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A Study of the Costs of Legal Services in Personal Injury Litigation in Ontario

FINAL REPORT

Allan C. Hutchinson

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TABLE OF CONTENTS Introduction ................................................................................................................................................. 3

PART A -- THE REGIME OF CFAs ........................................................................................................ 3

PART B – THE REALITY OF CFAs: DATA AND STUDY ................................................................ 11

PART C – THE FAILINGS OF THE PRESENT REGIME OF CFAs ............................................... 18

PART D – SOME PROPOSALS FOR REFORM OF CFAs ................................................................ 21

APPENDIX ONE ....................................................................................................................................... 23

APPENDIX TWO ...................................................................................................................................... 30

APPENDIX THREE ................................................................................................................................. 34

APPENDIX FOUR .................................................................................................................................... 35

APPENDIX FIVE ...................................................................................................................................... 43

APPENDIX SIX ......................................................................................................................................... 48

APPENDIX SEVEN ................................................................................................................................ 113

APPENDIX EIGHT ................................................................................................................................ 191

APPENDIX NINE ................................................................................................................................... 226

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Introduction

Contingency Fee Agreements (CFAs) are now a fixed feature of the Ontario litigation landscape. However, little research or study has been done on exactly how they operate in practice, whether they advance the objectives that they were intended to achieve, and whether litigants are best served by the current arrangements. In this study, I intend to make a preliminary start to that research, set out some tentative criticisms of the CFA system as it currently operates, and, where appropriate, suggest preliminary proposals for change. It should be said at the outset that my efforts to obtain real and serious data and information about the reliance on and kind of CFAs utilized by Ontario lawyers have been frustrated at every turn. Although often divided and divisive in interests, the Plaintiffs’ Bar seems to be almost uniquely united in striving to resist any efforts to render the fee-charging process more transparent and knowable. Accordingly, this Report has been written not only without any assistance from the Plaintiffs’ Bar, but with its concerted opposition. While there is an understandable concern among the Plaintiffs’ Bar about any inquiry that is driven and funded by the Insurance Bureau of Canada (IBC), the extent of the concern has reached almost paranoid proportions in attitude and response. However, I have tried to ensure that this fact has not influenced my analysis and recommendations. In what follows, I will first outline the formal regime within which contingency fees are allowed and regulated in Ontario. The focus of this Part is to get a general and comparative sense of the legal and policy framework for CFAs. The core of the Report attempts to go behind the received picture of CFAs and get to a more realistic sense of how they actually work in practice. Next, I draw some tentative conclusions and critical observations from the available data and information. Finally, I will put forward some proposals to address the more apparent failings of the present system in order to enhance its efficiency, fairness, and transparency. Throughout the Report, the emphasis will be on understanding and improving the existing system from the point of view of the litigant-as-consumer. The challenge is to make justice more available, but at a reasonable cost so that the interests of both litigants and lawyers are fairly represented, balanced and advanced.

PART A

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THE REGIME OF CFAs

1. The Costs of Litigation

The expense incurred in staffing and maintaining the courts is met largely by the state, with the litigant paying only a minimal sum to utilize these facilities. The major financial burden incurred by the parties is the cost of legal representation. A lesser expense is the payment of incidental expenses, so-called disbursements, that are incurred throughout the litigation. In allocating this burden, the legal system has two alternative solutions. It can permit costs to lie where they fall and leave litigants to pay their own costs, regardless of the outcome of the litigation, or it can order that costs should follow the event and require the unsuccessful litigant to pay the costs of the successful litigant. Whereas the Americans have adopted the former as a general rule, the Anglo-Canadian system has opted for a general rule of indemnity. This means that successful litigants may recover any costs that have been