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How lawyers and paralegals calculate their fees

Region: Ontario Answer # 862

There are three basic ways that lawyers and paralegals calculate their fees. They can charge a set hourly rate for the time they spend working on your file, a flat fee for a specific service, or a contingency fee, which is based on a percentage of the outcome of the case. Most lawyers or paralegals will ask for some payment in advance, called a retainer. They may require their clients to pay the cost of court fees and other disbursements as the proceedings unfold. You should ask questions about legal costs and disbursements before your lawyer or paralegal begins working on your case.

It is important to note that paralegals licensed by the Law Society of Ontario are only permitted to provide legal services and represent individuals in the following areas:

  • Small Claims Court litigation (up-to $25,000)
  • Traffic and other offences under the Provincial Offences Act, which are heard in Provincial Offences Court
  • Minor criminal charges under the Criminal Code, where the maximum penalty does not exceed six months’ imprisonment, and which are heard in the Ontario Court of Justice
  • Statutory Accident Benefits (SAB) claims covered under the Insurance Act, for minor injuries due to motor vehicle accidents
  • Hearings before administrative tribunals and boards (including the Landlord and Tenant Board, Workplace Safety and Insurance Board, the Financial Services Commission of Ontario, Social Benefits Tribunal, Human Rights Tribunal of Ontario, and the Immigration and Refugee Board)

Hourly fee

Most lawyers and paralegals calculate their fees using an hourly rate. This method of billing is especially common when the lawyer or paralegal cannot predict in advance exactly how much time your legal work will involve. This is particularly the case with lawsuits. The lawyer (or paralegal in certain cases) will keep track of all the time they spend working on your file, and will bill you accordingly.

There is no “official” hourly rate that all lawyers and paralegals must charge. Hourly rates, therefore, can differ greatly from one lawyer or paralegal to the next, and from region to region. Hourly rates are usually set by the lawyer or paralegal, or the law firm’s management, after considering things such as the individual’s years of experience, reputation, the “going rate” in the marketplace, and office overhead. A lawyer in a large city, for example, will have different costs to cover than a sole practitioner operating out of his or her home in a small town.

Your lawyer or paralegal will keep track of the time spent working on your file, often right down to the minute. Be aware that different lawyers and paralegals can take different lengths of time to do what appears to be the same task. Time spent can differ according to experience and the complexity of your case. Although it is often difficult for a lawyer or paralegal to predict their fees because they cannot tell in advance exactly how much time it will take, they should be able to give you an estimate of what it will cost. You can ask your lawyer or paralegal to contact you if something happens to change the estimate.

Many people, even sophisticated purchasers of legal services, are uncomfortable with an hourly rate approach. They fear that the “sky is the limit” and their legal costs will run up unreasonably. For this reason, it is very important for you to discuss fees at the beginning of the matter and stay on top of your costs throughout.

 

Flat rate

Only lawyers can represent clients in certain circumstances, such as in all family law matters, real estate, and wills and powers of attorney issues. In these cases, some lawyers charge a flat, or “fixed” fee,  for a specific task, such as preparing a will, or completing a real estate transaction. Generally, this method of billing is used when the lawyer has a good idea of how long it will take them to finish the task.

In some areas of law, such as sophisticated business financing or even property transactions in some western provinces, lawyers may also set fixed fees according to the overall value of the transactions. For example, a lawyer may charge a percentage of the value of the house you buy or sell.

A paralegal may charge a fixed fee for certain services as well, such as representation in Small Claims Court or in Landlord and Tenant Tribunal hearings, or for filing applications, or preparing or serving documents.

It is often left to the client to ask the lawyer or paralegal if a fixed fee might be negotiated for a specific matter. Even in complicated cases, such as lawsuits, lawyers may be willing to negotiate what is often called a “blended” fee – a mix of hourly rates for unpredictable aspects of the case and a fixed fee for more predictable tasks, such as preparing a Statement of Claim.

 

Contingency fees

Contingency fees are tied to the success or failure of your lawsuit or other transaction.

For example, if you have a lawyer (or paralegal in Small Claims Court) representing you, and he or she is successful in winning your claim or negotiating a business deal, they will receive a fee calculated as a percentage of what you are awarded in a court ruling or the value of what you gain in a deal. If the lawsuit or transaction fails, your lawyer (or paralegal) may receive an agreed-upon flat fee or the cost of disbursements only, or perhaps nothing at all.

Historically, lawmakers were reluctant to allow contingency fees because they feared it would encourage frivolous lawsuits since clients pay nothing at the start, and that some lawyers may only take on cases that they were reasonably certain would win. That said, paying for legal representation up-front can be prohibitive in many cases. By allowing contingency fees, people have greater access to justice, especially those who cannot afford a lawyer or paralegal and those who do not qualify for legal aid.

While contingency fees can be a good thing for the client, this type of fee arrangement should be considered carefully. The Law Society lawyers’ Rules of Professional Conduct, and the Paralegal Rules of Conduct, allow for both lawyers and paralegals to accept contingency fees, in certain circumstances. Contingency fees may not be used by lawyers or paralegals in criminal or quasi-criminal matters, or by lawyers in family law matters.

In litigation cases where contingency fees are allowed, under the Ontario Solicitors Act contingency fee agreements between the lawyer and client must be in writing. Among other things, the contingency fee rules outlined in the Act also state that the following be included in the agreement:

  • if the lawyer’s fee is to be a percentage of the amount recovered, the agreement must specify the percentage and that it excludes any amount received in respect of costs and disbursements,
  • the contingency upon which the fee is to be paid,
  • allows the client to collect full payment for an award of costs, even if it exceeds the amount payable under a contingency fee agreement, if the award is used to pay the client’s solicitor,
  • a statement that the client retains the right to make all critical decisions regarding the conduct of the matter,
  • if the client is the plaintiff, a statement must be included stating that the lawyer shall not be paid more in fees than the client recovers in damages from the lawsuit,
  • a simple example of how the contingency fee will be calculated, and
  • a description of disbursements, and a statement about whether the client is responsible for payment of the disbursements or taxes.

The Solicitor’s Act also precludes lawyers from collecting both the contingency fee and legal costs (unless approved by a judge), and gives the court the right to review contingency fee agreements.

Contingency fee agreements between a paralegal and a client must also be in writing, as per the Paralegal Rules of Conduct. While paralegals are not governed by the Solicitor’s Act, they may refer to the Act for terms to include when writing their contingency agreement.

If you and your lawyer or paralegal are considering entering into a contingency fee arrangement, investigate whether it truly is the best deal. The typical contingency fee may be anywhere from 10% to as much as 45% of what you may be awarded. You must decide if this is a fair amount in your situation. In deciding whether the percentage is appropriate, it is a good idea to consider:

  • what the estimated costs would be based solely on an hourly rate or fixed fee,
  • the complexity of the legal matter,
  • who pays for any up-front expenses, and
  • what, if anything, you may be required to pay if the case fails.

Personal injury and pro bono work

In Ontario, in some circumstances, such as personal injury cases (in which paralegals are not permitted to practise), a lawyer may agree to do the work and not bill the client until the case is over. Sometimes the lawyer will only expect to receive a fee if they are successful. Some lawyers will probably charge a fee even if their client’s case is unsuccessful, but will not ask to be paid until the case has been completed.

In personal injury, lawyers’ fees can depend on a variety of other factors as well, such as how complicated the case is and the difficulties the lawyer faced. The lawyer may also consider the final outcome of the case as a highly relevant factor.

Retainers and disbursements

In addition to your lawyer’s and paralegal’s fees, there are some additional expenses that you will have to pay. A retainer is the money you pay to the lawyer at the beginning of the case to cover some of the work and some of the expenses related to your situation. Your lawyer or paralegal will also charge you for disbursements, which are expenses such as photocopy charges, court filing fees, costs of medical reports, and the expense of hiring expert witnesses.

You should discuss your bill with your lawyer or paralegal if you do not understand parts of it, or if you want more information about how the fees were calculated.

If you have a problem with your bill

Lawyer’s bill

If you have a problem with your lawyer’s bill, and you are unable to settle the problem with your lawyer, you can have the bill reviewed by the Assessment Office of the Superior Court of Justice. You have one month from the day the bill was sent to you to apply to the Assessment Office to have it reviewed. There is a fee to apply to have your bill assessed. You must make sure that your lawyer receives a copy of both the Order for Assessment and the Notice of Appointment which provide information about the Assessment Hearing.

When the bill is assessed, an Assessment Officer will review the bill to decide if it is reasonable or if it is excessive. The Officer has the right to reduce the lawyer’s bill. As well, the Officer may decide that the lawyer’s bill is in order and you will then be responsible for the full amount of the account.

Paralegal’s bill

The Law Society does not handle disputes regarding bills charged by paralegals. Therefore, if you are unable to settle a fee dispute with a paralegal, you may submit a claim with the Small Claims Court. Currently, the Ontario Small Claims Court limit is $25,000 or less per claim.

The Law Society does not regulate the fees lawyers or paralegals charge their clients. The marketplace largely determines what the fees will be, except in the case where a lawyer’s bill is assessed and altered by the Assessment Office.

For more information regarding lawyers and paralegals rules of conduct and how they calculate their fees, refer to the Law Society of Ontario.


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