At NP Commercial Litigation, we prefer alternative fee arrangements rather than hourly billing. This includes contingency fee arrangements for business related litigation[1]. So, what is a contingency fee arrangement?
Nature of a Contingency Fee Agreement.
Contingency fees are payments made to a lawyer that are calculated based on an agreed upon percentage of the ultimate recovery for a piece of litigation. They are contingent on the lawyer recovering monies for the client. For example, if the lawyer and client agree to a 33% contingency fee, then the lawyer and/or law firm would receive 33% of the amounts (or damages) awarded or negotiated and recovered in the claim. If the lawyer successfully recovers $200,000 for the plaintiff/client, then the contingency fee would be $66,000.00[2]. Because the contingency fee is based on the actual recovery on behalf of a client, it usually applies to cases where the lawyer acts for a plaintiff pursing a claim[3]. If the litigation does not produce a damages award, then the lawyer does not receive payment for their services.
Disbursements
In pursing any piece of litigation, the law firm will incur disbursements. These are expenditures made in on behalf of the client to pursue the claim. It costs the law firm monies to file a claim, have a claim issued, pay for transcripts, retain experts, etc. Usually, these disbursements are not included in the contingency fee amount. Continuing with the example above, if the client and lawyer agree to a 40% contingency fee, and law firm incurred $6,000 as disbursements to pursue the claim the amount of the fee payable to the law firm would be $66,000.00 plus $6,000.00[4]. In most cases, because disbursements are actual expenses incurred by the law firm, they are paid by the client regardless of whether the litigation produces a damages award.
Costs
Generally, the successful party in any litigation is entitled to costs. Costs represent the legal fees and disbursements incurred to pursue the case. There are a variety of factors that affect: (1) whether costs should be awarded, and (2) the amount of costs that are in fact awarded. Ultimately, the court has discretion whether to award costs and the amount of those costs. Where a court awards costs at the conclusion of the litigation and the client has a contingency fee arrangement with their lawyer, then those costs are owed to the client unless: (1) the retainer agreement specifies that those costs are payable to the lawyer, and (2) the retainer agreement receives judicial approval. Succinctly, for the lawyer to receive costs awarded by a court, it must be specifically included in your retainer agreement and the court must approve that term.
Why does NP Commercial Litigation accept Contingency Fee Retainers for Business Disputes?
We accept
contingency fee cases where we believe the case is viable and where the
defendant has the means to pay an eventual damages award. We believe in our ability to achieve an award
for our clients and prefer to share in that success.
[1] NP Commercial Litigation works with most alternative fee arrangements including contingency fees and fixed fee retainers.
[2] This does not include applicable taxes such as HST or disbursements which I will discuss below.
[3] There are examples of reverse contingency fee agreements for defence files where the lawyer receives a percentage of the amount saved on the value of the plaintiff’s claim. For example, if the plaintiff sues for $1,000,000 and is ultimately awarded $500,000, the defendant’s lawyer in a reverse contingency fee arrangement would receive a percentage of the savings, i.e. of the $500,000 as their fee.
[4] Again, this amount does not include applicable taxes as HST.