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CFA Committee Report Preliminary Report of the Law Society of New Brunswick Ad Hoc Committee on Contingent Fee Agreements September 23, 2020 Contents A. Introduction………………………………………………………………………………..1 B. History of Contingent Fees in New Brunswick…………………………………………...1 C. Current Statute and Regulation……………………………………………………………3 D. Regulation in Other Provinces…………………………………………………………….4 E. Problematic Cases under Existing New Brunswick Regulation…………………………..4 a) Medical Malpractice………………………………………………………………………4 b) Claims for Periodic Payments……………………………………………………………..5 c) Claims Including Non-Monetary Relief…………………………………………………..6 d) Family Law and Criminal Cases…………………………………………………………..6 F. Issues with Existing CFA Form and Structure……………………………………………6 a) Standard Form……………………………………………………………………………..6 b) Disbursements……………………………………………………………………………..7 c) Requests for Review / Appointment of Reviewing Officers……………………………...8 G. Competition Bureau Recommendation……………………………………………………9 H. Recent Law Society of Ontario Reforms………………………………………………...10 I. Caps on Fees……………………………………………………………………………..11 J. Recommendations………………………………………………………………………..12 a) Increase, but do not eliminate caps on fees………………………………………………12 b) Maintain the existing ban on CFA's in family and criminal cases……………………….12 c) More transparent and flexible options for how to deal with disbursements……………..12 d) More flexible options for how to deal with interest on disbursements…………………..12 e) Reviewing Officers to be appointed by Council…………………………………………13 f) Changes to Reviewing Officer Procedure………………………………………………..13 g) “Know Your Rights” Document…………………………………………………………13 K. Next Steps. ………………………………………………………………………………14 L. Conclusion……………………………………………………………………………….15 APPENDICES…………………………………………………………………………………...16 A. Introduction 1. On April 28, 2017, Council struck an ad hoc committee to investigate the issue of contingent fee agreements (CFA’s) in general, and to make recommendations to Council on whether there ought to be changes to those rules. 1 2 3 2. The Committee considered inputs including: • current governing statutes, regulations and rules; 4 and the current Form 1 CFA; 5 • memo from our late colleague Richard Scott, Q.C.; 6 • CFA regimes in other provinces; 7 • report of the Competition Bureau of Canada; 8 • submission from Canadian Defence Lawyers to Law Society of Upper Canada (LSUC); 9 • report from LSUC counterpart to the Committee; 10 • data provided by LSNB staff; • the Committee members’ own experience with CFA’s. 3. The Committee considered the issue from two main perspectives: • access to counsel: does the existing CFA structure allow people with worthy cases to afford to retain counsel? • fair compensation: does the existing CFA structure allow lawyers fair compensation for the time, effort, risk and expense of taking on some worthy cases? B. History of Contingent Fees in New Brunswick 4. Historically, in much of the common law world, CFA’s were considered illegal and unenforceable as being against public policy. The concern was that a lawyer in a CFA was participating in the tort of maintenance and champerty by funding and sharing in the proceedings of a civil case. 1 The terms “Contingent Fees” and “Contingency Fees” are both in common use, and both understood to mean the same thing. In this report, we have adopted the term “Contingent Fees” because the fee is “contingent” on some outcome. 2 The Committee is comprised of Darren Blois (chair); David O’Brien, Q.C.; Mark Canty, Q.C.; Philippe Eddie,Q.C.; Justin Robichaud; and John Jarvie. The late Richard Scott, Q.C. was also appointed to the Committee and contributed immeasurably with written reports and suggestions, but sadly did not participate in its deliberations. The Committee was grateful to have the assistance of LSNB staff members Shirley MacLean, Q.C., Michèle Morin, and Lucie Leclerc. 3 The Committee met, in person or by telephone conference on July 11 and November 8, 2017; February 1, March 23, July 4 and November 14, 2018; May 10 and October 16, 2019; March 11, May 1, and June 10, 2020, plus several other deliberations by email. 4 Summary of Current and Proposed Statutes and Regulations Governing Contingent Fees in New Brunswick [Appendix A] 5 Current and Proposed Form 1 Contingent Fee Agreement [Appendix B] 6 Richard Scott, Q.C., Regulation of Contingent Fee Agreements in New Brunswick, October 30, 2012 [Appendix C] 7 Summary of Contingent Fee Regulation in Other Provinces [Appendix D] 8 Competition Bureau of Canada, Self-Regulated Professions: Balancing Competition and Regulation, 2007 [Appendix E] 9 Canadian Defence Lawyers Submission to Law Society of Upper Canada, September 28, 2016 [Appendix F] 10 Fifth Report of the Advertising & Fee Arrangements Issues Working Group [Appendix G] 1 1 5. New Brunswick courts had historically been more permissive than most jurisdictions in allowing CFA’s since at least 1962. 11 6. In 1971, the Barristers’ Society of New Brunswick (precursor to LSNB) first regulated CFA’s with the adoption of a new Professional Conduct Handbook. The only regulation at that time was that a CFA must: • be in writing; • be reasonable; • provide that the client has the option at the outset of paying on the usual solicitor- client basis; • be subject to review pursuant to s. 85 of the Law Society Act, 1996 (or taxation as it was then called); • not be used in a criminal or quasi-criminal case. 12 7. In 1974, LSNB adopted the Canadian Bar Association’s Code of Professional Conduct (1974), which provided only that CFA’s be “reasonable.” 13 8. In 1979, the New Brunswick Legislature regulated CFA’s by statute for the first time by enacting amendments to the Judicature Act. Highlights of the 1979 legislation include: • a lawyer could only enter into a CFA with a client who is or will be unable to pay for legal fees and disbursements in the usual way; 14 • the fee was not limited to a percentage of the final result, as we are used to now, but could be a “gross sum, commission, percentage or otherwise.” 15 • it was left open whether a CFA could call for the client to pay disbursements regardless of the outcome. 16 9. In 1996, the 1979 amendments were repealed and replaced upon the enactment of the Law Society Act, 1996. 10. The Law Society Act, 1996 delegated to Council the authority to adopt rules for CFA’s (s. 17(2)(dd)). The Act permitted (but did not require) Council to adopt limits on the amounts of contingent fees; and provided that CFA’s that allowed fees in excess of those limits would be unenforceable (s. 83.(3)). 11 Scott, Regulation of Contingent Fee Agreements in New Brunswick, pp 2-3 [Appendix C] 12 Barristers Society of New Brunswick, Professional Conduct Handbook (1971), Part E, s. 2; cited in Scott, Regulation of Contingent Fee Agreements in New Brunswick, p 4 [Appendix C]. 13 Canadian Bar Association, Code of Professional Conduct (1974), Chapter X, s. 8; cited in Scott, Regulation of Contingent Fee Agreements in New Brunswick, p 5 [Appendix C]. 14 Judicature Act (1979), s. 72.1(3); cited in Scott, Regulation of Contingent Fee Agreements in New Brunswick, Appendix A [Appendix C]. 15 Judicature Act (1979), s. 72.1(3); cited in Scott, Regulation of Contingent Fee Agreements in New Brunswick, Appendix A [Appendix C]. 16 Scott, Regulation of Contingent Fee Agreements in New Brunswick, pp 6-8 [Appendix C]. 2 2 11. In 1997, pursuant to the authority newly delegated to it under this Act, Council adopted the Contingent Fee Rules Under Section 83 of the Law Society Act, 1996 (the “CFA Rules”). 12. Neither the Act nor the CFA Rules have been amended since 1997. 17 13. In summary, until Council adopted the CFA Rules in 1997, there was no regulation on how much a lawyer could charge under a CFA, other than that it be “reasonable.” C. Current Statute and Regulation 14. The Law Society Act, 1996 provides that: • CFA’s continue to be authorized; 18 • a CFA shall contain: 19 o the name of the lawyer or firm; o the name of the client; o a description of the legal services to be provided; o the method by which the contingent fee is to be calculated; o provision for who gets any costs awarded on a settlement or judgment; • fees under CFA’s were still subject to review pursuant to s. 85 of the Law Society Act, 1996 (formerly “taxation”); 20 • CFA’s could not be used in any case involving: 21 o child custody or access; o matrimonial disputes; o criminal or quasi-criminal charges. 15. The 1997 CFA Rules provided both new flexibility and new restrictions. For the first time in New Brunswick: • a standard form CFA was enacted; 22 • fees under CFA’s were limited to 25% of the amount recovered, or 30% if the lawyer represented the client in an Appeal; 23 17 Scott, Regulation of Contingent Fee Agreements in New Brunswick, p 12 [Appendix C]. 18 Law Society Act, 1996, s. 83(1) [Appendix A]. 19 Law Society Act, 1996, s. 83(2) [Appendix A]. 20 Law Society Act, 1996, s. 83(7)-(8) [Appendix A]. 21 Law Society Act, 1996, s. 83(5) [Appendix A]. 22 Contingency Fee Rules, R. 3(1); Form 1 [Appendix A]. 23 Contingency Fee Rules, R. 1 [Appendix A]. 3 3 • there was no regulation on whether lawyers were allowed to charge interest on disbursements; • a lawyer and client could apply to have a CFA in a different form, or for higher limits, to a Reviewing Officer. 24 The Reviewing Officers are appointed by Order in Council. 25 D. Regulation in Other Provinces 16. In eight of the ten provinces, there is no prescribed maximum contingent fee, and no prescribed form for CFA’s. 26 17. The only province other than New Brunswick that prescribes maximum contingent fees is British Columbia. Fees in BC are capped at 33.33% for claims for personal injuries or wrongful death arising from a motor vehicle accident; 40% for claims for non-MVA personal injuries; and no maximum for non-personal injury claims.
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