The contingency fee agreement is the standard retainer structure for plaintiff-side medical malpractice litigation in Ontario. The framework permits the lawyer to advance the costs of the litigation (expert reports, court filing fees, transcripts, examinations) and to be paid only if and when the case is successful, with the fee calculated as a percentage of the recovery. The framework makes it possible for injured plaintiffs and families to pursue claims they could not otherwise afford to bring. It is, however, a regulated retainer structure. Ontario’s contingency fee regime imposes specific requirements on the form, content, and approval of these agreements, and the framework operates with particular force where the client is vulnerable, where the matter involves a person under disability, or where the recovery is substantial.
Leduc v Dufour, 2026 ONCA 3, released by the Court of Appeal for Ontario on January 8, 2026, is a recent appellate articulation of the framework. The underlying medical malpractice case arose from a 2009 birth at a regional hospital that resulted in hypoxic-ischemic brain injury and a subsequent diagnosis of cerebral palsy. The mother, on behalf of her catastrophically injured child, retained plaintiff-side counsel to advance a medical malpractice claim against the obstetrician, hospital, and nursing staff. After 14 years of litigation, the claim settled in January 2023 for $14 million inclusive of damages, costs, and interest. The retainer agreement provided for a one-third contingency fee, which would have produced approximately $4.1 million before HST.
The motion judge approved the settlement but declined to approve the contingency fee. The judge found that the fee agreement was not fair when it was entered into and was not reasonable at the time of approval. The judge substituted a reduced fee of $3.25 million calculated on a graduated percentage structure. The law firm appealed. The Court of Appeal dismissed the appeal and affirmed the reduction.
The case is doctrinally important for several reasons. It is a clear appellate articulation of the consumer protection function of Ontario’s contingency fee regulation. It applies the two-stage analytical framework (fair when entered into; reasonable at the time of approval) to a vulnerable-client retainer in a catastrophic injury context. It identifies several specific deficiencies in the form and content of contingency fee agreements that can lead to a reduction. And it reaffirms the judicial supervisory role in the approval of contingency fee agreements involving persons under disability and other vulnerable clients.
The legal framework
A brief overview of the regulatory framework is useful for the analysis.
The Solicitors Act framework. Section 28.1 of the Solicitors Act, RSO 1990, c S.15 authorizes contingency fee agreements between lawyers and clients in Ontario. The framework permits the agreement provided it meets the statutory and regulatory requirements. The framework also imposes specific limits, including the prohibition that a lawyer’s fee cannot exceed the client’s actual recovery in the matter.
The Contingency Fee Agreements Regulation. O Reg 195/04 under the Solicitors Act sets out the specific form and content requirements for contingency fee agreements. The requirements include:
- Written form
- Specific disclosures including the manner in which the fee is to be calculated
- Disclosure of the matters that the client has the right to negotiate
- The maximum percentage of the recovery that the lawyer is entitled to receive
- The circumstances in which court approval of the fee is required
- The client’s right to terminate the agreement
- Other prescribed disclosures intended to ensure the client is informed about the implications of the retainer
The Rule 7.08 framework for persons under disability. Rule 7.08 of the Rules of Civil Procedure, RRO 1990 Reg 194, requires court approval for the settlement of any claim brought by or against a person under disability, including minors and adults found incapable of managing their own affairs. The approval is sought through a motion supported by evidence about the proposed settlement, the parties’ interests, and (where the client is a minor) the future needs of the child. The framework includes specific scrutiny of the proposed lawyer’s fees, which are usually addressed in the same motion as the settlement approval.
The two-stage analytical framework. Where a contingency fee agreement involves a person under disability or where it otherwise comes before the court for approval, the analysis proceeds in two stages:
- Fair when entered into: The first stage asks whether the agreement was fair at the time it was made. The analysis considers the circumstances of the agreement, the client’s understanding, the disclosures made (and not made), the bargaining position of the parties, and whether the agreement complies with the regulatory requirements.
- Reasonable at the time of approval: The second stage asks whether the fee that would result from the agreement is reasonable at the time of approval. The analysis considers the actual amount of the fee, the work done, the risk undertaken, the result achieved, the complexity of the matter, the client’s circumstances, and the overall reasonableness of the fee in light of what actually occurred.
Where the agreement fails the first stage (not fair when entered into), the analysis does not need to proceed to the second stage. The agreement can be set aside on that basis alone, and the court can substitute a fee determined on principles of fairness.
The judicial supervisory role. Where the matter involves a person under disability or a vulnerable client, the framework reflects the broader principle that the court acts as a guardian of the client’s interests. The framework does not require the court to defer to the agreement reached between lawyer and client; it requires the court to assess the agreement on its merits.
The clinical context — catastrophic birth injury claims
A brief contextual note about catastrophic birth injury litigation is useful because the regulatory framework operates with particular force in this context.
Hypoxic-ischemic encephalopathy. Hypoxic-ischemic encephalopathy (HIE) is brain injury caused by oxygen deprivation and reduced blood flow to the brain. In the obstetrical context, HIE can occur during labour and delivery due to several mechanisms (placental abruption, umbilical cord compression, prolonged second stage of labour with inadequate fetal monitoring, shoulder dystocia, and others). HIE that results in permanent brain injury can produce cerebral palsy, intellectual disability, seizure disorders, and other lifelong impairments.
The clinical trajectory. A child with severe HIE typically has lifetime needs that include specialized medical care, rehabilitation therapies, equipment, modified housing, transportation, and personal support. The economic loss component of the claim can be substantial because it includes the cost of these lifetime needs along with the loss of the child’s future earning capacity.
The litigation timeline. Birth injury claims typically take 10 to 15 years from injury to resolution. The reasons include the time required for the child’s clinical trajectory to stabilize sufficiently to support a damages assessment, the complexity of the expert evidence (obstetrics, neonatology, neurology, life care planning, economics, vocational), the procedural complexity of cases involving persons under disability, and the practical complexity of coordinating multiple defendants. Leduc v Dufour illustrates the timeline: the birth was in 2009, the settlement was in 2023, and the appellate fee decision was in 2026.
The settlement scale. The damages in a severe birth injury claim with full lifetime care needs can be very substantial. Settlements in the $5 million to $25 million range are not unusual for the most severely affected children with the longest expected lifespan. The framework for contingency fee approval applies with particular force to these substantial settlements because the dollar amounts involved make even modest percentage differences material.
The facts
The Court of Appeal decision proceeds on a factual record that includes the underlying birth, the litigation history, the retainer arrangement, and the motion judge’s findings.
The underlying injury and litigation. The case arose from a 2009 birth at a regional hospital. The labour and delivery resulted in HIE and a subsequent diagnosis of cerebral palsy. The mother retained counsel to investigate and prosecute a medical malpractice claim against the obstetrician, the hospital, and the nursing staff.
The litigation. The litigation extended over approximately 14 years. The matter involved expert evidence, multiple pre-trial proceedings, and the procedural complexity of a claim brought by a litigation guardian on behalf of a child with severe injuries.
The settlement. In January 2023, the case settled for $14 million inclusive of damages, costs, and interest. The settlement structure (whether the recovery was directed in whole or in part to a structured settlement, the allocation among heads of damages, and the related framework) is part of the broader settlement architecture for catastrophic injury claims.
The contingency fee agreement. A 2018 contingency fee agreement provided for a one-third fee on settlement. Applied to the $14 million recovery, this would have produced approximately $4.1 million before HST.
The client’s circumstances. The motion judge found the mother to be a vulnerable client. The factual findings supporting this characterization included her limited education, her lack of legal experience, her financial hardship, and the extraordinary demands of caring for her severely disabled child. The framework recognizes that these features together produce a power imbalance in the retainer relationship and warrant heightened scrutiny.
The motion judge’s findings. The motion judge approved the settlement (consistent with the Rule 7.08 framework for settlement approval involving a person under disability) but declined to approve the contingency fee. The findings on the fee agreement were:
- The agreement was not fair when it was entered into
- The agreement was not reasonable at the time of approval
The motion judge substituted a reduced fee of $3.25 million calculated on a graduated percentage structure. The framework for graduated structures typically applies a higher percentage to lower portions of recovery and a lower percentage to higher portions, on the principle that the marginal value of each additional dollar of recovery to the lawyer’s effort and risk decreases as the recovery amount increases.
The Court of Appeal’s reasoning
The Court of Appeal affirmed the motion judge’s reduction of the fee. The reasoning proceeded along four principal axes.
Vulnerable clients require heightened protection. The court reaffirmed that vulnerable clients (limited education, lack of legal experience, financial hardship, extraordinary care demands, or other features producing a power imbalance) warrant heightened scrutiny of fee agreements. The framework operates on the principle that the regulatory regime exists in substantial measure to protect these clients from agreements that they may not have meaningfully understood at the time of signing. Strict compliance with the regulations is especially important in this context.
The framework does not categorically prevent vulnerable clients from entering into contingency fee agreements. The framework requires that the agreements be entered into with full disclosure, that the client understand the implications, and that the agreement comply with the regulatory requirements designed to ensure informed consent.
Regulatory non-compliance matters. The court reaffirmed that technical non-compliance with the regulations does not automatically void a contingency fee agreement. The framework instead treats the regulations as serving a consumer protection function. Where the non-compliance affects substantive disclosures necessary for informed consent, the agreement can fail the fairness analysis at the first stage.
The court identified several specific deficiencies in the agreement. The agreement failed to include key disclosures required to ensure the client’s informed consent to the retainer.
The risk of excessive fees was not properly explained. Section 28.1 of the Solicitors Act prohibits a lawyer’s fee from exceeding the client’s actual recovery in the matter. The contingency fee agreement in Leduc v Dufour contemplated scenarios where the fee could exceed the client’s recovery (for example, where the recovery was modest and the calculated contingency percentage would have exceeded the recovery available to the client after disbursements and other deductions). This scenario is prohibited by the statutory framework. The court found it significant that the risk of this scenario, and the prohibition that would apply, was never explained to the client.
The framework treats this category of disclosure failure as particularly serious because it goes to the heart of the consumer protection function of the regulatory regime. A client who does not understand the prohibition on excessive fees cannot meaningfully assess the implications of the agreement.
Court approval must be clearly disclosed. Where the contingency fee agreement involves a matter that will require court approval of the fee (including settlement on behalf of a person under disability), the agreement should clearly disclose that the court will assess the fee and that there are legal limits on contingency fees. The framework reflects the principle that the client is entitled to know that the agreement does not give the lawyer the unilateral right to the calculated fee; the fee remains subject to court approval.
The agreement in Leduc v Dufour did not adequately explain that court approval was required or that there were legal limits on contingency fees. The court found that this failure undermined the fairness of the retainer.
The conclusion. Because the agreement was not fair when it was entered into (the first stage of the analytical framework), the Court of Appeal held that it was unnecessary to consider whether the resulting fee was reasonable at the time of approval (the second stage). The motion judge’s substitution of the $3.25 million graduated fee was affirmed.
The doctrinal anchors
Several doctrinal anchors emerge from the case.
The Solicitors Act / Contingency Fee Agreements Regulation framework. The framework for contingency fee agreements in Ontario operates through the Solicitors Act and O Reg 195/04. The framework imposes specific form and content requirements designed to ensure the client’s informed consent. The framework is consumer-protective and is applied with particular force to vulnerable clients and to matters involving persons under disability.
The “fair when entered into / reasonable at the time of approval” two-stage framework. The framework provides a two-step analytical structure for the review of contingency fee agreements. The first stage assesses the agreement at the time it was made; the second stage assesses the resulting fee at the time of approval. Where the agreement fails the first stage, the analysis does not need to proceed to the second stage.
The vulnerable client framework. The framework recognizes that some clients face a power imbalance in the retainer relationship arising from factors such as limited education, lack of legal experience, financial hardship, or extraordinary care demands. The framework imposes heightened scrutiny of the retainer in these circumstances and applies the consumer protection function of the regulations with particular force.
The Rule 7.08 settlement approval framework. Where the matter involves a person under disability, the framework requires court approval of any settlement. The framework includes scrutiny of the proposed lawyer’s fees as part of the broader settlement approval process. Leduc v Dufour applies the framework in the catastrophic birth injury context.
The consumer protection function of contingency fee regulations. The framework treats the regulations as serving a consumer protection function. Technical non-compliance does not automatically void an agreement, but substantive non-compliance affecting the disclosures necessary for informed consent can support a finding that the agreement was not fair when entered into.
The informed consent framework for fee agreements. The framework for informed consent applies to fee agreements with the same analytical structure as it applies to medical treatment. The client must be given the information necessary to make an informed decision, must have the capacity to understand it, and must give consent that is not vitiated by undue influence or material non-disclosure. Leduc v Dufour applies the framework to a contingency fee retainer.
The “fee cannot exceed client’s recovery” prohibition. Section 28.1 of the Solicitors Act prohibits a lawyer’s fee from exceeding the client’s actual recovery in the matter. The framework operates as a categorical limit on the contingency fee structure. The risk of the prohibition being triggered must be disclosed to the client as part of the informed consent framework.
The court approval disclosure requirement. Where the contingency fee agreement involves a matter that will require court approval of the fee, the agreement should clearly disclose this requirement. The framework reflects the principle that the client is entitled to know about the supervisory role of the court.
The graduated fee structure as alternative. Where the court reduces the calculated contingency fee, the framework permits the substitution of a graduated fee structure. The graduated structure typically applies higher percentages to lower portions of recovery and lower percentages to higher portions. The framework reflects the principle that the marginal value of the lawyer’s effort and risk decreases as the recovery amount increases. Leduc v Dufour affirms the use of the graduated structure in the catastrophic injury context.
The appellate standard of review for fee approval decisions. The framework for appellate review of fee approval decisions reflects the broader appellate standard of review framework articulated in Housen v Nikolaisen, 2002 SCC 33. Questions of law are reviewed on the standard of correctness; questions of fact and mixed fact and law are reviewed on the standard of palpable and overriding error. The framework respects the motion judge’s findings on the underlying facts and the application of the framework to those facts.
The judicial supervisory role in vulnerable client retainers. The framework reflects the broader principle that the court acts as a guardian of the client’s interests where the client is vulnerable or where the matter involves a person under disability. The framework does not require the court to defer to the agreement reached between lawyer and client; it requires the court to assess the agreement on its merits. Leduc v Dufour reaffirms the supervisory role at the appellate level.
Why this case matters
For prospective clients and families. The case is an important affirmation of the consumer protection regime that applies to contingency fee agreements in Ontario, with particular force in catastrophic injury cases.
Some practical observations:
Contingency fee agreements should be in writing and should explain the framework clearly. Ontario’s regulatory regime requires written contingency fee agreements with specific disclosures. The disclosures are designed to ensure that the client understands what they are agreeing to. A retainer that does not include these disclosures may not be enforceable on its full terms.
The percentage in the agreement is not the only relevant figure. Ontario’s framework includes a prohibition on the lawyer’s fee exceeding the client’s actual recovery. The framework also includes court oversight in cases involving persons under disability. The percentage in the agreement is the starting point, not the end point.
Vulnerable clients receive heightened protection. Where the client has limited education, lack of legal experience, financial hardship, or extraordinary care demands (such as caring for a severely disabled child), the framework applies the consumer protection regime with particular force. The framework is intended to ensure that vulnerable clients are protected from agreements they may not have fully understood.
Court approval of settlements involving minors and other persons under disability is mandatory. Rule 7.08 of the Rules of Civil Procedure requires court approval of any settlement of a claim brought by or against a person under disability. The framework includes scrutiny of the lawyer’s fees as part of the approval process. Clients can be assured that the court is reviewing the proposed fee.
Graduated fee structures can be appropriate in large recoveries. In catastrophic injury cases with substantial settlements, the framework can support a graduated fee structure where the percentage applied decreases as the recovery amount increases. The framework reflects the principle that the marginal value of the lawyer’s effort and risk does not increase linearly with the recovery amount.
For more on the general framework for evaluating medical malpractice cases including the retainer arrangements, see Suing for Medical Malpractice in Ontario: What You Need to Know and Most Common Misunderstandings About Medical Malpractice in Ontario.
For plaintiff-side counsel. A few practical observations:
Compliance with the regulations is the foundation. The regulatory framework is consumer-protective and is designed to support the lawyer-client relationship rather than to obstruct it. Careful compliance with the form and content requirements of the regulations supports the enforceability of the retainer.
The vulnerable client framework warrants particular attention. Where the client presents with features suggesting vulnerability (limited education, lack of legal experience, financial hardship, caregiving demands), the framework applies the consumer protection regime with particular force. The careful approach is to document the client’s understanding of the agreement, to ensure the disclosures are clearly communicated, and to allow the client adequate time to consider the agreement before signing.
The disclosures matter. The specific disclosures required by the regulations are not just technical requirements. They serve substantive functions in supporting the client’s informed consent. The disclosures should be clearly worded, prominently placed, and explained in conversation as well as in writing.
Court approval involves substantive review. Where the matter involves a person under disability, the framework requires court approval of both the settlement and the lawyer’s fee. The court’s review is substantive and the framework does not assume the agreed fee will be approved as written. The careful approach is to anticipate the court’s review and to support the proposed fee with evidence about the work done, the risk undertaken, and the result achieved.
Decision Date: January 8, 2026
Jurisdiction: Court of Appeal for Ontario
Citation: Leduc v Dufour, 2026 ONCA 3 (CanLII)
Outcome: Appeal dismissed. The Court of Appeal affirmed the motion judge’s decision to reduce the contingency fee from the approximately $4.1 million that would have resulted from the one-third contingency calculation to a graduated fee of $3.25 million. The court found that the agreement was not fair when it was entered into, on four principal grounds: (1) the client was vulnerable, with limited education, lack of legal experience, financial hardship, and extraordinary demands of caring for a severely disabled child, and the regulatory framework required heightened scrutiny in these circumstances; (2) the agreement failed to include key disclosures required to ensure the client’s informed consent under the consumer protection framework of Ontario’s contingency fee regulations; (3) the agreement contemplated scenarios where the lawyer’s fee could exceed the client’s recovery (a result prohibited under the Solicitors Act), and the risk of this scenario was not explained to the client; (4) the agreement did not adequately explain that court approval of the fee was required and that there were legal limits on contingency fees, undermining the fairness of the retainer. Because the agreement failed at the first stage of the analytical framework (not fair when entered into), the court did not need to consider the second stage (reasonable at the time of approval).
Key authorities: Solicitors Act, RSO 1990, c S.15, s 28.1 (contingency fee framework, including the prohibition on a lawyer’s fee exceeding the client’s recovery); Contingency Fee Agreements Regulation, O Reg 195/04 (form and content requirements); Rules of Civil Procedure, RRO 1990 Reg 194, Rule 7.08 (court approval of settlements involving persons under disability); Housen v Nikolaisen, 2002 SCC 33 (appellate standard of review framework).
Leduc v Dufour: Contingency Fee Approval, Vulnerable Clients, and the Consumer Protection Framework
Ontario Court of Appeal affirms reduction of contingency fee from $4.1 million to $3.25 million in $14 million birth injury settlement involving vulnerable client.
The contingency fee agreement is the standard retainer structure for plaintiff-side medical malpractice litigation in Ontario. The framework permits the lawyer to advance the costs of the litigation (expert reports, court filing fees, transcripts, examinations) and to be paid only if and when the case is successful, with the fee calculated as a percentage of the recovery. The framework makes it possible for injured plaintiffs and families to pursue claims they could not otherwise afford to bring. It is, however, a regulated retainer structure. Ontario’s contingency fee regime imposes specific requirements on the form, content, and approval of these agreements, and the framework operates with particular force where the client is vulnerable, where the matter involves a person under disability, or where the recovery is substantial.
Leduc v Dufour, 2026 ONCA 3, released by the Court of Appeal for Ontario on January 8, 2026, is a recent appellate articulation of the framework. The underlying medical malpractice case arose from a 2009 birth at a regional hospital that resulted in hypoxic-ischemic brain injury and a subsequent diagnosis of cerebral palsy. The mother, on behalf of her catastrophically injured child, retained plaintiff-side counsel to advance a medical malpractice claim against the obstetrician, hospital, and nursing staff. After 14 years of litigation, the claim settled in January 2023 for $14 million inclusive of damages, costs, and interest. The retainer agreement provided for a one-third contingency fee, which would have produced approximately $4.1 million before HST.
The motion judge approved the settlement but declined to approve the contingency fee. The judge found that the fee agreement was not fair when it was entered into and was not reasonable at the time of approval. The judge substituted a reduced fee of $3.25 million calculated on a graduated percentage structure. The law firm appealed. The Court of Appeal dismissed the appeal and affirmed the reduction.
The case is doctrinally important for several reasons. It is a clear appellate articulation of the consumer protection function of Ontario’s contingency fee regulation. It applies the two-stage analytical framework (fair when entered into; reasonable at the time of approval) to a vulnerable-client retainer in a catastrophic injury context. It identifies several specific deficiencies in the form and content of contingency fee agreements that can lead to a reduction. And it reaffirms the judicial supervisory role in the approval of contingency fee agreements involving persons under disability and other vulnerable clients.
The legal framework
A brief overview of the regulatory framework is useful for the analysis.
The Solicitors Act framework. Section 28.1 of the Solicitors Act, RSO 1990, c S.15 authorizes contingency fee agreements between lawyers and clients in Ontario. The framework permits the agreement provided it meets the statutory and regulatory requirements. The framework also imposes specific limits, including the prohibition that a lawyer’s fee cannot exceed the client’s actual recovery in the matter.
The Contingency Fee Agreements Regulation. O Reg 195/04 under the Solicitors Act sets out the specific form and content requirements for contingency fee agreements. The requirements include:
The Rule 7.08 framework for persons under disability. Rule 7.08 of the Rules of Civil Procedure, RRO 1990 Reg 194, requires court approval for the settlement of any claim brought by or against a person under disability, including minors and adults found incapable of managing their own affairs. The approval is sought through a motion supported by evidence about the proposed settlement, the parties’ interests, and (where the client is a minor) the future needs of the child. The framework includes specific scrutiny of the proposed lawyer’s fees, which are usually addressed in the same motion as the settlement approval.
The two-stage analytical framework. Where a contingency fee agreement involves a person under disability or where it otherwise comes before the court for approval, the analysis proceeds in two stages:
Where the agreement fails the first stage (not fair when entered into), the analysis does not need to proceed to the second stage. The agreement can be set aside on that basis alone, and the court can substitute a fee determined on principles of fairness.
The judicial supervisory role. Where the matter involves a person under disability or a vulnerable client, the framework reflects the broader principle that the court acts as a guardian of the client’s interests. The framework does not require the court to defer to the agreement reached between lawyer and client; it requires the court to assess the agreement on its merits.
The clinical context — catastrophic birth injury claims
A brief contextual note about catastrophic birth injury litigation is useful because the regulatory framework operates with particular force in this context.
Hypoxic-ischemic encephalopathy. Hypoxic-ischemic encephalopathy (HIE) is brain injury caused by oxygen deprivation and reduced blood flow to the brain. In the obstetrical context, HIE can occur during labour and delivery due to several mechanisms (placental abruption, umbilical cord compression, prolonged second stage of labour with inadequate fetal monitoring, shoulder dystocia, and others). HIE that results in permanent brain injury can produce cerebral palsy, intellectual disability, seizure disorders, and other lifelong impairments.
The clinical trajectory. A child with severe HIE typically has lifetime needs that include specialized medical care, rehabilitation therapies, equipment, modified housing, transportation, and personal support. The economic loss component of the claim can be substantial because it includes the cost of these lifetime needs along with the loss of the child’s future earning capacity.
The litigation timeline. Birth injury claims typically take 10 to 15 years from injury to resolution. The reasons include the time required for the child’s clinical trajectory to stabilize sufficiently to support a damages assessment, the complexity of the expert evidence (obstetrics, neonatology, neurology, life care planning, economics, vocational), the procedural complexity of cases involving persons under disability, and the practical complexity of coordinating multiple defendants. Leduc v Dufour illustrates the timeline: the birth was in 2009, the settlement was in 2023, and the appellate fee decision was in 2026.
The settlement scale. The damages in a severe birth injury claim with full lifetime care needs can be very substantial. Settlements in the $5 million to $25 million range are not unusual for the most severely affected children with the longest expected lifespan. The framework for contingency fee approval applies with particular force to these substantial settlements because the dollar amounts involved make even modest percentage differences material.
The facts
The Court of Appeal decision proceeds on a factual record that includes the underlying birth, the litigation history, the retainer arrangement, and the motion judge’s findings.
The underlying injury and litigation. The case arose from a 2009 birth at a regional hospital. The labour and delivery resulted in HIE and a subsequent diagnosis of cerebral palsy. The mother retained counsel to investigate and prosecute a medical malpractice claim against the obstetrician, the hospital, and the nursing staff.
The litigation. The litigation extended over approximately 14 years. The matter involved expert evidence, multiple pre-trial proceedings, and the procedural complexity of a claim brought by a litigation guardian on behalf of a child with severe injuries.
The settlement. In January 2023, the case settled for $14 million inclusive of damages, costs, and interest. The settlement structure (whether the recovery was directed in whole or in part to a structured settlement, the allocation among heads of damages, and the related framework) is part of the broader settlement architecture for catastrophic injury claims.
The contingency fee agreement. A 2018 contingency fee agreement provided for a one-third fee on settlement. Applied to the $14 million recovery, this would have produced approximately $4.1 million before HST.
The client’s circumstances. The motion judge found the mother to be a vulnerable client. The factual findings supporting this characterization included her limited education, her lack of legal experience, her financial hardship, and the extraordinary demands of caring for her severely disabled child. The framework recognizes that these features together produce a power imbalance in the retainer relationship and warrant heightened scrutiny.
The motion judge’s findings. The motion judge approved the settlement (consistent with the Rule 7.08 framework for settlement approval involving a person under disability) but declined to approve the contingency fee. The findings on the fee agreement were:
The motion judge substituted a reduced fee of $3.25 million calculated on a graduated percentage structure. The framework for graduated structures typically applies a higher percentage to lower portions of recovery and a lower percentage to higher portions, on the principle that the marginal value of each additional dollar of recovery to the lawyer’s effort and risk decreases as the recovery amount increases.
The Court of Appeal’s reasoning
The Court of Appeal affirmed the motion judge’s reduction of the fee. The reasoning proceeded along four principal axes.
Vulnerable clients require heightened protection. The court reaffirmed that vulnerable clients (limited education, lack of legal experience, financial hardship, extraordinary care demands, or other features producing a power imbalance) warrant heightened scrutiny of fee agreements. The framework operates on the principle that the regulatory regime exists in substantial measure to protect these clients from agreements that they may not have meaningfully understood at the time of signing. Strict compliance with the regulations is especially important in this context.
The framework does not categorically prevent vulnerable clients from entering into contingency fee agreements. The framework requires that the agreements be entered into with full disclosure, that the client understand the implications, and that the agreement comply with the regulatory requirements designed to ensure informed consent.
Regulatory non-compliance matters. The court reaffirmed that technical non-compliance with the regulations does not automatically void a contingency fee agreement. The framework instead treats the regulations as serving a consumer protection function. Where the non-compliance affects substantive disclosures necessary for informed consent, the agreement can fail the fairness analysis at the first stage.
The court identified several specific deficiencies in the agreement. The agreement failed to include key disclosures required to ensure the client’s informed consent to the retainer.
The risk of excessive fees was not properly explained. Section 28.1 of the Solicitors Act prohibits a lawyer’s fee from exceeding the client’s actual recovery in the matter. The contingency fee agreement in Leduc v Dufour contemplated scenarios where the fee could exceed the client’s recovery (for example, where the recovery was modest and the calculated contingency percentage would have exceeded the recovery available to the client after disbursements and other deductions). This scenario is prohibited by the statutory framework. The court found it significant that the risk of this scenario, and the prohibition that would apply, was never explained to the client.
The framework treats this category of disclosure failure as particularly serious because it goes to the heart of the consumer protection function of the regulatory regime. A client who does not understand the prohibition on excessive fees cannot meaningfully assess the implications of the agreement.
Court approval must be clearly disclosed. Where the contingency fee agreement involves a matter that will require court approval of the fee (including settlement on behalf of a person under disability), the agreement should clearly disclose that the court will assess the fee and that there are legal limits on contingency fees. The framework reflects the principle that the client is entitled to know that the agreement does not give the lawyer the unilateral right to the calculated fee; the fee remains subject to court approval.
The agreement in Leduc v Dufour did not adequately explain that court approval was required or that there were legal limits on contingency fees. The court found that this failure undermined the fairness of the retainer.
The conclusion. Because the agreement was not fair when it was entered into (the first stage of the analytical framework), the Court of Appeal held that it was unnecessary to consider whether the resulting fee was reasonable at the time of approval (the second stage). The motion judge’s substitution of the $3.25 million graduated fee was affirmed.
The doctrinal anchors
Several doctrinal anchors emerge from the case.
The Solicitors Act / Contingency Fee Agreements Regulation framework. The framework for contingency fee agreements in Ontario operates through the Solicitors Act and O Reg 195/04. The framework imposes specific form and content requirements designed to ensure the client’s informed consent. The framework is consumer-protective and is applied with particular force to vulnerable clients and to matters involving persons under disability.
The “fair when entered into / reasonable at the time of approval” two-stage framework. The framework provides a two-step analytical structure for the review of contingency fee agreements. The first stage assesses the agreement at the time it was made; the second stage assesses the resulting fee at the time of approval. Where the agreement fails the first stage, the analysis does not need to proceed to the second stage.
The vulnerable client framework. The framework recognizes that some clients face a power imbalance in the retainer relationship arising from factors such as limited education, lack of legal experience, financial hardship, or extraordinary care demands. The framework imposes heightened scrutiny of the retainer in these circumstances and applies the consumer protection function of the regulations with particular force.
The Rule 7.08 settlement approval framework. Where the matter involves a person under disability, the framework requires court approval of any settlement. The framework includes scrutiny of the proposed lawyer’s fees as part of the broader settlement approval process. Leduc v Dufour applies the framework in the catastrophic birth injury context.
The consumer protection function of contingency fee regulations. The framework treats the regulations as serving a consumer protection function. Technical non-compliance does not automatically void an agreement, but substantive non-compliance affecting the disclosures necessary for informed consent can support a finding that the agreement was not fair when entered into.
The informed consent framework for fee agreements. The framework for informed consent applies to fee agreements with the same analytical structure as it applies to medical treatment. The client must be given the information necessary to make an informed decision, must have the capacity to understand it, and must give consent that is not vitiated by undue influence or material non-disclosure. Leduc v Dufour applies the framework to a contingency fee retainer.
The “fee cannot exceed client’s recovery” prohibition. Section 28.1 of the Solicitors Act prohibits a lawyer’s fee from exceeding the client’s actual recovery in the matter. The framework operates as a categorical limit on the contingency fee structure. The risk of the prohibition being triggered must be disclosed to the client as part of the informed consent framework.
The court approval disclosure requirement. Where the contingency fee agreement involves a matter that will require court approval of the fee, the agreement should clearly disclose this requirement. The framework reflects the principle that the client is entitled to know about the supervisory role of the court.
The graduated fee structure as alternative. Where the court reduces the calculated contingency fee, the framework permits the substitution of a graduated fee structure. The graduated structure typically applies higher percentages to lower portions of recovery and lower percentages to higher portions. The framework reflects the principle that the marginal value of the lawyer’s effort and risk decreases as the recovery amount increases. Leduc v Dufour affirms the use of the graduated structure in the catastrophic injury context.
The appellate standard of review for fee approval decisions. The framework for appellate review of fee approval decisions reflects the broader appellate standard of review framework articulated in Housen v Nikolaisen, 2002 SCC 33. Questions of law are reviewed on the standard of correctness; questions of fact and mixed fact and law are reviewed on the standard of palpable and overriding error. The framework respects the motion judge’s findings on the underlying facts and the application of the framework to those facts.
The judicial supervisory role in vulnerable client retainers. The framework reflects the broader principle that the court acts as a guardian of the client’s interests where the client is vulnerable or where the matter involves a person under disability. The framework does not require the court to defer to the agreement reached between lawyer and client; it requires the court to assess the agreement on its merits. Leduc v Dufour reaffirms the supervisory role at the appellate level.
Why this case matters
For prospective clients and families. The case is an important affirmation of the consumer protection regime that applies to contingency fee agreements in Ontario, with particular force in catastrophic injury cases.
Some practical observations:
Contingency fee agreements should be in writing and should explain the framework clearly. Ontario’s regulatory regime requires written contingency fee agreements with specific disclosures. The disclosures are designed to ensure that the client understands what they are agreeing to. A retainer that does not include these disclosures may not be enforceable on its full terms.
The percentage in the agreement is not the only relevant figure. Ontario’s framework includes a prohibition on the lawyer’s fee exceeding the client’s actual recovery. The framework also includes court oversight in cases involving persons under disability. The percentage in the agreement is the starting point, not the end point.
Vulnerable clients receive heightened protection. Where the client has limited education, lack of legal experience, financial hardship, or extraordinary care demands (such as caring for a severely disabled child), the framework applies the consumer protection regime with particular force. The framework is intended to ensure that vulnerable clients are protected from agreements they may not have fully understood.
Court approval of settlements involving minors and other persons under disability is mandatory. Rule 7.08 of the Rules of Civil Procedure requires court approval of any settlement of a claim brought by or against a person under disability. The framework includes scrutiny of the lawyer’s fees as part of the approval process. Clients can be assured that the court is reviewing the proposed fee.
Graduated fee structures can be appropriate in large recoveries. In catastrophic injury cases with substantial settlements, the framework can support a graduated fee structure where the percentage applied decreases as the recovery amount increases. The framework reflects the principle that the marginal value of the lawyer’s effort and risk does not increase linearly with the recovery amount.
For more on the general framework for evaluating medical malpractice cases including the retainer arrangements, see Suing for Medical Malpractice in Ontario: What You Need to Know and Most Common Misunderstandings About Medical Malpractice in Ontario.
For plaintiff-side counsel. A few practical observations:
Compliance with the regulations is the foundation. The regulatory framework is consumer-protective and is designed to support the lawyer-client relationship rather than to obstruct it. Careful compliance with the form and content requirements of the regulations supports the enforceability of the retainer.
The vulnerable client framework warrants particular attention. Where the client presents with features suggesting vulnerability (limited education, lack of legal experience, financial hardship, caregiving demands), the framework applies the consumer protection regime with particular force. The careful approach is to document the client’s understanding of the agreement, to ensure the disclosures are clearly communicated, and to allow the client adequate time to consider the agreement before signing.
The disclosures matter. The specific disclosures required by the regulations are not just technical requirements. They serve substantive functions in supporting the client’s informed consent. The disclosures should be clearly worded, prominently placed, and explained in conversation as well as in writing.
Court approval involves substantive review. Where the matter involves a person under disability, the framework requires court approval of both the settlement and the lawyer’s fee. The court’s review is substantive and the framework does not assume the agreed fee will be approved as written. The careful approach is to anticipate the court’s review and to support the proposed fee with evidence about the work done, the risk undertaken, and the result achieved.
Decision Date: January 8, 2026
Jurisdiction: Court of Appeal for Ontario
Citation: Leduc v Dufour, 2026 ONCA 3 (CanLII)
Outcome: Appeal dismissed. The Court of Appeal affirmed the motion judge’s decision to reduce the contingency fee from the approximately $4.1 million that would have resulted from the one-third contingency calculation to a graduated fee of $3.25 million. The court found that the agreement was not fair when it was entered into, on four principal grounds: (1) the client was vulnerable, with limited education, lack of legal experience, financial hardship, and extraordinary demands of caring for a severely disabled child, and the regulatory framework required heightened scrutiny in these circumstances; (2) the agreement failed to include key disclosures required to ensure the client’s informed consent under the consumer protection framework of Ontario’s contingency fee regulations; (3) the agreement contemplated scenarios where the lawyer’s fee could exceed the client’s recovery (a result prohibited under the Solicitors Act), and the risk of this scenario was not explained to the client; (4) the agreement did not adequately explain that court approval of the fee was required and that there were legal limits on contingency fees, undermining the fairness of the retainer. Because the agreement failed at the first stage of the analytical framework (not fair when entered into), the court did not need to consider the second stage (reasonable at the time of approval).
Key authorities: Solicitors Act, RSO 1990, c S.15, s 28.1 (contingency fee framework, including the prohibition on a lawyer’s fee exceeding the client’s recovery); Contingency Fee Agreements Regulation, O Reg 195/04 (form and content requirements); Rules of Civil Procedure, RRO 1990 Reg 194, Rule 7.08 (court approval of settlements involving persons under disability); Housen v Nikolaisen, 2002 SCC 33 (appellate standard of review framework).
Paul Cahill
Partner, Davidson Cahill Morrison LLP | LSO Certified Specialist in Civil Litigation
Paul represents victims of medical malpractice across Ontario, with trial experience including a $11.5M jury verdict in a birth injury case. He is recognized in Best Lawyers in Canada and serves as trial counsel to other lawyers on complex medical negligence matters.
About PaulMore on medical malpractice in Ontario.
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