Legalese: March 2014

Hiring lawyers to pursue a claim through the court system can be daunting. Everyone is aware that choosing to pursue a claim through the court system comes at a cost and questions usually arise as to lawyer fees, disbursements and costs associated with court proceedings.

The traditional manner in which lawyers charge clients is based on time spent. In this scenario, the lawyer will work on your case for you and keep track of the time he or she spends on it. The system is really not that different from how your mechanic would charge you to fix your vehicle. Disbursements (expenses incurred by your lawyer in the provision of legal services, such as courier fees for example) and taxes are additional to the hourly fees.

Hourly fees for lawyers in Canada vary greatly depending on where you are located, the type of legal matter and the expertise of the lawyer. Generally, more senior counsel have higher hourly rates. In Manitoba, articling student hourly rates are in the range of $150 while senior counsel on complex matters may charge more than $500 per hour.

Depending on the nature of your case, you may not like the hourly rate scenario but for many legal files it is the best way to charge. For example, if you were wanting to consult an attorney in order to draft a new employment agreement for your company, the best way to engage counsel is probably by the hour. Your lawyer will be able to give you a rough estimate of the amount of time it will take, and the engagement is not open ended.

Pursuing a claim through the court system, however, is trickier. It is impossible to give a good estimate of how long it will take, mainly due to the fact that you will have an adversary and you don’t know how your adversary will behave. Moreover, don’t forget that you could lose your case entirely. In that scenario, not only have you paid your lawyer for all of the time spent, but you get nothing from your opponent.

When pursuing monies through the court system you are better off in most cases agreeing with your lawyer on an alternative system of compensation. In Manitoba, lawyers are permitted to charge the clients a percentage of the amount recovered (a “contingency” fee). In other jurisdictions, this is not permitted. A contingency fee arrangement with your legal counsel is simply this: your lawyer agrees not to charge you fees by the hour. Instead, the lawyer agrees to accept a fixed percentage of the amount recovered through his or her involvement. There are other terms and conditions which must be addressed, but that is the essence of the contingency arrangement.

Contingency agreements must always be in writing. The benefit is that the client knows with certainty the amount which he or she will pay to their lawyer in the event of success. If you lose the case, then no fee is payable. In jurisdictions where contingency files are not permitted, there may be other options open to you, such as flat fee arrangements. These still give certainty of cost to you, as a client, and your lawyer may be willing to perform certain legal matters for a fixed fee.

One of the main advantages of contingency files is that cases which normally would not be pursued have the potential to proceed. For example, if you have a case worth $5,000 you are probably not going to want to pay a lawyer $5,000 in time, just for the chance to maybe win your case. In that scenario, you would need to win your case and recover the judgment from your opponent, just to break even (not to mention all of your time, effort and aggravation). If you had an arrangement with your legal counsel, however, whereby the lawyer took a fixed percentage of your winnings, but you only paid your lawyer if you won, then you would be more likely to pursue that claim. What would you have to lose? If the lawyer doesn’t get you your money, you don’t pay your lawyer. Seems fair to me.