Contingency Fees Under a Different Name Still Prohibited in Family Law

The civil (private) law system serves an important function in the resolution of disputes between individuals. Essential to this resolution is some protection from outside interference by external interests. Regulation of these relationships have changed over the years, where work would be done in advance by a lawyer on a promise of recovery, but is still limited in many ways across Canada.

The common law prohibited champetry, bargains by a stranger to a suit in consideration of proceeds; maintenance, meddling in a suit by maintaining or assisting a party; and barratry, an offence of exciting and stirring up quarrels in a suit. The Ontario Law Reform Commission’s Report on Class Actions, 1982 stated,

Rules against maintenance and champerty were introduced over 700 years ago in response to abusive interference in the legal system by powerful royal officials and nobles. Although the particular abuses against which the prohibitions were directed had been cured by the time of the Tudors, the rules continued to survive. In modern decisions concerning maintenance, courts do not refer to the mediaeval origins of the doctrine, but justify its continued existence on the basis of public policy considerations. The antipathy of the courts to champertous agreements similarly is supported by policy concerns. In these expressions of policy are the roots of the arguments justifying the present ban on contingent fees.

Ontario enacted The Champerty Act in 1897, based on older English statutes that date back to 1305. Abuse by royal officials was no longer a concern at that time, and was overshadowed by “new and different abuses.” Champerty and maintenance remained common law crimes until amendments in 1953-54, after the Criminal Code Revision Committee recommended their abolition on the basis they were obsolete and archaic, but remained actionable in tort as proof of special damages. Ontario was particularly notable for being the only province to prohibit contingency fees entirely, outside of class proceedings.

In 1997, an Ontario Legal Aid Review, A Blueprint for Publicly Funded Legal Services, indicated that the shortages in legal aid coverage for civil matters could be met in part by contingency fee arrangements. It wasn’t until 2002-2004 that Ontario formally allowed and regulated contingency fee arrangements, prohibiting its use in criminal law and family law. The rationale was that the vulnerabilities of clients in both, and the threat of the loss of liberty in the former and loss of loved ones in the latter, meant that contingency fee arrangements would be ripe for abuse. The Solicitors Act explicitly states,

Contingency fee agreements 

 28.1 (1) A solicitor may enter into a contingency fee agreement with a client in accordance with this section.

Remuneration dependent on success

(2) A solicitor may enter into a contingency fee agreement that provides that the remuneration paid to the solicitor for the legal services provided to or on behalf of the client is contingent, in whole or in part, on the successful disposition or completion of the matter in respect of which services are provided.

No contingency fees in certain matters

(3) A solicitor shall not enter into a contingency fee agreement if the solicitor is retained in respect of,

(a) a proceeding under the Criminal Code (Canada) or any other criminal or quasi-criminal proceeding; or
(b) a family law matter.

[emphasis added]

Ontario remains the only jurisdiction in Canada to continue to prohibit the use of contingency fees for family law matters.

The Ontario Court of Appeal recently reviewed a solicitor’s agreement in a family matter in Jackson v. Stephen Durbin and Associates and considered it a violation of the Solicitors Act, finding it a contingency fee arrangement under a different name.

The primary issue in the family law matter was custody of a 6 year-old child. The retainer agreement included hourly rates, daily fees for court appearances with a 15% increase, and a provision for “an increase in fees in the event of a positive result achieved (‘Results Achieved Fee’).” Although the client achieved his desired outcome after trial, sole custody of the child, the law firm unilaterally deducted $72,433.24 for a Results Achieved Fee on top of the client’s outstanding account.

The firm attempted to claim that the Results Achieved Fee was simply a premium or bonus. They attempted to distinguish it from a contingency fee on the basis that it was not a “no win, no fee” arrangement, often seen in other contingency fee type arrangements, and that the results sought were not based on a specific monetary amount.

There have been some calls to reconsider this prohibition on contingency fees in family law. In 2015, a group of lawyers, including some of those involved in this matter, sent a letter to the provincial government, stating in part,

The billable hour method contributes to a two-tier family justice system here, and also exacerbates the feminization of poverty. Those fortunate enough to afford to hire lawyers, do. Those less fortunate cannot. Despite improvements made to our legislation over the past decades, women continue to be more likely to suffer the adverse economic consequences of marriage breakdown.

We have seen this. This needs to stop.

Justice Benotto rejected the firm’s position in Jackson on the basis that the 2004 amendments to the Act the phrase “contingent, in whole or in part,” which would also prohibit a premium or a bonus. She provided special attention to the policy considerations of contingency fee arrangements in family law, as follows,

(ii) Policy concerns

[44] I do not accept the appellant’s submission that the public policy concerns regarding contingency fee agreements in family law matters do not apply where the agreement is contingent only on success, and not tied to a specific monetary result.

[45]  Family law litigation is fundamentally different from civil litigation. One of the unique aspects of family law is that monetary recovery does not occur in the same way in family law litigation as it does in civil litigation. Instead the family finances – which are depleted daily by litigation costs – are divided. No outside funds are injected into the recovery. In these circumstances, it is inappropriate for a lawyer’s fee to be contingent on the monetary result.

[46] It is also inappropriate for a lawyer’s fees to be contingent on success. In family law litigation, the emphasis is “on resolution, mediation and ways to save time and expense in proportion to the complexity of the issues”: Frick v. Frick, 132 O.R. (3d) 321, at para. 11. A fee based on success risks detracting from, and indeed undermining, this emphasis.

[47] When the primary issue is custody, a fee based in whole or in part on results achieved is even less appropriate. There are no “winners” and “losers”. A custody decision by the court involves a determination of a child’s best interests. It cannot be scrutinized to determine which parent had the more “successful disposition”.

[48] The legislature excluded family law matters from contingency fee agreements on public policy grounds under s. 28.1(3)(b) of the Act. There is no reason to limit that exclusion to only agreements tied to monetary results.

[emphasis added]

The firm’s appeal of the assessment of the Results Achieved Fee was therefore dismissed.

There cannot be any traditional gauge of success in family law, as a provision of custodial decision-making to one parent is not a “win” by any understanding of civil litigation, but rather a determination of responsibilities in the specific context of a child, who is often an unrepresented non-party. The notion of “custody” is also frequently misunderstood by the public with concepts like primary residence and parenting time, and enormous and disproportionate emphasis is also placed on this goal without contemplation of the reasons behind it.

The only way this might occur is if the lawyers themselves engage in what the court in Bergel & Edson v. Wolf described as “the stirring up of the client to litigate in an endeavour to enforce rights which she would not otherwise pursue,” without proper counsel of dispute resolution alternatives and the long-term implications to the broader family unit of pursuing high-conflict litigation strategies. A contingency fee arrangement ultimately removes money from a party in the dispute over a child that could otherwise be spent on that child.

It’s unlikely that any firm, even if a contingency fee ban was lifted in family law, would likely be successful if they were to repeat this statement by Justice Benotto at para 47. For that reason, the prohibition on contingency fees in family law remains a pressing and compelling policy objective that should be continue to be upheld.