Worked Estimates and Hiring Checklists
What you actually keep from a settlement on a contingency fee: a Canadian worked example
A personal injury settlement worked through to the net amount: contingency percentage, costs, HST, disbursements, interest on disbursements and subrogated claims, with checks.
On a contingency fee, the amount you keep is the settlement minus the lawyer's percentage, minus sales tax on that fee, minus disbursements and the tax and interest on them, minus any amounts owed to others out of the settlement, such as a health insurer's or disability insurer's subrogated claim. In a typical case those items together can take 35% to 45% of the gross figure, which is why the headline percentage in the agreement understates the real cost. The worked example below takes an Ontario slip-and-fall settlement from the gross number to the cheque you receive, with each line checked.
This guide is part of the hiring a lawyer cost checklist. The rules behind each line are in the contingency fee rules by province. All figures are illustrative examples.
The agreement (illustrative)
- Standard Form Contingency Fee Agreement, as required in Ontario.
- Sliding scale: 25% if settled before examinations for discovery, 30% after discovery, 33% if settled after a trial date is set.
- The percentage applies to damages and any amount paid for costs (Ontario has allowed costs to be included since 1 July 2021 when the agreement says so).
- The firm pays disbursements as they arise and recovers them at the end, with interest at the rate in the agreement, here 6% a year simple on the outstanding balance.
- HST at 13% on the fee and on taxable disbursements.
The settlement
The case settles after discovery for $150,000 in damages plus $25,000 for costs, a gross total of $175,000. Disbursements, with HST already included where applicable, were $12,000 on average outstanding for 18 months. A long-term disability insurer that paid benefits has a repayment claim of $8,000 under its policy.
Line by line
| Line | Calculation | Amount |
|---|---|---|
| Gross recovery (damages + costs) | $150,000 + $25,000 | $175,000.00 |
| Contingency fee (30% after discovery) | $175,000 x 0.30 | $52,500.00 |
| HST on the fee | $52,500 x 0.13 | $6,825.00 |
| Disbursements (incl. HST) | given | $12,000.00 |
| Interest on disbursements | $12,000 x 6% x 1.5 years | $1,080.00 |
| Repayment to disability insurer | given | $8,000.00 |
| Total deductions | $52,500 + $6,825 + $12,000 + $1,080 + $8,000 | $80,405.00 |
| Net to client | $175,000 - $80,405 | $94,595.00 |
The client keeps about 54% of the gross amount, and about 63% of the damages figure of $150,000. The contingency fee calculator reproduces the first part: enter $175,000, 30%, tax on the fee $6,825, and costs of $21,080 (disbursements, interest and repayment combined) to get the same net.
Same case, different clauses
The agreement wording changes the result. Using the same settlement:
| Variation | Fee | HST on fee | Net to client |
|---|---|---|---|
| As above: 30% of damages + costs | $52,500 | $6,825 | $94,595 |
| 30% of damages only; costs go to the lawyer in addition | $45,000 + $25,000 = $70,000 | $9,100 | $74,820 |
| 30% of damages only; costs credited to the client | $45,000 | $5,850 | $103,070 |
| 25% (if it had settled before discovery) of damages + costs | $43,750 | $5,687.50 | $104,482.50 |
| No interest on disbursements | $52,500 | $6,825 | $95,675 |
Check the second row: deductions are $70,000 + $9,100 + $12,000 + $1,080 + $8,000 = $100,180; net = $175,000 - $100,180 = $74,820. Check the third row: $45,000 + $5,850 + $12,000 + $1,080 + $8,000 = $71,930; net = $175,000 - $71,930 = $103,070. The $25,000 paid for costs stays with the client in this variation because no percentage is taken from it.
That second row is the arrangement to be most careful about: taking a percentage of damages and also keeping the costs award. In Ontario, a lawyer may not recover more in fees than the client recovers, and the agreement must state clearly how costs are treated. Read that clause twice.
Other items that can come out of a settlement
- Subrogated claims: a disability insurer, an employer's benefit plan or, in some cases, a provincial health plan may have a right to be repaid for amounts it paid because of the injury.
- Accident benefits offsets in motor vehicle cases, which can reduce what the at-fault insurer pays.
- The statutory deductible for pain and suffering in Ontario motor vehicle claims, which is indexed annually and can greatly reduce smaller awards. Check the current figure with your lawyer or the Financial Services Regulatory Authority of Ontario.
- Litigation loans: if you borrowed against the case, the lender is repaid with interest from the settlement.
- Structured settlements: part of the settlement paid over time; ask how the percentage applies to its value.
Before you sign the release
- Ask for a written settlement statement showing every line above.
- Check the percentage used matches the stage at which the case settled.
- Check how costs were treated against the agreement.
- Ask for an itemised list of disbursements and the interest calculation.
- Confirm all subrogated and lien amounts in writing.
- If anything is unclear, ask before signing. Once the money is distributed, challenging it is harder, though you can still ask for the account to be assessed; see how to challenge a lawyer's bill.
Is the contingency fee worth it?
Compare with hourly billing on the same case. If the lawyer had billed 140 hours at $350, fees would have been $49,000 plus HST of $6,370, about $55,370, before disbursements. That is similar to the contingency fee here. But if the case had failed, the hourly client would have owed $55,370 plus disbursements, and the contingency client would have owed little or nothing in fees. The contingency premium buys protection against losing. Use the fee arrangements comparison to model your own case.
Frequently asked questions
Is the contingency fee calculated before or after disbursements?
It depends on the agreement. Most calculate the percentage on the gross recovery, with disbursements deducted separately. A few calculate it after disbursements, which is better for the client. Ask.
Can I negotiate the fee at the end?
You can ask, and some lawyers reduce the fee when the case settled quickly or the net is low. They are not obliged to.
Does the BC cap include tax?
The BC caps on personal injury contingency fees apply to the fee percentage; tax and disbursements are additional. Check the Law Society Rules.
Who pays if the case loses?
Usually no fee, but read whether you must repay disbursements and whether you are exposed to the other side's costs; see how costs awards work.
Sources
- Law Society of Ontario — Standard Form Contingency Fee Agreement and client information
- Ontario e-Laws — Solicitors Act s. 28.1 and O. Reg. 563/20
- Financial Services Regulatory Authority of Ontario — auto insurance, accident benefits and the indexed deductible
- Law Society of British Columbia — contingency fee caps for personal injury
- Canada Revenue Agency — HST on legal fees
