Part One of a Three Part Series on Ontario Lawyer Referral Fees
At Ferguson Barristers we work with a network of Ontario lawyers to provide service in personal injury law and civil litigation to clients in smaller communities. We’ve prepared a three part blogs series to help lawyers better understand the referral process and how the fees are divided.
Prior to 2000, referral fees were strictly outlawed by Rule 9 of the Law Society of Upper Canada’s Rules of Professional Conduct
Rule 9 stated that a lawyer could not divide fees with another lawyer who was not a partner or associate unless the fees were divided in proportion to the work done and responsibilities assumed. It was also improper and professional misconduct to divide fees with conveyancers, notaries public, students, clerks, or other persons “who bring or refer business to the lawyer’s office, or to pay referral fees to such persons.” The former Rule 9 does not appear to have been enforced all that often.
Rule 9 was revised by Rule 2.08 (7), adopted by convocation on June 22, 2000, and put into effect on November 1, 2000. The new Rule explicitly accepts the practice of referral fees and also the practice of dividing fees between co-counsels. An amendment was made in April 2008 to begin using the word “licensee” to reflect the new changes in the treatment of paralegals in this province and now referral fees are legally payable to both lawyers and paralegals licensed in Ontario.
Under the new Rule 2.08 (7), the referral must be made because of the expertise and ability of the Ontario lawyer or paralegal receiving the referral fee and not because of a conflict of interest.
The referral fee must be reasonable and must not increase the total fee charged to the client. There is no assistance in determining what reasonable means. It is the practice of Ferguson Barristers LLP to pay 10% to 15% of our total fee for referrals made. We give consideration to the relative size of the disbursements our firm has incurred as well as the relative risk we took on in taking the case. This formula is one used by many law firms dividing fees between partners that did the legal work and those partners that attracted that legal work. The formula was actually incorporated into a precedent standard law firm partnership published by the Canadian Bar Association years ago.
Finally, the client must be informed about the referral fee in writing. Our firm uses a standard retainer form, in addition to our contingency fee agreement, which specifically sets out that the client is retaining Ferguson Barristers LLP to prosecute their action and authorizes Ferguson Barristers to pay any referring lawyers fees to the specific firm that has made the referral.
The Rule clearly states that referral fees cannot be paid to anyone other than a paralegal or lawyer.
Interested in our Referring Lawyer program ? Please contact our Midland, Sudbury or North Bay, Ontario law office and one of our lawyers will be happy to discuss the program with you.