How a Contingency Fee Works in Ontario: What to Know Before You Sign

You have been injured in an accident or suffered a serious financial wrong, but you cannot afford a lawyer by the hour. Someone mentions "contingency fees" — no win, no fee. It sounds perfect. And it can be — but only if you understand exactly what you are agreeing to before you sign.

A contingency fee is an arrangement where your lawyer is paid a percentage of the amount you recover at the end of the case, rather than an hourly rate. If you lose, you do not pay the lawyer's fees. But the devil is in the details: what percentage, what costs are excluded, what happens if you terminate the lawyer mid-case, and what does "recovery" include?

Ontario regulates contingency fee agreements under the Solicitors Act and associated regulations. Every contingency fee agreement must be in writing. This article explains how the system works — and what to scrutinize before you sign.

The Basic Structure

In a contingency fee arrangement:

• If you win or settle: Your lawyer takes a pre-agreed percentage of the total amount recovered. From what remains after that deduction, you pay disbursements. What is left is yours.
• If you lose: You pay no legal fees to your lawyer. However — read this carefully — you may still owe disbursements (out-of-pocket costs like expert reports, court filing fees, process service), and you may owe the other side's legal costs if the court awards them against you.

The "no win, no fee" message that many firms advertise refers only to legal fees — not to all potential financial exposure.

The Percentage: What Is Typical?

There is no fixed statutory cap on contingency fee percentages in Ontario — the regulations allow flexibility based on the nature and complexity of the case. As of writing, contingency fees typically range from approximately 25% to 40% of the amount recovered, though rates vary by law firm, case type, and province-wide changes in the regulatory framework — verify the current rules and any regulatory caps with your lawyer before signing.

The percentage often increases as the case progresses:

• Settling early (before discovery): lower percentage
• Settling after discoveries: mid-range percentage
• Proceeding to trial: higher percentage

This tiered structure gives both lawyer and client an incentive to resolve the case early if a fair offer is available.

What Comes Out of Your Recovery

Before the contingency fee percentage is taken, understand what else reduces your net payout:

Disbursements

These are the out-of-pocket expenses your lawyer incurred running the case: court filing fees, expert reports, medical record requests, process server fees, transcript costs. In complex cases, disbursements can reach tens of thousands of dollars. Confirm whether disbursements are deducted before or after the contingency percentage is calculated — the order matters.

HST on Legal Fees

The lawyer's contingency fee is subject to HST in Ontario. So if you recover $100,000 and the contingency fee is 33%, the fee is $33,000 — plus 13% HST, adding another $4,290. This is often overlooked by clients reading contingency agreements.

Costs Awards From the Other Side

If you lose, the court may award costs against you. A contingency agreement protects you from your lawyer's fees — not from a costs order the court issues. Discuss with your lawyer what happens to costs awards in different scenarios.

What Ontario Law Requires in a Contingency Agreement

Under the Solicitors Act and the regulations governing contingency fees, a valid contingency agreement must be:

• In writing, signed by both lawyer and client
• Specific about the percentage and how it is calculated
• Specific about disbursements — whether they are covered by the fee or charged separately
• Clear about what happens if the client terminates the retainer before the case concludes (you may owe quantum meruit — reasonable value of services rendered)
• Clear about how disputes about the fee are resolved

Ontario also requires lawyers to explain the nature of the agreement and ensure the client understands what they are signing. If the explanation was inadequate or the agreement is unreasonable, it may be subject to court review.

When Contingency Fees Make Sense

Contingency fees are most commonly used in:

• Personal injury claims (motor vehicle accidents, slip and fall, workplace injuries)
• Long-term disability claims against insurers
• Employment claims (wrongful dismissal with a clear monetary claim)
• Some class actions

They generally do not make sense for litigation where the outcome is uncertain but damages are small, or for disputes where even a win might produce a nominal recovery that barely covers costs.

Questions to Ask Before Signing

1. What is the percentage at different stages of the case?
2. Are disbursements charged separately, and when are they due?
3. How is the percentage calculated — on the gross recovery or after disbursements?
4. Is HST included in the percentage or added on top?
5. What happens if I want to change lawyers or terminate the retainer?
6. What is my exposure if the court awards costs against me?
7. What is your honest assessment of the likelihood of recovery?

A lawyer who is unwilling to answer these questions clearly is not a lawyer you should retain on a contingency basis.

Frequently asked questions