Ontario private members’ bill seeks to ban lawyer referral fees, cap contingency fees

A private members' bill seeks to ban lawyer referral fees and cap contingency fees. Fred Lum / File / The Globe and Mail

TORONTO – Turn on a radio or TV or watch a bus drive by and it likely won’t take long to spot an advertisement for personal injury lawyers, as the once largely American phenomenon increasingly pops up in Ontario.

A private members’ bill from former Progressive Conservative leader Tim Hudak aims to curtail what he calls some of their “less ethical” tactics. Hudak resigned as an MPP last week, but the protection for motor vehicle accident victims bill is one of three he left behind that he is hoping another Tory or even the government will carry forward.

“Having grown up on the border with Buffalo, in Fort Erie, Ont., I’ve always thought the most famous Buffalonians were Cellino and Barnes (the personal injury lawyers),” Hudak said in a recent interview.

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“We’re getting our own Cellino and Barneses here in Ontario.”

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Though Hudak’s bill itself may for now be a long shot, he has tapped into an issue that is of timely interest to the legal community.

The Law Society of Upper Canada, which regulates Ontario lawyers, has been studying the increasing amount of legal advertising and found that some lawyers and firms were advertising mainly for the purpose of referrals.

“These firms engage in mass advertising campaigns both in order to take on certain cases internally, and in order to earn revenue by referring certain cases out to selected licensees for a referral fee,” the law society wrote in an interim report.

“Referrals to the highest bidder might not be based on the competency of counsel, or made to counsel with requisite expertise.”

Hudak’s bill would ban referral fees in auto insurance cases except on the successful completion of the claim. The law society could come to that same conclusion at the end of its review, said Malcolm Mercer, the head of the working group.

“It is entirely possible that we would conclude that fixed referral fees in the context of personal injury contingent fees are something that lawyers can’t receive,” he said.

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The Ontario Trial Lawyers Association has told the law society it doesn’t support lawyers advertising when they have no intention of taking on the case, said president Adam Wagman.

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But some of Hudak’s bill is “simplistic and frankly misinformed,” he said.

The bill proposes to put a cap of 33 per cent on contingency fees – the percentage of damages that an accident victim’s lawyer or paralegal would be paid in a successful claim.

Wagman believes that would actually end up raising some contingency fees, when the most common one charged is already one-third.

“The problem with a cap is, as we know from simple economics, caps end up becoming targets,” he said. “So right now you’ve got a very competitive environment in which, depending on the type of case, people can have contingency fees that are less than one-third.”

Capping contingency fees is “trickier” than it seems, said Mercer.

“If you imagine a client who has suffered a loss that’s worth $100,000 and a client who’s suffered a loss that’s worth $10 million – to fully compensate them, the percentage of the award is a clumsy way to think about the amount of work that needs to be done,” he said.

Wagman noted that anyone can dispute their legal bills through a court-based assessment process.

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