The Law of Costs and the Cost of Law - LawNow Magazine

The Law of Costs and the Cost of Law

Photo Credit: Dreamstime

Photo Credit: Dreamstime

Introduction

Equality is one of the most important underpinnings of law and justice.  This encompasses equal access to the law.  Numerous initiatives ease the difficult and expensive engagement with law that most citizens encounter.  These measures include free public legal databases, pro bono programs and legal aid services.  However, when you need a lawyer, access to law comes at an extremely high price.

This article describes the law of costs when engaging lawyers.

Legal Costs and Expenses

The cost of law can generally be divided into court costs, other litigation costs, and lawyer costs.

  • Court Costs

 The new Alberta Rules of Court state that “[i]ndividuals may represent themselves in an action.  Judges may permit another person to assist the self-represented party “in any manner and on any terms and conditions the Court considers appropriate,”..Governments largely socialize the costs of justice.  They pay for the construction and operation of the courthouses and the judges’ salaries.  They only ask that users of courts in civil cases pay a small ‘filing’ fee.  Even the Supreme Court of Canada charges only $75 as a user fee.  The lower courts charge slightly more.  For example, it costs $200 to launch a small claims matter over $7500 in Alberta.

While relatively low, these filing fees may still be waived by a judge if you claim it would be a financial hardship to pay them.  Court costs are either readily affordable or waivable.  They are not a bar to accessing the legal system.  The doors of justice ought to be open to all.

  • Other Litigation Costs

There are various other ligitation-related expenses that must be paid.  These can include covering a portion of the lawyer’s business overhead, such as secretarial and paralegal time, computer use and photocopies.  Other costs are called “disbursements” – actual and necessary expenses incurred by the lawyer performing legal services for their client and paid to third parties.  Long distance telephone calls, medical reports, document binding and courier charges come to mind, as well as charges for database legal research and expert witnesses.

Each party pays according to what is needed in the litigation.  Like court fees, overhead charges and disbursements are not usually prohibitive cost components for most people.  By far, most of the high cost of using the courts arises from the very expensive professional service fees charged by law firms to perform their services.

  • Lawyer Costs

 Lawyers have an ethical duty to devote a modest portion of their time and effort toward pro bono work.  Pro bono publico is Latin, meaning “for the public good.” For small value disputes, you should consider whether you should go to the law at all.  The angst, uncertainty, stress, possible adverse publicity, risk of not collecting on judgments, possible appeal, and the time and energy consumed in a lawsuit are all non-pecuniary reasons to walk away from a small debt.

Every province maintains small claims courts where claims up to $50,000 can be launched and prosecuted without a lawyer.  This is an effective option where the dispute is straightforward and you are likely to actually collect the judgment amount if successful.  For complicated or highly adversarial cases and those in higher courts, you may still represent yourself (called “pro se”) and this trend is increasing. However, most people who become involved in this litigation choose to hire a lawyer to represent them.  Legal services, unlike medical services, are not socialized (and are largely uninsured) in Canada.  They have to be paid directly by the client.

  • Legal Fees

 

Legal fees are the costs of a range of professional services provided by lawyers, ranging from advice and drafting of documents to preparation and representation in court.  A lawyer may bill for services on the basis of a flat rate fee, a contingency fee, or an hourly fee.  Flat rates (or tariffs) are rare in litigation.  Contingency fees require no payment for legal services unless the client wins the case.  The client only pays the lawyer a percentage of the successful outcome obtained.  The lawyer must agree to work on this basis and will only offer it when the chances of winning are strong.  The contingency model for legal fees is most common when suing to recover for personal injuries after car accidents and in tax cases.

..judges will usually only order the losing party to pay a portion – generally about one third – of the winning party’s legal bill. ..The hourly rate is by far the most common basis for hiring a lawyer to assist in a court case.  The rate will vary based on the lawyer’s experience, expertise and skills.  These fees vary from lawyer to lawyer and are guided by supply and demand.  You should be able to hire a competent lawyer for about $300 per hour.  Clients may request an estimate of total costs to complete a lawsuit, but estimates cannot be accurate when no one knows for certain the amount of work and time that the lawyer will need to dedicate to the case.  The hourly lawyer will usually bill the client on an interim basis, such as every month or after defined stages in the proceedings.

  • Review of a Lawyer’s Bill

The lawyer-client financial relationship in Canada is the only one in which the law establishes a review procedure.  Clients may ask a third, neutral party to review the lawyer’s bill for reasonableness and seek a reduction of the amount of fees payable.  This is called “taxation of the account.”

Clients must ask for the review within six months (12 months in British Columbia) of receiving the lawyer’s bill for legal services or, if the bill was paid, within three months of payment.  The deadlines may vary from province to province, so you should check locally.  The taxation officer is usually located at the courthouse where the request for taxation must be filed.

The reviewer must consider all aspects of the bill, such as the difficulty and complexity of the services, the lawyer’s seniority, skill, specialized knowledge and standing in the legal profession, the amount of money involved, the time reasonably spent, whether any hourly rate agreed to was reasonable, the importance of the matter to the client, and the result obtained.  Contingency fee agreements may also be reviewed and adjusted for reasonableness.

 Clients may ask a third, neutral party to review the lawyer’s bill for reasonableness and seek a reduction of the amount of fees payable.  This is called “taxation of the account.”The reviewing officer may adjust the lawyer’s bill, but must approve fees and disbursements found necessary to conduct the proceeding, as well as all fees authorized and approved by the client.  If the client was informed of the futility of services, but requested them anyway, the client will have to pay for them.

The taxation of a lawyer’s bill, as a court-related procedure, also comes at a cost.  The taxation or reviewing officer may order the client or lawyer to pay for it depending on who enjoyed the most success in the review.  I recall once winning a reduction in the opposing lawyer’s bill.  Yet I was still assessed the (higher) costs of the taxation, which rendered the successful taxation a losing proposition in the end.

Lawyers may also apply to have their own legal bills reviewed.  Once approved, they can take steps to collect on them.

Legal fees can become expensive very quickly even when dealing with simple matters.  This high cost can serve as a powerful deterrent to accessing legal recourse.

 Cost Shifting

 If you hire a lawyer and wins the lawsuit – whether suing or defending – it seems reasonable that you should then be indemnified for the cost of that litigation.  After all, you had to hire a lawyer to sue and were successful in the judgment.  Why should the judge not also add the costs of scoring the win to your successful judgment?  Likewise, where you hire a lawyer to successfully defend against someone’s claim, why should the losing party not also have to pay for your lawyer’s bill?  In both cases you had to hire the lawyer to prove you were on the right side of the case.

Canada follows a modified loser-pay model.  Requiring the loser of the lawsuit to bear not only their own legal costs but also the costs of the winning party would mean that the financial risk of bringing any dispute to court for resolution would be exceptionally high.  Indeed, it might be viewed as being such a high risk that it forecloses practical access to the courts.

Therefore judges will usually only order the losing party to pay a portion – generally about one third – of the winning party’s legal bill. This partial cost-shifting increases access to the legal system, because it allows winning parties to be indemnified for their litigation costs somewhat without dealing a paralyzing costs blow to the losing party.

It is important to realize that if winning comes at a very high legal cost (professional legal fees) relative to the financial gain of the win, you may have won the battle but still lost the war. Your legal win can easily be over-ridden by the legal fees that you must ultimately pay to your own lawyer.  In other words, even when you win the case, you might lose financially.

For complicated or highly adversarial cases and those in higher courts, you may still represent yourself (called “pro se”) and this trend is increasing. The law allows judges almost unfettered discretion to order that disbursements and legal fees be paid by the losing party.  Usually, the shifted fees will be based on an itemized schedule corresponding to the amount in issue in the litigation.  This schedule is found in each province’s Rules of Court.  The basis of cost-shifting is referred to as “party and party” costs.

In rare cases, the judge will decide that a party should be indemnified for court and legal costs on a “solicitor and client” basis.  This is to say that the other side is ordered to pay the full legal bill.  Solicitor and client costs can also be used to sanction a party or lawyer who has acted egregiously in the litigation in some way.

Recently, the Ontario Court of Appeal upheld a decision that ordered Toronto lawyer Paul Slansky to personally pay $84,000 in costs awarded against his “vexatious” client.  In her decision, the trial judge wrote: “Mr. Slansky counselled the plaintiff or otherwise allowed his client to proceed with a series of unmeritorious steps and to take unreasonable positions to achieve goals in this action.”  She applied Rule 57.07 of the Rules of Civil Procedure which permits such orders against lawyers when they cause “costs to be incurred without reasonable cause or to be wasted by undue delay, negligence or other default.”  Slansky was also ordered to pay a further $30,000 in costs related to the appeal.  Some have argued this could discourage lawyers from representing controversial clients and from advocating unpopular positions in court especially in relation to difficult cases.  Others view it as a hardy example of the enforcement of lawyer ethics and civility in the practice of litigation.

Legal Aid

Governments may cover the costs of legal representation for Canadian citizens who otherwise cannot afford it for essential legal services as family law, criminal law and immigration law.  However, many poor Canadians are refused legal aid because the means testing extends to only the lowest income individuals and only to these limited domains of legal services.  Legal aid is not available for civil cases such as wrongful dismissal, car accidents and collecting a debt as in a landlord and tenant dispute.

Pro Bono Publico

Lawyers have an ethical duty to devote a modest portion of their time and effort toward pro bono work.  Pro bono publico is Latin, meaning “for the public good.” Lawyers may offer pro bono work to whomever they choose.  There are also programs to match lawyers with clients in need of their services.  In 2007 the Law Society of Alberta created a non-profit organization,  Pro Bono Law Alberta, to act as a liaison between lawyers offering pro bono work and indigent clients.

Pro Bono Law of British Columbia accepts invoices of $2,500 in disbursements.  Lawyers can more easily offer free services to those in need, because basic expenses required to practice this law are covered.

Conclusion

This article is about the law of costs and the high cost of law which can effectively close the courthouse doors to average low-and middle-income earning Canadians.  The reality of more people representing themselves today was acknowledged in the last iteration of procedural rules in Alberta.

The new Alberta Rules of Court state that “[i]ndividuals may represent themselves in an action.  Judges may permit another person to assist the self-represented party “in any manner and on any terms and conditions the Court considers appropriate,” including offering quiet suggestions, note-taking, support, or addressing the particular needs of that party.  Such assistance may not be “disruptive” and cannot amount to a layperson practising law.

The new Rules also now allow you to retain a lawyer for limited purposes.  This enables you to assume the parts of the case that you feel comfortable with and designate a lawyer to handle other more technical and complex parts.

Apart from these minor adjustments, professional service fees of lawyers continue to be a major impediment to accessing the civil justice system for many Canadians.  The high cost of law can be used to wear down financially weaker opponents or foist unfair settlements on them.

The law is a high cost endeavour. Even in light of these law of costs measures, you may discover it is still too expensive to pay to play in the Canadian justice system.

Authors:

Peter Bowal
Peter Bowal
Peter Bowal is a Professor of Law at the Haskayne School of Business, University of Calgary in Calgary, Alberta.
 

John Rollett
John Rollett earned a BComm at the Haskayne School of Business, University of Calgary.
 


A Publication of CPLEA

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