Legal fees

The cost of going to Court is famously high. Lawyers have been blamed for that cost for many years – I used to have a wonderful 19th Century Cartoon where two skinny and bedraggled men pulled on either end of a cow marked “litigation” while a fat lawyer milked the cow (and presumably got the cream). Echoing that concept Bejamin Franklin is supposed to have said “A countryman between two lawyers is like a fish between two cats.” A couple of years ago, the Chief Justice of Canada said the “price of justice should not be so dear” when she was told a three day civil trial in Ontario costs about $60,000.

And it is true that legal costs are enormous. The three day civil trial is a rarity now – even fairly straightforward matters take a week and as a default it is best to assume an even moderately complex matter will take at least two weeks. If experts reports are needed the cost of taking a matter to trial can easily break into the six figure range.

But is that cost because lawyers are making too much money? The question really becomes “what is a fair income for a lawyer and how does that turn into the hourly rate that is the basis of most legal billing?” Put otherwise, what is a fair amount to pay for a lawyer’s time? A survey from 2005 said the average hourly rate for a lawyer with 10 years experience from $170 to $260, depending on the province.

Lawyers are often compared to doctors and dentists in terms of professionals. Certainly both professions require post graduate degrees and intensive practical training before qualification. Doctors in Canada, at the GP level, tend to make around $100,000 a year while specialists can make up to $250,000 yearly. Dentists seem to make a bit more than general practice doctors with annual incomes in the $125,000 range. As a control, postgraduate degree or diploma holders made $72,500 annually as an Ontario average for 2006.

Lawyers seem to make more or less the same as doctors or dentists. Although there is a range, a lawyer with 10 to 12 years experience in a midsized law firm would be expected, on average, to make $135,000 annually. More junior lawyers, say up to three years of experience, would make less, around $77,000 annually. Of course, some lawyers (particularly in large commercial law firms) make considerably more but there are many lawyers (often serving a poverty based clientele doing criminal or family work) who make considerably less.

Another point often overlooked is that law, in some ways like medicine, is a very high stress profession. People who are coming to lawyers are seldom in the best and most amiable frame of mind. Lawyers deal with upset, angry and often unreasonable people. That may explain the significant drop out rate from the profession – looking at my graduation photograph significantly more than half my graduating class stopped practicing law years ago.

All that said, from the salary numbers sought it is easy to calculate an appropriate hourly rate (I omit the calculation here but am happy enough to share it with anyone who cares for it). Assuming four weeks vacation, and the usual overhead and write offs for bad debts, for a lawyer to make $77,000 annually they need to charge at least $115/hr. To make $135,000 annually the hourly rate has to go to $200/hr. A number closer to $400/hr is required for a lawyer to get to the high end salary of a specialist doctor. This assumes the lawyer is more or less constantly busy and gives up no time to pro bono or free legal work.. Every time a lawyer does work for free (as lawyers are often urged to do by the judiciary) the paying clients have to pay more to make up the difference. Where the overhead is higher – Toronto, Vancouver, Montreal all spring to mind, the hourly rate has to be increased accordingly.

All this suggests that legal fees, on an hourly rate, are not out of proportion to the actual costs of doing business and giving a modest return to lawyers – put otherwise, lawyers hourly rates are not grossly excessive.