Why legal advice is so expensive

The legal system in Canada is complicated, arcane, and out of reach for the majority of people. One important reason for that is that the cost of getting answers to legal questions is generally very high.

Lawyers are expensive relative to other professionals. While it is tempting to blame high rates on self-interested lawyers, there are structural considerations that we need to acknowledge if we are ever to address our access to justice crisis meaningfully.

To be clear, the purpose of this article is not to address the cost of litigation in particular, since our court system isn’t something that will change anytime soon. However, there is a lot we can do to ensure that regular people can access legal advice that might keep them out of court in the first place.

Let’s start with some figures. The average hourly wage of an Ontarian who provides professional, scientific, and technical services is $33.56 per hour. The Law Society of Ontario's fee schedule for their own work sets the price of a lawyer with 10 years of experience at $300/hr. Business lawyers in Toronto charge around $350-$700/hr. Why is this so?

Onboarding new clients is expensive

The first barrier to consulting a lawyer is finding the right one. Unless they have a family friend who is a lawyer, the typical person can't get a "quick answer to a “quick question" because of the administrative costs for law firms. For a small firm, merely opening a new file for a new client, running a conflict check, and collecting identity information can cost up to $300, because of the time involved and record-keeping requirements.

Although a client might think they're giving the lawyer $300 of business, opening a new file often involves a free initial consultation, or at least some time spent by the lawyer in speaking to the new client (if only to know if the lawyer can help the client). This is why lawyers are reluctant to take on "small" files. If the client never goes back to the lawyer, then that's a $0 client.

The cost of risk

Lawyers can't contract out of negligence (like many service providers can), so they especially worry about providing poor advice. Ontario’s legal insurer even warns lawyers: "that a modest $150 independent legal advice (ILA) consultation can leave [them] exposed to a significant malpractice claim." What’s more, damages aren't limited to the legal fees paid, or even a multiple of the fees — they're fact-specific and uncapped. In a case last year involving General Motors, $28 million was awarded against a major Toronto-based law firm in part due to conflict of interest rules.

Lawyers run businesses. Risky advice means higher fees, fewer clients, or personal liability for the lawyer.

Too many laws

As co-founder of the largest global law search engine, used by the justice departments of Canada and the US, I learned that no one knows how many laws there are in Ontario. There are over 10,000 provincial acts and regulations, many hundreds of thousands of provincial court & board decisions. No one knows how many municipal laws exist across Canada, and there are new court, tribunal, and board decisions released every day. People even disagree on what counts as “law”.

Our laws are disorganized. Court cases are published in big blocks of unstructured text that can't be read by computers, in many different places (some of which aren’t publicly available), without any notification to the lawyers who are tasked with understanding them. For many years I ran a business providing these missing notifications to major international companies and lobbyists. The problem: Governments don’t communicate law in ways that can be counted, let alone understood.

There are roughly 40,000 lawyers in Ontario who are tasked with understanding our large number of laws. As many as that seems, that's about four lawyers per law (only counting regulations and statutes).  

Lawyers provide legal advice about a vast number of areas and a wide range of laws. And yet, clients want certainty. There is a higher standard for legal work than exists in other professions, and a greater degree of uncertainty due to law’s evolving nature, never mind the uncertain behaviours of the people involved in a legal issue.

Uncertainty + liability = high fees.

Regulatory costs

There are many rules governing what lawyers do. In Ontario, the Rules of Professional Conduct are 170 pages long. There is a cost to these rules because they increase the complexity (and sometimes expense) of operating a law practice, which is ultimately passed on to clients.

All businesses have costs. For lawyers, they are quite high as they include: accounting/bookkeeping related to trust accounts, regulator dues ($2500/yr), mandatory insurance ($3000/yr), administrative work related to complying with Law Society requirements, mandatory professional development course fees, confidential office space for conversations (expensive in some urban markets), legal research tools, mandatory transaction levies, regulator interactions (e.g. $200k cost of proceedings in an extreme case), etc. These costs and mandated structures foreclose certain modes of operating.

The cost of becoming a lawyer

Legal services are provided à la carte by highly educated people. They are not computers instructed by people (e.g. Google's services) or workers trained following a standard playbook. There are two implications for the cost of legal services.

First, it's not cheap to become a lawyer, and the system needs to pay back the cost of the workers' education. Lawyers must work for 10 months as an apprentice in order to become a lawyer, after seven years of expensive university education. When they begin their apprenticeship, 85 percent  of law school graduates report being saddled with debt greater than $40,000. Then they began a licensing process that involves paying many thousands of dollars in fees to their law society. Then they get to work.

How lawyers work to solve problems

It's rare that clients, unfamiliar with legal rules and legal thinking, have their legal issues and facts organized in a way that they can quickly engage with a lawyer. It takes time for lawyers, after speaking with their clients, to convert highly personal (and sometimes wandering) stories into legal issues and ultimately legal services (that clients want to pay for).

Lawyers often provide custom services to their clients. New lawyers who are hired by a firm are generally expected to learn on their own, and law firms lack the training materials that are standard in other jobs. This is a recipe for expensive services.

There's some scope for commoditizing legal services by turning them into fixed fee legal products. But there are limits to how far this approach can take us given the wide-ranging legal issues that people face, and the regulatory environment. In 2014 I founded the first flat-rate legal marketplace in Canada, but many lawyers view this approach with skepticism, and it’s not a cure-all.

Domain knowledge is expensive

Lawyers are often both legal experts and business experts. This means that lawyers end up being in demand not just for their legal skills but also their knowledge of industry and business. Business experts command a premium over other professionals.

In search of solutions

There's a growing awareness that the current system is expensive and not serving most people's legal needs. What's less clear is what the solutions are.

I've been thinking about how to solve this problem since I first opened my law practice in 2013. Although my work — I’m a blockchain lawyer who deals with international tech projects — is so specialized that these issues don't affect my practice, they're of profound importance to people in Ontario, and the rule of law.

We can do better but it'll require significant changes in how laws are produced, consumed, and connected to people’s lives.

At least 20 percent of Ontarians work in jobs that are regulated by the government. That's millions of Ontarians and only 40,000 lawyers to serve them. Access to law is integral to those people's livelihoods, and the impact of laws on our lives in 2019 can't be understated.

If Canadians can't find out how laws apply to them, or how they should handle themselves in a regulated environment, then we risk becoming a society in which only those with significant capital can follow the law and everyone else is left taking cues from others and hoping for the best.