Legal fees are high, but that’s no reason to pay more than you should. It helps to understand lawyers’ fees
By Olev Edur
It’s a sad reality that justice can be so expensive that it’s beyond the financial means of the average retiree.
According to a study published in 2010, lawyers’ fees for both parties in a two-day trial in Ontario ranged from a minimum of $37,476 to a maximum $180,808, with the average being $90,954; in some cases the loser would have to pick up both parties’ legal costs. And these figures don’t include added disbursements for such things as court filings, expert witnesses, and even photocopies.
“Lawyers’ fees and costs rules are the single largest problem in the administration of justice,” concluded the study’s author, H. Patrick Glenn, then Peter M. Laing Professor of Law at the Faculty of Law at McGill University in Montreal and director of McGill’s Institute of Comparative Law. “They are the chief cause for very significant declines in litigation rates in Canada.”
Another consequence of these high legal costs has been the proliferation in recent years of “contingency” arrangements, in which clients pay their lawyers a percentage of the final settlement only upon successful conclusion of the case. Most commonly used in personal injury cases, these arrangements may make justice more accessible, they don’t necessarily make it more affordable.
Grace Maitland-Carter, a former lawyer with 20 years of experience reviewing legal billings as an assessment officer at the Ontario Superior Court of Justice and now a consultant in that field, cautions that contingency arrangements may be far more expensive than expected, regardless of whether one wins or loses, and that litigants should be sure they understand exactly what they’ll be paying before signing on.
(While the following information relates to Ontario, most other provinces also allow contingency billing for certain types of actions, and similar problems exist elsewhere. The Law Society of Alberta website, for example, notes that its audits have recently disclosed a wide range of methods for calculating contingency fees, many of which result in overpayments to lawyers.)
“Section 28 of the Ontario Solicitors Act states that ‘partial indemnity costs’ are payable to clients to help defray lawyer’s fees,” Maitland-Carter says. “Lawyers have been taking these partial indemnity costs on top of the percentage fee [which can range up to 45 per cent, depending on province and type of case]. It’s called ‘double-dipping,’ and the clients didn’t realize this until the case was settled and they got their final bill. In assessment court, clients would often say that when they got the bill they were ‘shocked’.”
Abuses Have Become Widespread
“This practice has become common, and it’s not just with contingency cases,” Maitland-Carter says, adding that in some cases the extra charges are questionable to begin with. She cites the example of personal injury law firm Neinstein & Associates LLP, which is in the process of being hit with a class action suit for having allegedly charged its clients excessive fees, as determined in a June 2017 decision by the Ontario Court of Appeal.
“Neinstein allegedly charged excessive interest on the disbursements they paid out, and while that sounds trivial, it’s important because these cases can go on for two, three, four years,” Maitland-Carter says. “If the interest is too high—and it was certainly higher than bank interest rates—it can become very significant. In this case, it amounted to a fortune.”
According to a news report on the appeal proceedings by Kenyon Wallace and Michele Henry of the Toronto Star, the decision effectively meant some 6,000 accident victims had been granted permission to “band together to try and get their money back from a law firm alleged to have double dipped from their settlements.”
The Star article cited testimony from class counsel Peter Waldmann regarding his client, a mother of two from Brooklin, ON, who hired Neinstein after developing chronic pain as the result of a car accident; the final account rendered on her $150,000 settlement included charges for “legal fees” of $30,326 (aother source has that figure as $20,325) and “costs” of $30,000. She was also charged for $48,924 of disbursements, which included $4,008 for photocopies, $2,791 for “laser copies,” and $1,372 for “interest recovery.” The victim was left with a third of her original settlement.
If (as is yet to be demonstrated in court) all 6,000 victims were similarly re-victimized, the total interest costs alone could have amounted to more than $8 million, never mind the question of all those other charges. Nor, as Maitland-Carter suggests, was this an isolated case. Based on information it had received previously, the court stated in its conclusions that there appears to be “widespread” non-compliance in Ontario with the Solicitors Act when it comes to protection of contingency fee clients and the allocation of costs.
Not Just Double-Dipping
Maitland-Carter adds that while the interest costs in the Neinstein case seemed particularly excessive, her experience as an assessment officer revealed many other areas of concern when it came to the adjudication of legal fees.
“Docketing [time-based billing by individual lawyers] is another concern, and it applies even where there is no contingency arrangement,” she says. “You may have two lawyers attending meetings for discovery or mediation, with the junior lawyer getting $600 an hour and the senior lawyer getting $800 an hour, but the client never realizes he or she is paying a combined rate of $1,400 an hour. Case law says that when both lawyers are involved, only one lawyer is entitled to docket, unless the client specifically agreed to this double docketing when he or she signed the retainer agreement.
“A lot of times, several lawyers may work on a file, and they all docket,” Maitland-Carter says. “It happens a lot. You have senior and junior lawyers all meeting to get instructions, for example, but senior lawyers are not supposed to docket for these meetings. One good example I assessed recently was a case dealing with a mortgage foreclosure—everybody in the firm was docketing to this one file. It was a huge file, so they’d all go to lunch and talk about it. I don’t like to say it was wrong, but it shouldn’t have been done. You don’t need to accept all those costs, so you have to look at how many people worked on the file and docketed their time.”
“Travel costs are another problem area,” Maitland-Carter says. “Take for example, a lawyer travelling from Toronto to Newmarket [about 30 kilometres/20 miles north] to attend a hearing. It’s okay as long as they charge for only one way—they can’t charge for travel both ways, yet many do. Docketing, interest charges, travel costs—there are so many things, and they all get reduced in assessment court.”
As a result, Maitland-Carter stresses the importance of verifying what all the costs will be, before signing onto any contingency arrangement or indeed, any legal arrangement. Unfortunately, that may be easier said than done, although you still must make your best effort.
Be an Informed Consumer
“You have a responsibility to be a good consumer so, as with everything else, you should check the costs,” Maitland-Carter says. “Ask questions and find out everything you can. See several lawyers if necessary, and do your research. You have to be a prudent consumer. When you buy a car, or a house, or anything else, you want to know how much it’s going to cost, and you should do so with legal costs as well.
“Of course, litigation is scary for most people, and very expensive,” Maitland-Carter acknowledges. “People meeting a lawyer for the first time are often intimidated and afraid to ask questions. You may get a retainer agreement that’s pages and pages of legal terms and your eyes just glaze over. But you shouldn’t be shy about the process.
“In fairness, nobody knows for certain what the outcome of any court case will be, but a lawyer should be able to provide a reasonable estimate of what the costs will be if you lose. Some lawyers may want a premium if they get a fabulous result, or if the case was exceedingly complex. Regarding disbursements, clients should be informed that at the end of the day these payments will be charged back to the client.”
What’s Your Recourse?
How can you determine if the fees you’re being charged are legitimate and reasonable?
According to the LSUC, neither lawyers nor paralegals may use contingency fee arrangements in criminal or quasi-criminal matters and lawyers are further prohibited from accepting contingency fees in family law matters, which are outside a paralegal’s permitted scope of practise. Similar strictures may apply in other provinces—in British Columbia, for example, contingency fees are not permitted in family law cases involving child custody or access, although they are permitted in other types of family law cases, subject to court approval.
Assuming the contingency arrangement is legitimate, Maitland-Carter says that in fee assessments, the factors that go into determining reasonableness are:
– the time expended by the solicitor;
– the legal complexity of the matters dealt with;
– the degreee of responsibility assumed by the solicitor;
– the monetary value of the matters in issue;
– the importance of the matters to the client;
– the degree of skill and competence demonstrated by the solicitor;
– the results achieved; and the
– the ability of the client to pay.
In addition, though, Maitland-Carter says a major consideration is the expectation of the client as to the amount of the fee. Put another way, a lawyer must be able to demonstrate that he or she clearly explained all aspects of the fees to the client.
Ontario Rules of Professional Conduct provide more specific guidance: “The lawyer should give the client a fair estimate of fees and disbursements pointing out any uncertainties involved, so the client may be able to make an informed decision. This is particularly important concerning fee charges or disbursements which the client might not reasonably be expected to anticipate. When something unusual or unforeseen occurs which may substantially affect the amount of the fee or disbursement, the lawyer should forestall misunderstandings or disputes by immediate explanation to the client.”
Furthermore, these disclosures should be made in writing to eliminate any doubt. And of course, the fees should be reasonable. “It is just common sense that business dealings, whether they be the provision of legal services or indeed any service to the public, should be clearly explained in advnce to clients, preferably in writing,” Maitland-Carter says. “The clients then can make informed and responsible decisions with respect to the conduct of their own matters.”
If you don’t believe that you were given a full explanation of all the potential costs, including any unexpected costs that might have arisen during a trial, or if you feel that the fees were simply unreasonable, you may have grounds for redress. Maitland suggests the following course of action:
- Get written copies of the agreement if you don’t already have one (if you have trouble getting one, contact your provincial law society for help).
- Talk to your lawyer (or paralegal) about the bill. “Your lawyer or paralegal or someone in the legal office can tell you exactly what your representative did in your case and how long it took,” Maitland-Carter says. “If you tell the lawyer or paralegal why you feel the bill is too high, he or she may, in some cases, be willing to reduce the account.”
- If you’re unable to settle the dispute over the bill directly with your lawyer, you can contact the Ontario Supreme Court of Justice’s Assessment Office (or its equivalent in other provinces—contact your law society for guidance) to have your bill reviewed.
“Don’t wait too long to start the assessment process because [in Ontario] if you begin more than one month from the time you received your lawyer’s bill, you will have to get permission from a judge of the Superior Court of Justice to have the bill reviewed,” Maitland-Carter says. “This may cost you time and money, and you may not receive the judge’s permission.”
In Quebec, by comparison, if you are questioning the fee and are unable to come to an agreement with your lawyer, you need to contact the Barreau du Québec within 45 days of receiving the fee statement in order to avail yourself of the Barreau’s conciliation/arbitration services. In Nova Scotia, complaints are referred to that province’s Small Claims Court. The Manitoba Law Society will arrange for a free neutral arbitrator or panel of three arbitrators who will meet with you and the lawyer to review the statement(s) of account.
- In the case of paralegals in Ontario (this step can also vary by province), if you are unable to settle the dispute directly you may be able to make a claim for up to $25,000 in Small Claims Court.
The best way to avoid problems, though, as Maitland-Carter points out, is to do your homework at the outset and treat the arrangement with all the diligence you would accord any other important purchase. If you ask lots of questions and make detailed records, maybe seek a second opinion, you can keep the odds against soliciting misadventures on your side.