were discussing numbers, such as 33% for most cases, and 40% for medical malpractice cases. I think the only point to be taken from this is that complexity and difficulty of achieving a judgment may well entitle the solicitor to a higher percentage of recovery.