High Costs of Litigation
As Canadians, we do not pay medical fees directly. Instead, the physicians who treat us are paid by provincial medical insurance plans which are funded by our tax dollars. This of course is not the case for lawyers. Unless we qualify for provincially funded legal aid, which is limited to criminal and family disputes if we want legal representation we need to pay for a lawyer ourselves.
A recent survey by Canadian Lawyer magazine found that 87 percent of lawyers and law firms charge by the hour for their legal services: Hendry, Mallory, Priced for Value, Canadian Lawyer, June 5, 2017.
Hourly rates vary by experience, firm size, geographic region, and the type of law involved. Lawyers who represent clients in court (trial lawyers) can charge hourly rates in excess of $1,000 per hour. Of course, not all of those fees end up in the lawyer’s bank account – the lawyer must maintain and staff an office. However, that is little comfort for the client who must pay the fees.
To make matters worse, in a typical law firm, lawyers receive payment up-front in stages as the lawsuit progresses. These up-front payments are called retainers. Lawyers have learned from experience that it is much more efficient to get paid upfront than it is to collect fees after the fact. The retainer is set based on the number of hours the lawyer expects to devote to a particular stage of the case. As the lawyer works on the case he or she keeps track of time spent and periodically renders a bill to the client.
The retainer funds are then used to pay the bill. The client must replenish the retainer for the next step in the case and so on. The lawyer has a right to refuse to do any further work on the case until the retainer is paid. The larger and more complex the case the more hours the lawyer will spend and the higher the bill will be.
In 1994 the Supreme Court of Canada acknowledged that the cost of hiring a lawyer was a barrier for most people: “Truly litigation can only be undertaken by the very rich or the legally aided. Legal rights are illusory and no more than a source of frustration if they cannot be recognized and enforced” – Coronation Insurance Co. v. Florence,  S.C.J. No. 116 at para. 14. The above-noted survey confirms this. It found that the average legal fees charged for preparing for a simple one-day trial was between $15,000 and $20,000.
The problem is only magnified in large and complex cases which require a great deal of time and skill on the part of the lawyer. Justice Lang of the Ontario Superior Court of Justice found that birth trauma cases fall into this group: “This was a medical malpractice/compromised baby case. By its nature, it was a complex procedure of great importance to the litigants involving a substantial claim. Also inherent in the nature of the action, it carried with it significant risk.” – Grass v. Women’s College Hospital, 2004 CanLII 19636 (ON SC) at para. 14.
The Solution – No Recovery No Fee
Fortunately, Canadians across Canada are now able to hire experienced lawyers who are prepared to work on a contingency fee basis (no recovery, no fee) rather than the traditional pay-as-you-go model. Under this arrangement, the lawyer will not charge legal fees unless funds are actually recovered for the client. Instead, the lawyer and client agree up-front that the lawyer will charge a fixed percentage of the recovery.
The Supreme Court of Canada recognized the importance of contingency fees as a way of facilitating access to justice: “The concept of contingency fees is well established in the United States although it is a recent arrival in Canada. Its aim is to make court proceedings available to people who could not otherwise afford to have their legal rights determined. This is indeed a commendable goal that should be encouraged …”- Coronation Insurance Co. v. Florence, supra. at para. 14. However, it was only in 2002 that Ontario paved the way for contingency fee arrangements in Ontario, the last jurisdiction in Canada to adopt contingency fees: McIntyre Estate v. Ontario (Attorney General), 2002 CanLII 45046 (ON CA), at para. 56.
Regulating Legal Fees
Each jurisdiction in Canada has rules and regulations which govern lawyers and the fees they charge. All fees charged, including contingency fees, must be reasonable taking into account a number of factors. On its website the Law Society of Ontario lists several of these factors:
- the time and effort required and spent;
- the difficulty of the matter and the importance of the matter to the client;
- whether special skill or service has been required and provided;
- the amount involved or the value of the subject matter;
- the results obtained;
- fees authorized by statute or regulation;
- special circumstances, such as the loss of other retainers, postponement of payment, the uncertainty of reward, or urgency;
- the likelihood, if made known to the client that acceptance of the retainer will result in the lawyer’s inability to accept other employment;
- any relevant agreement between the lawyer or paralegal and the client;
- the experience and ability of the lawyer or paralegal;
- any estimate or range of fees given by the lawyer or paralegal, and
- the client’s prior consent to the fee.
Most of these factors have been cited by courts when approving contingency fee agreements in specific cases. Typically, contingency fees of 35 percent have been routinely approved. Higher fees have also been approved in some complex, high-risk cases.
Courts have acknowledged that in some cases the fee charged based on a percentage may be higher than the fees that would have been charged had the lawyer billed by the hour in the traditional method. Fees above the hourly rates have been approved as justified given the substantial risk taken by the lawyer and the possibility that in other cases the lawyer may not receive any fees at all. The British Columbia Supreme Court wrote in 1986: “A lawyer who takes a great risk for a client deserves to be handsomely rewarded if successful because, in another case, he may take a great risk but fail. By a great risk, I mean not only investing weeks, perhaps months, of work but also putting up substantial disbursements in a case that is fought hard by the other side.” – Usipuik v. Jensen, Mitchell & Co.,  3 B.C.L.R. (2d) 283.
Out of Pocket Expenses – Disbursements
It is important to distinguish between legal fees and disbursements. Disbursements are out-of-pocket expenses related to the case which the lawyer pays. In birth trauma cases disbursements can amount to hundreds of thousands of dollars and the largest disbursements will be payments to experts. As explained in other articles on this site, experts are essential to a successful birth injury case and the cost of the reports and attendance at trial for a single expert can amount to tens of thousands of dollars.
Almost all birth injury lawyers charge for disbursements in addition to the legal fees to which they are entitled under their contingency fee agreement. In other words, reimbursement for disbursements is not included in the contingency fee. Policies differ between lawyers when it comes to disbursements and may even vary within an individual law practice depending on the case.
Some lawyers expect the client to reimburse them for disbursements as the case progresses while others are content to wait until the end of the case to be paid their disbursements. Others encourage clients to finance disbursements with litigation loans. With a litigation loan, the client borrows money at a substantial interest rate but is only required to repay the loan (and the interest) if and when the client successfully recovers compensation from the defendant.
The litigation loan company shares the risk of losing too and usually relies on the lawyer’s assessment of the merits of the case in deciding whether to loan money for disbursements. It is often hard to obtain litigation loans for medical malpractice cases because of the high risks associated with these fiercely defended cases.
Contingency Fee Agreements
Each jurisdiction requires contingency fee agreements to be set out in writing and signed by both the client and the law firm. As you may expect, the percentage to be paid to the law firm must be set out in the agreement. The agreement will also deal with disbursements and other matters relating to the solicitor-client relationship, such as what happens if the client terminates the lawyer’s services.
Each jurisdiction has its own rules as to the formalities required of a contingency fee agreement. Ontario, for example, requires that certain matters be set out in the agreement – like the right of the client to have the fees reviewed by the court. Nova Scotia requires that the contingency fee agreement be placed in a sealed envelope for safe-keeping until such time as a court is asked to review it.
You can find the requirements for a valid contingency fee agreement that apply to you on the website maintained by the provincial law society in your province. You should feel free to ask questions of your lawyer about the contingency fee agreement and seek advice from an independent lawyer to make sure you understand the terms of the agreement.
In order to ensure that fees charged under contingency fee agreements are reasonable, clients are able to ask the Courts to review fees charged by a lawyer. Adults without cognitive impairments can decide for themselves whether they wish to have a judge review legal fees in their own case. However, for infants and adults under disability who are unable to manage their own financial affairs, a court review of legal fees is mandatory upon the settlement of a case.
In Nova Scotia, for example, Civil Procedure Rule 36.15 requires a lawyer to apply to the court for approval of his or her fees supported by an affidavit setting out the terms of the contingency fee agreement, details of what the lawyer has done, details of the disbursements incurred and an explanation of the risks incurred by the lawyer.
Since most birth trauma cases involve an infant or a person with severe intellectual disabilities, a court review of lawyers’ fees in such cases is routine.
Legal Fees When Changing Lawyers
Contingency fee agreements usually provide that if the client decides to terminate the solicitor-client relationship before the end of the case, the lawyer is entitled to be paid reasonable fees for the work performed, usually on an hourly rate basis taking into account the factors listed above. This may cause clients to think twice before firing a lawyer even when they have justified concerns about the representation being received. They are subject to having to pay large sums to the lawyer they want to discharge.
In practice, this rarely happens. Instead, the new lawyer will deal with the former lawyer and come to an arrangement as to the fees to be paid to the former lawyer. This usually involves the new lawyer paying the former lawyer the outstanding disbursements when the file is transferred and then paying legal fees when the case settles. The new lawyer pays the former lawyer so the client pays only one fee. All of this takes place behind the scenes and the client need not be directly involved in the discussions.
While the cost of pursuing a birth trauma claim such as with autism caused by hypoxic Ichemic Encephalopathy may seem daunting at first, a solid contingency fee agreement that clearly addresses disbursements can go a long way toward alleviating the fears some parents have in seeking justice for their injured child. When an experienced lawyer takes on a case on a contingency fee basis, it is because he or she has carefully reviewed the case and is satisfied with the chances of success. This should be additional comfort to parents considering advancing a claim.