Surprises are for Birthdays, Not for Legal Bills

February 25, 2019


Ontario based personal injury law firm Neinstein & Associates LLP have recently agreed to payout almost four million dollars to settle a class action law suit alleging that they were double charging their personal injury clients. In this case they were illegally double charging clients, but the story of clients being surprised by their fees when their personal injury claim is settled has played out time and time again.

As was the case with the clients of Neinstein & Associates LLP, many personal injury clients are unpleasantly surprised (to say the least) to find out their bill is double what they anticipated and they're even more upset to discover the lawyer charing the fee can legally charge the larger amount. So, what's the problem?

Let's go back to the beginning.

How are clients charged for personal injury matters?

To understand the answer to that question, first we need to start by defining what a Contingency Fee is...


A Contingency Fee is a term used for a type of fee agreement between a lawyer and client. The agreement usually says something along the lines of, "if you don't get paid, we don't get paid". This usually means the lawyer representing the client collects a percentage of the settlement funds or court awarded sum received by the client. Contingency fee agreements are good because they allow injured people who would otherwise not be able to afford lawyer fees to bring their case forward.

Different law firms have different approaches to these agreements.  Some charge a set percentage, some charge a percentage based on what state of litigation the case settles, some charge a percentage plus a fee if it goes to court. As a general rule, the fee collected by the lawyer is in addition to any disbursements.

What are disbursements?

Disbursements are items the law firm paid for out of pocket as part of advancing the case. Common disbursements are your medical records, police report, independent medical exams, expert witness reports and testimony, and document production.  Certain firms also charge for things like long distance phone calls, postage or courier fees, legal research, travel, administration fees, file fees, storage fees, and word processing. Disbursements can add up if a matter is complicated.

Let's review this information with a case study.

Bob Smith was hurt in an accident and his lawyer settled the matter for $100,000. Bob signed a contingency fee agreement with his lawyer in which Bob agreed to pay a 33% contingency fee plus any disbursements and plus HST. Disbursements on Bob's matter came to $2,000 (most of which was for medical reports).

Math time:

Total settlement: $100,000
Lawyer Fee (33%): $33,000
HST on Lawyer Fee (15%): $4,950
Disbursements: $2,000 (HST included)

TOTAL TO LAWYER: $39,950
TOTAL TO BOB: $60,050

You can imagine how Bob would be upset if he was expecting to receive $67,000 (which is $100,000 minus $33,000), instead of the $60,050 he was entitled to under his contingency fee agreement.

Seems pretty simple, right? Not really. The issue can become a bit more complicated when costs are at issue.

What are costs?

It is a long-standing legal principle that the successful party is entitled to costs to compensate them for having to bring an action to Court.  This award belongs to the injured party; it is to help them pay their legal bill.  It was never meant to be an additional windfall of money for the lawyer the injured person hired.  However, lawyers may take their contingency percentage of this amount when it is included in what is called a global settlement.  Global settlement means an all inclusive amount (say $100,000 in Sean's case). This is a final settlement amount that is not broken down into what portion is settlement and what portion is meant to compensate the client for their legal fees.

Neinstein & Associates LLP went wrong when they took the entire cost awards on top of their legal fees; taking the cost award in this way was contrary to the Ontario Solicitor’s Act. The case came to light when a client was shocked their bill for a $150,000.00 settlement came to $109,250.00 leaving them with less than 1/3 of the settlement. That client was very unpleasantly surprised.


Cases like this make clients wary of hiring a lawyer to help with their case. People are often worried about the hidden fees involved with hiring a lawyer. That's fair. As was the case with Neinstein & Associates LLP there are lawyers who take advantage of clients. In order for clients to protect themselves and avoid the surprise of hidden fees, every client who is seeking a lawyer to help them with a personal injury case should be ask their lawyer these two questions:

(1) Will there be HST charged on your fee?
While you do not pay income tax on an insurance settlement, you must pay sales tax on the lawyer’s bill.  This is commonly forgotten or not discussed.  With 15% tax in Nova Scotia this means after tax, a 30% contingency fee is really 34.5% of your settlement.

(2) Will I be charged for disbursements? If so, which ones?
In addition to legal fees you will be responsible for disbursements.  What is considered a disbursement and how much they cost varies widely from firm to firm and there is no way to predict how much disbursements will cost at the start of your case. Disbursements on an injury case should be the cost of obtaining evidence and providing it to the other side; they should not be for legal work. Always ask your lawyer for a list of any standard additional fees and their rates for things such as photocopying at the start of your case.

Your lawyer will give you a contingency fee agreement to sign. Read it and ask questions. Then read it again and ask more questions. I strongly believe that openly talking with a client about how a must matter will cost and what a client can expect in the end is the best way to avoid confusion and surprises when the bill comes in.

You should never be surprised by your legal bill.



This post was written by our criminal and personal injury lawyer, Tj McKeough.
If you'd like to contact Tj, you can reach him at tj@manleylaw.ca





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Anna Manley

Anna Manley
Anna is the principal lawyer of Manley Law Inc. and is a regular contributor to the Manley Law Blog. She practices in the areas of Real Estate, Privacy/Internet, Corporate, and Wills & Estates

Danielle MacSween

Danielle MacSween
Danielle is an associate lawyer at Manley Law Inc. and is a regular contributor to the Manley Law Blog. She practices in the areas of Family, Immigration, and Labour & Employment

Tj McKeough

Tj McKeough
Tj is an associate lawyer at Manley Law Inc. and is a regular contributor to the Manley Law Blog. He practices in the areas of Litigation, Personal Injury, and Criminal