Chapter 8 - Cost Of Civil Justice

8.1 - Cost Research

As discussed in our First Report [1] , the civil justice system costs money. There are both institutional and individual litigant costs of civil justice. Institutional costs include those necessary to keep the civil justice system operating: the cost of facilities; judicial and administrative personnel; the salaries, benefits and support networks necessary for them to perform their functions; and services, equipment and technology. There are also costs to litigants. As users of the civil justice system, litigants have to pay the direct costs relating to their litigation, including legal fees and disbursements, such as administrative and witness fees.

At present, there is insufficient data available on these costs and little analysis. This is true not only for Ontario but for most other jurisdictions. Without this information, it is difficult to assess what is a reasonable and acceptable "cost" of civil justice and whether the public and litigants are receiving the best value for their expenditure on civil justice. Moreover, it is important to have such information available to guide and inform future reform choices.

In our First Report, [2] we recommended:
[T]hat a research project be commissioned to examine and analyze the question of the "cost" of justice, both from an institutional or systemic perspective and from the perspective of individual litigants.

The Review feels strongly that this research be undertaken and wishes to reiterate its recommendation that such a project proceed. It had been proposed that this research project be undertaken by the Ontario Law Reform Commission. Prior to beginning the study, however, the Commission received news of its discontinuance. In light of these circumstances, we propose that the Ministry of the Attorney General be charged with the responsibility for setting up an appropriate Task Force or Working Group, with representation from the Judiciary, Bar, Ministry and Public to conduct this study.

RECOMMENDATION

We recommend that the Ministry of the Attorney General, in conjunction with the Judiciary, the Bar, and the Public, establish a Working Group to study the question of the "cost" of justice, both from an institutional perspective and from the perspective of individual litigants, with a view to completing a report within one year of the creation of the Working Group.

In making this recommendation, we would like to stress the importance of addressing the issue of the cost of lawyers' fees and, in particular, how those fees are arrived at. This was also discussed in our First Report. [3] Clearly, these costs can be a barrier to individual litigants in accessing the civil justice system. Many of our recommendations, both in our First Report, as well as this Supplemental and Final Report, will help to lessen the amount of legal fees borne by litigants through the earlier resolution of litigation and more streamlined procedures. Nonetheless, we continue to believe that the way legal fees are arrived at requires examination. The "billable hour", which currently appears to be the cornerstone of legal billing practises, is seen by many as resulting in legal fees that are unreasonably high. The Task Force suggests there are other alternatives, such as "results based" or overall value for services based billing, that should be considered by the legal profession. Accordingly, the Task Force makes the following recommendation.

RECOMMENDATION

We further recommend that the Working Group include in its study, in particular, the question of alternatives to the billable hour as a mechanism for establishing lawyers' fees, including the concept of "results based" or overall value for services based billing.

8.2 - CONTINGENCY FEES

Introduction

One of the sentiments we heard repeatedly, and which we reiterated throughout our First Report, is that civil justice costs too much money. For many members of the public it is unaffordable; unaffordability breeds inaccessibility. While we believe the implementation of our vision will reduce costs -- as both case management and alternative dispute resolution (ADR) have the potential to save parties money -- access to justice may still be a problem, particularly in the context of the current legal aid situation.

The public believes that the high costs of civil justice are due to a number of factors including the legal profession's billable hour approach to fees for service. During our consultations we heard both dismay and frustration expressed over the apparent lack of alternatives to this approach. One alternative billing practice frequently recommended to us was contingency fees.

In our First Report we described the results of a survey of the private bar which we commissioned in order to gain information on the costs to individual litigants. Based on the results of this survey, we concluded that lawyers' fees can be a barrier to access. This conclusion, coupled with the public's overall frustration, led us to determine that the profession needs to re-examine the way in which it charges its clients. In particular, we feel that consideration should be given to:

  • examining alternatives to the billable hour; and
  • whether contingency fees should be permitted.

With respect to the latter, we concluded in our First Report that "it is time to re-visit the concept of contingency fees as a possible means of improving access to justice". [4] We noted, however, that there are a number of issues which need to be addressed, including: [5]

  • whether contingency fees would increase access to civil justice;
  • whether they would result in an overall cost saving;
  • whether matrimonial and criminal matters should be excluded;
  • what safeguards need to be put in place for clients, with respect to the reasonableness of the fee; and
  • whether there should be limits on the percentage or recovery that may be agreed to as a fee.

In order to address these issues, as well as others with respect to legal fees, we recommended in our First Report that: [6]

[A] working group be established, in conjunction with the Law Society of Upper Canada, for the purpose of addressing the issues involving legal fees and making recommendations to the Civil Justice Review in that regard for the purposes of its Final Report.

This Working Group has not yet been established. However, we would urge that these general issues regarding legal fees be included in the research project on the larger issue of costs recommended earlier.

History of the Debate on Contingency Fees

The issue of contingency fees has been considered on numerous occasions with a general consensus in favour of them. In 1988, the Canadian Bar Association - Ontario released a report on contingency fees in which it concluded that, on balance, such an arrangement should be available in Ontario. [7] The Special Committee on Contingency Fees of the Law Society of Upper Canada also released a report in 1988 in which it recommended that contingency fees be approved in principle. [8] Convocation, which is the governing body of the Law Society and the legal profession, approved this recommendation. In 1992 the Special Committee released another report recommending a particular contingency fee scheme. [9]

In October, 1995, a Private Member's Bill was introduced in the Ontario Legislature which, if enacted, would permit contingency fee agreements for civil, non-family proceedings. [10]

Other Jurisdictions

At present, Ontario is the only provincial jurisdiction which does not allow contingency fees, although a form of contingency fee is available to representative parties in class actions. [11] The Canadian Bar Association of Ontario commented on this anomalous situation: [12]

[I]s there not some equality right that is being infringed in terms of access to justice for members of the public in Ontario. Simply living in Ontario denies a client the right to retain a lawyer on a contingent fee basis. The Ontario resident is, therefore, denied an available access to justice option that exists for residents of all other jurisdictions in Canada.

Context of the Debate

The arguments often articulated in favour of contingency fees are:

  • they will increase access to justice;
  • they will save clients money;
  • Ontarians should have the same right to enter into such arrangements as other Canadians; and
  • legal aid expenditures may decrease.

The arguments against contingency fees focus on the potential for abuse. They include the contentions:

  • that the lawyer will become an "interested" party with an attendant motivation to win at all costs;
  • that contingency fees may lead to undue influence and excessive fees;
  • that they will lead to less incentive to settle;
  • that damage awards will be unduly inflated; and
  • that there may be an increase in frivolous litigation.

Both sides of this debate have ardent supporters and it is difficult to decide conclusively which approach is the correct one. As stated in the C.B.A.O. Report: [13]

In approaching this subject the reader of this report should appreciate, as this committee has, that to a great extent 'the whole subject of contingent fee contracts approaches the theological'....
There is a lack of systematic studies and empirical data to support either side of the debate. Perhaps the majority concrete fact that this province has to deal with is that all of the other Provinces and Territories in Canada permit contingent fee contracts in varying forms and with varying controls. Their experiences would certainly seem to indicate that many of the fears and concerns that gave rise to the original prohibition of contingent fees in Canada are unrealistic in terms of modern Canadian society and the practice of law in that society.

Despite the concerns, the current opinion appears to be in favour of allowing contingency fees so long as there are safeguards in place to protect the public.

Necessary Safeguards

While we accept that, on balance, contingency fees have merit, we are aware of the potential for abuse and the need for adequate safeguards. A review of the legislative schemes in other provinces reveals that there are a number of options, including:

  • imposing a standard form contract;
  • granting a right of review for all contracts;
  • requiring all contingency fee agreements to be filed with the court;
  • stipulating the form the agreement must take -- for instance, that it be in writing and signed by the client and the lawyer; that it describe the contingency on which payment is to be made; and that there be notice to the client of their right of review;
  • prohibiting contingency fees in certain types of actions, such as criminal and matrimonial cases;
  • imposing a cap on the percentage allowed; and
  • having review mechanisms in place to ensure the reasonableness of the fee.

As illustrated in the chart included as Appendix 3 to our Report, provincial jurisdictions take differing approaches in this area. Based on our consideration of this information, the Review makes the following general recommendation.

RECOMMENDATION

We recommend that contingency fee agreements be permitted in Ontario in all matters except criminal and family proceedings. We further recommend that a standard form agreement be used, which includes notice to the client of their right to have the agreement reviewed by the Court.


Footnotes:
[1] First Report of the Civil Justice Review (Toronto: Ontario Civil Justice Review, March 1995), Chapter 11 [hereinafter "First Report"].
[2] Id., at p.131.
[3] Id., at pp. 145 - 149.
[4] Id., at p.148.
[5] Id.
[6] Id., at p.149.
[7] Canadian Bar Association - Ontario, Opening Doors or Stirring Up Strife - The Implementation of Contingent Fees in Ontario (March 15, 1988) [hereinafter "CBAO Report"].
[8] Law Society of Upper Canada, Report of the Special Committee on Contingency Fees (May 27, 1988).
[9] Law Society of Upper Canada, Report of the Special Committee on Contingency Fees (February 28, 1992).
[10] Bill 3, An Act to amend the Solicitors Act, 1st Sess., 36th Leg. Ont., 1995 (1st Reading October 2, 1995).
[11] See the Class Proceedings Act, S.O. 1992, c.6, s. 32.
[12] CBAO Report, supra, note 7, at pp. 33 - 34.
[13] Id., at pp. 11 - 12.

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