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Welcome everyone.  This is Amer Mushtaq from YouCounsel.

Today we will talk about how do lawyers charge their fees in Canada. Before we begin, there is the usual disclaimer that this course is not legal advice.  If you have any specific questions, you must contact your own lawyer or paralegal or the lost sight of opportunity for and for its.

Legal fees usually have two components: (1) one is the legal fees itself, which is paid to the lawyer and (2) the second component is disbursements.  Disbursements are all of the costs associated with your legal case.

Let’s talk about disbursements.  One of the things, that we can give, as an example of disbursements, is court fees.  For instance, if you commence a court action in the court you will have to provide certain fees for the commencement of that court action.  Similarly, there are other instances within the court action where you may have to provide some fees along with it.  For instance, if you are bringing a motion, there are fees for a motion.  If you are setting your matter down for trial, there are fees for trials.  So court fees are part of disbursements that clients are responsible for.  Similarly, process server fees—process server is a glorified term for a high-end courier if you call it that. If you have watched any movies where you see that somebody is at a restaurant or a club and a person taps them on the shoulder.  When the person turns around he says John Smith? And the answer is yes.  Then they hand over certain papers and say you have been served.  The person who is doing that role of serving documents is called a process server.  Process servers do a variety of things for law firms and their clients.  They file documents with the courts, serve it on different parties, get records from the court and so on and so forth.  They charge their fees which are part of a client’s disbursements.

Similarly, there are fees like agency fees.  For example, if you go to mediation and you have to hire a mediator the cost of that will come under agency fees.  In medical malpractice cases you may be getting your medical reports from doctors and other sort of clinics and those may fall under agency fees as well.  Any fees that you pay to some third party e.g., when you hire actuaries or damage consultants to provide expert evidence to the court and there may be fees associated.  All of those come under the umbrella of “agency fees”.  Then there are smaller kinds of fees e.g., for copying, binding, faxing and long distance calls.  The key thing to know here is that disbursements are costs that are associated with your particular case—depending upon what it is.  Those costs are the responsibility of the client. Mostly law firms obtain a retainer from the client and they use that money to pay for the disbursements as they go along or they can ask the client to pay directly to the vendor for those disbursements.

Coming to legal fees, the fee structure is generally of three kinds.  (1) hourly fee structure; (2)  flat or block fees or fixed fee structure; and (3) is contingency fee structure.  I will cover each one by one.  Hourly fee as the name implies is based upon the number of hours that the lawyer works on your case and then charges it accordingly.  For instance, if a lawyer charges $400 an hour and he works on your file for two hours—then the legal fees are $800 plus tax.  Hourly fees are captured usually at one tenth off an hour.  When you see a notation of .1 as the time entry for the lawyer, that indicates that the lawyer has worked on that specific tasks task for six minutes or less.

In hourly retainers you will see quite detailed invoice statements from the lawyer indicating the date and the time that the lawyer worked on your specific matter i.e., what dates that the lawyer worked on your file and what specific tasks did he or she perform in that file, then how long did it take him to do that.  Those are recorded as the lawyers do their work.  They have a software in most law firms where they keep on recording and then once the invoice is generated all of that information is already there. Hourly fees are not dependent upon results.  If the lawyer has worked X amount of hours—whether you win the case or you lose the case—you are bound to or are liable to pay those fees.

Second model is the flat fee / block fee model which is now becoming more popular primarily because clients would like certainty in terms of what cost they will incur for a specific matter.  These, as the name implies, are fixed fees and mostly they are coded per specific task.  For instance, in employment law practice if we are drafting a statement of claim or statement of defense on behalf of the client, we will and the client is interested in obtaining block fee quote, then we will advise the client based upon the amount of work that we will have to do, that this specific task will cost $X amount.  Those tasks are then listed in the retainer agreement along with the fees that will be charged.  The retainer agreement also covers some of the unanticipated costs that may arise—for instance if the other party brings a motion, which was not part of the usual court process, then the lawyer may advise that if that happens then $X amount will be charged for that particular task.  The main function of block or flat fees is that they provide certainty both to the client and to the lawyer in terms of the cost of the specific work that is being done.  Again, like hourly fees, these are not contingent upon results as long as the lawyer has performed the work, the success of that matter is not relevant in this case and the lawyer is entitled to the fees that are agreed upon.

Third model is the contingency model.  As the name implies, it is contingent upon the results.  Most contingency retainers indicate that lawyer will only get their fee if the client is successful either in a settlement or in a judgment.  If the client is not successful, then there are no fees towards the lawyers.  In contingency fee models the lawyer takes significant risk on the file.  Obviously his or her analysis of the case is that strong that he or she is willing to put his / her own time and effort with hopes that there will be some fees generated because of results that the lawyer will get achieve.  Contingency fee model is usually based upon a percentage of success.  It could range anywhere from 25% to 35%.  Once the settlement is achieved or the judgment is awarded that percentage is paid as legal fees.  Important thing to keep in mind in contingency fee retainer is that if your matter goes to trial (all the way to trial) and you are unsuccessful / you lose the case, the court will award some legal fees against you to be paid to the other side.  If that is the case, then you the client is responsible for payment of those fees. The lawyer is not responsible for paying fees to the other side.  The only risk that the lawyer is taking is upon only his fees but not on the other side’s legal fees.  If you lose, then you have the burden to pay the legal fees of the other side.  Finally, keep in mind that all of the disbursements that are incurred even on a contingency fee file are also client’s responsibility because these are costs associated—these are not monies that are to be paid to the lawyer, but are paid to the vendors and third parties.  Those are always the client’s responsibility—whether they pay at the outset or whether they pay towards the end, depending upon which law firm and what kind of case you have.  That is the contingency fee model.

Those are the three major models that are in place.  I want to go back to the block fee model one more time.  This has become popular.  As I indicated, one of the primary reasons why it is so popular now and increasingly so—and probably as you know, still underutilized is because Law Societies across Canada have generally now created this option of hiring lawyers on a specific task basis.  It is called unbundled services or limited scope retainer and I have talked about in a separate lecture on self-representation.  You can find more information on that.  Essentially the idea is that because the legal fees or the costs of retaining a lawyer have become so exorbitant it is so hard to retain a lawyer on a long term basis.   Depending on the length of the entire file you can actually choose when you want to bring in a lawyer to do a specific task and then just pay them accordingly.  Because there is now the option of unbundled services and specific limited scope retainers you can actually negotiate flat or block fees for that specific task and then have the lawyer represent you only for that part of your case.  Then you can continue to perform the representation of your case on your own or you can have the lawyer represent you for the entire length and still negotiate the flat fee.  This does give you some certainty.

Let’s go back to now the last slide that I want to talk about which is the selection of lawyers.  There are two things that obviously the clients want from a lawyer—(1) they want the certainty of the legal fees i.e., they want to know exactly how much money they will incur with respect to a matter and (2) they want some certainty or guarantee in terms of the results that will be achieved.  I want to talk briefly about both things certainty and legal fees.  It is something that obviously people want—they want to know how much they’re going to spend—if you are buying a pair of pants you want to know exactly how much you’re paying.  You do not want to be in a situation where the manufacturer says, “well it depends on how often you use the pants” and “you know how you use them” and what not—and our fee or our costs for the pants will be based upon that.  It is an odd way to pose that—because the legal structure is so different.  The certainty is possible in some cases while in some cases not.  I mean, you get absolute certainty when you have block fees because you know how much you’re incurring. 

But, even in Block fees there are unanticipated steps that may happen, not because of you, but because of the other parties—especially in court actions.  Even though you know with certainty exactly how much you will pay for that action—an unanticipated action, it may still increase the overall cost of your legal action. Certainty is achievable.  It is more and more possible.  In my practice I am pretty confident about every single step and how much it will cost my client.  I can provide certainty but sometimes it’s not possible to do so.  The second component is: results.  You be wary of any lawyer who guarantees success of any kind because the simple fact is when you have a court action, it is a judge or a panel of judges who are going to decide and they may decide against you no matter how strong your case is.  There is no guarantee.  A lawyer can always indicate to you that based on previous cases and based upon jurisprudence your chances of success is very high i.e., 99% or 99.9% but it can never be one hundred percent guaranteed—because the lawyer himself or herself is not the decision maker, somebody else is.  And also depending upon how your case performs—you may have a bad day at court and your testimony may not be as strong as your case is and that may jeopardize the success of your case.  So there is no guarantee of results.  Yes, the lawyer can advise what are the chances of success and your chances of success could be very high.  Those are sort of the two cautions. 

With that in mind, I want to talk about whether you want to hire a lawyer whose legal fees or hourly rates or contingency fees are low vs. a lawyer who charges a lot more.  What role should play in your decision to hire lawyers?  Obviously, I completely agree with you that the cost of legal services are a strong component for a client to decide which lawyer to hire but I want to give you a word of caution that hiring a lawyer is no different than hiring a plumber or hiring a general contractor.  You would not simply hire a plumber or a contractor because the rates that that person is offering are the cheapest.  The same principle should apply in hiring a lawyer.  My recommendation is that fees should not be the sole factor for you to decide whether to hire the lawyer or not.  It should be one of the factors.  You should obviously get referrals, get some understanding of whether the lawyer has expertise in what you want, whether the lawyer will be suitable for your kind of case and obviously whether the costs are within your reach.  It should be one of the factors but not the sole factor.

Hopefully this lecture has given you some insight on how lawyers are retained and how they charge their legal fees in Canada.  Look forward to any comments and anything else that you want to explore in this area.  Further please send us a comment or send us a note and we’ll be happy to include that in our next lecture.  Thank-you for watching.