What are Contingency Fees in Estate Litigation?

Contingency fees are ‘success fees’.

Legal fees that are payable on contigency are payable when the claim ‘succeeds’ and not before.

Generally, when the client engages a lawyer on contingency, if the lawyer’s efforts do result in recovery of funds for the client, then the client does have to pay for the legal services.

The High Price of Estate Litigation

Contingency fees can be a game changer because estate litigation is usually quite expensive.

Why?  Done properly litigation requires a deep dive into all of the details followed by a professional judgment to focus the case a few key issues and facts.  This exercise consumes time, effort, and energy, and requires real skill and judgement.  In addition, the stakes are often high.  As a general rule, estate litigation is best done by counsel with deep experience in estates law.  As a result, hourly rates are high and the number of hours are high, resulting in high overall costs.

That said, experienced counsel can also assist to ensure that the litigation is as cost-efficient as possible.  This includes – bringing the right claim in the right court framed the right way, focusing on the right arguments and evidence, efficient production and discovery, then efficient use of Court hearings and offers to settle.  Clients, can also play a pivotal role in cost control by actively participating in fact-finding, document compilation, and focusing on the key issues and not irrelevant matters. 

The Inequality Factor in Estate Disputes

In estate litigation there is often a signfiicant disparity in financial resources between the parties. On one side, you have a party wielding all the assets and financial resources, while on the other side, there’s a party struggling with limited means. Picture this scenario: an executor neglecting their responsibilities, residing rent-free in the deceased’s property, while other beneficiaries are left fending for themselves, covering their own rent or mortgages. Such disparities inherently create an imbalance, making it challenging for the disadvantaged party to assert their rights.  Similarly, the mere fact that delay is usually good for one party, while the other party needs to keep the matter moving forward, creates a significant imbalance.

Contingency Fees: A Paradigm Shift

 Contingency fees are success-based compensation. Instead of the client being obliged to pay along the way as the case proceeds, clients and legal professionals forge an agreement that pegs the legal fees to the case’s outcome. This approach can be a financial lifeline for clients who might otherwise struggle to bear the substantial costs that estate litigation entails.

Contingency fee arrangements must comply with the regulations established by the Law Society of Ontario. 

Here’s how it typically unfolds:

1. Assessment: Legal professionals evaluate the case’s strengths and weaknesses, considering factors such as case complexity, available evidence, and the likelihood of a favorable outcome.
2. Agreement: If the client and lawyers are aligned, a formal contingency fee agreement is drawn up, explicitly stating the percentage of the final settlement or award that will serve as legal fees.
3. Client Participation: Clients remain actively engaged in the case, providing essential information, documents, and collaborating closely with their legal representatives throughout the legal process.
4. Legal Representation: Legal professionals shoulder the litigation costs and the associated risks. They zealously represent the client’s interests in court, striving to secure a favorable outcome.
5. Case Resolution: When the case concludes, whether through negotiation or a court ruling, the agreed-upon percentage of the settlement amount is paid to the lawyer as fees.

The benefits of contingency fees in estate litigation

Contingency fees in estate litigation have many potential benefits:

1. Access to Justice: Contingency fees open the doors for individuals with limited financial resources to access the legal system and assert their rights, fostering fairness and ensuring equitable access to justice.
2. Risk Mitigation: Clients are shielded from the financial risks that typically accompany litigation. In case of an unfavorable outcome, they are spared substantial legal bills.
3. Alignment of Interests: Contingency fee arrangements naturally align the interests of clients and their lawyers.  Both parties share a vested interest in securing a positive outcome, in the most efficient manner.  This removes the concern that the lawyers are pursuing unnecessary or unproductive tactics to boost billings.
4. Transparency: Contingency fee agreements are characterized by transparency. Clients are fully aware of the agreed-upon percentage and grasp the financial implications of the arrangement.
5. Motivation for Success: Legal professionals are incentivized to work diligently and secure a favorable outcome, as their compensation hinges on success.  This helps to reduce the not uncommon problem of litigation is not pushed forward and does not go anywhere.

Crafting Contingency Fee Agreements with Precision

Contingency fee agreements in estate litigation in Ontario are governed by the regulations of the Law Society of Ontario.  Our firm uses the LSO standard form agreement, tailored to the specifics of the case.  

The LSO also mandates that all clients receive this guide to contingency fees.

We use two approaches – a percentage of recovery, and a ‘fixed fee’ approach.  Under the fixed fee approach the amount due to us is a fixed amount, with the amount determined based on when during the litigation process the matter is resolved (for instance, before pleadings, at mediation, or at the end by way of contested court hearing).

A Real-Life Scenario: How Contingency Fees Restore Equity

Imagine a dispute between the executor of an estate and several beneficiaries. The executor may have neglected their duties entirely and never probated the Will or taken any steps to administer the estate, while enjoying rent-free occupancy of the deceased’s property.  In this scenario, the beneficiaries likely have mortgages and rent and other expenses and may feel overwhelmed by the prospect of litigation.  It gets worse if the executor is also able to access funds from the estate to pay legal counsel while the other the beneficiaries may lack the financial resources needed for a protracted legal battle.

This is where contingency fees can be the great equalizer. Beneficiaries can seek legal representation on a contingency fee basis, dramatically leveling the playing field. Their legal team assumes the responsibility of pursuing their claims, bearing the financial burden of litigation, and diligently working to secure a favorable outcome. If they succeed, the legal fees are deducted from the settlement amount received from the estate (and a portion may be payable by the executor personally from their share).

Transparency and Communication: Pillars of Contingency Fees

Transparency and open communication are foundational principles within contingency fee agreements. Clients are fully informed about the agreed-upon fees (whether a percentage or a flat fee or other structure) and understand the financial implications of the arrangement. Throughout the process, clients should feel comfortable seeking updates on case progress and discussing any concerns related to legal fees.

Cost Recovery from the Losing Party

Generally, in estate litigation, a portion of the winner’s legal costs can often be recovered from the losing party.  Once, it was the norm for everyone’s fees to be paid from the estate, but this has not been the law in Ontario for over a decade as the Courts seek to incent parties to negotiate and be reasonable.

This recovery of ‘costs’ would usually be applied to reduce the amount of the fees (contingency or otherwise) payable by the winning party to their counsel.

This is particularly relevant when the losing party is an estate trustee who has failed in their responsibilities or acted against the beneficiaries’ interests. 

It is very important however for all parties to litigation to consider this rule before they commence litigation – a person who commences and loses a law suit may have to pay some or all of the other side’s legal expenses.

Crafting the Contingency Fee Agreement

The drafting of the contingency fee agreement is a critical milestone in the process. This legally binding document sets out the terms and conditions of the arrangement and should encompass the following crucial elements:

1. Percentage Fee: The agreement unambiguously specifies the percentage of the final settlement or court award designated as legal fees.
2. Client Duties: It outlines the client’s responsibilities, including information provision, cooperation, and any potential costs they may bear.
3. Legal Expenses: Clarity is provided on which legal costs, if any, are separate from the contingency fee and are the client’s responsibility.
4. Termination Provisions: Many contingency fee agreements include a termination clause specifying the conditions under which either party can terminate the agreement.
5. Dispute Resolution: The agreement delineates the process for resolving disputes related to legal fees or case outcomes.
6. Conflict Mitigation: Legal professionals adhere to ethical standards and prevent conflicts of interest when entering into contingency fee agreements.

The Role of Legal Professionals in Contingency Fee Cases

Legal professionals who engage in contingency fee cases assume the financial burden and associated risks. They are driven by the prospect of success, as their compensation is contingent on achieving a positive outcome for their clients. This motivation fuels their diligence, comprehensive case investigation, and persuasive court advocacy.

A Modest Premium for Success

When legal professionals successfully conclude the case, their compensation is fixed by pre-agreement.  Sometimes the amount is less than the fees would have been if calculated on an hourly basis, and sometimes it is more.  When the fees are higher than hourly rates, it is likely a modest premium that compensates for the risk and skill deployed, and is a reasonable fee for the client who otherwise might have been unable to litigate at all to pay.  

In Conclusion: Empowering Access to Justice Through Contingency Fees

Contingency fees emerge as a potent instrument for ensuring equitable access to justice. They level the playing field, empowering individuals with limited financial means to seek legal representation and assert their rightful claims and align their interests with their counsel.

Contingency fee agreements, when thoughtfully designed and transparent, offer an equitable and effective approach to managing estate litigation costs. Clients remain active participants in their cases, confident that their legal team shares their commitment to a successful outcome.

For opponents, the fact that it is unlikely that a party represented by a lawyer who is ‘on contingency’ will run out of money and abandon the claim can dramatically change the litigation and proper tactics.  

At the heart of contingency fee arrangements lies a dedication to justice and fairness. Legal professionals who embark on contingency fee cases play an indispensable role in advocating for their clients’ rights and preserving a legal system that remains accessible to all, irrespective of their financial circumstances.

We hope that this has been helpful.  If you have inquiries or concerns or find yourself facing an estate dispute, please don’t hesitate to reach out to us via email. 

Miltons Estate Lawyers – Probate, Wills, Trusts and Estates