Contingency Fee Cases Are Risky for the Lawyer, with very Little risk for the Client.
Contingency fee agreements with a lawyer where the lawyer only earns a fee based on assets recovered, is commonly known as “the poor man’s key to the court room”.
The Ontario Court of Appeal in Indcondo Building v Sloan ( Feb.2012) held that law firms working under a contingency fee agreement do not have to post security for costs when representing cash strapped clients.
It is believed that the decision is also the first time the court has recognized the risk law firms face in being stuck with disbursement costs in contingency fee cases agreements and the significant barrier that could create for lawyers involved in them.
Mr. Justice Armstrong stated that as a matter of principle,” the lawyer who acts in a contingency fee basis is already carrying a significant risk of not being paid and, as in this case, being stuck with the cost of paying the disbursements”.
To force upon law firms the additional burden of posting security for costs would no doubt have a chilling effect on those lawyers who might otherwise make their services available on a contingency basis, thus creating another problem for the general public in its frustrated access to justice.
The main defendant argued that law firms in some circumstances should be required to post security for costs on behalf of the client.
They sought an order that the law firm pay into court $300,000 in security for costs of the action, and a further $75,000 in security for costs of the appeal.
In a sense, disinherited.com is of the view that the decision seems to say lawyers cannot be held responsible for their clients costs simply because they are representing clients in a contingency fee agreement.
The court appears to have made a policy decision of access to the courts, and therefore lawyer should not have to bear the financial burden of their clients cases, as if they had to do so, it would create a significant chilling effect upon the overall access to the courts by the public.
The decision seems to fall into line with the general rule that the courts rarely order lawyers to pay costs except in cases of misconduct.
Disinherited.com strongly agrees with the reasoning of this decision and contingency fee agreements in principle as the “poor man’s key of the courtroom”.