Billing without Bilking: Regulating Time-Based Legal Fees

Abstract

Forthcoming, Dalhousie Law Journal. A lawyer should be a loyal ally for each client, and should never exploit a client for personal gain. Legal services regulation should prevent such exploitation. It should also create certainty, and foster trust in every lawyer-client alliance. When it comes to time-based legal fees, Canadian legal services regulation is not yet doing its job. Throughout Canada, rules say that legal fees must be “fair and reasonable,” and “disclosed in a timely fashion.”1 These fine sentiments are supported by long lists of factors to be considered when a legal fee is called into question and then assessed retrospectively. That is, more or less, all that the codes of conduct have to say about time-based legal fees. What we lack are clear rules and efficient procedures to determine what specific billing and disclosure practices are -- and are not -- “fair,” “reasonable,” and “timely.” The status quo gives unethical lawyers room to take advantage of inexperienced clients in niches such as family law, estate law, and employment law, in which time-based billing is common.2 It also subjects ethical lawyers, and their clients, to unnecessary distrust and disputes regarding fees. Reconciling the obvious need to charge and collect fees with the ethical obligation to practice “honourably and with integrity” raises complicated ethical issues,3 for which regulators should offer more concrete guidance. Without fixing prices or curtailing flexibility in billing arrangements, regulatory reform can create a much fairer field for agreements between lawyers and clients about time-based fees. Part 1 of this article considers first the beginning, then the middle, and finally the end of a typical retainer involving time-based billing and an inexperienced client. At each of these three junctures, we find ethical ambiguity creating both opportunities for exploitation and conflicts of interest. The vagueness of the rules requires a lawyer to unilaterally make decisions that increase or decrease the client’s bill. This creates a conflict between the lawyer’s financial self-interest, and their fiduciary obligation to put the client’s interest first. Part 2 argues for more detailed regulation of time-based legal fees, in order to prevent exploitation, create certainty, and eliminate fee-related conflicts of interest that undermine trust in the lawyer-client relationship. Wherever possible, the best practices for time-based billing already used by ethical and conscientious lawyers should be enshrined in regulation. Drawing on regulatory theory, I argue that a move from the current vague standard to more precise rules would create certainty, without significantly constraining flexibility. Part 3 turns from the rules to the procedure that is meant to enforce them. I argue that the court-based process for identifying and remedying unethical billing is inaccessible, inconsistent, and vulnerable to strategic abuse by both lawyers and clients. Making law societies fully responsible for regulating legal fees would make the system more holistic, accessible, and consistent.