Canadian Lawyer

The Going Rate The 2013 Canadian Lawyer Legal Fees Survey shows more than half of lawyers plan to freeze fees this year. By Charlotte Santry 2013 looks set to be a crunch year for Canadian law firms. While many increased their fees in 2011 and 2012 to reflect spiraling overheads, there now seems to be a broad recognition the market cannot tolerate further successive price rises. The majority (56 per cent) of respondents to Canadian Lawyer's latest Legal Fees Survey plan to freeze fees this year. This is a significant jump from last year, when only one per cent indicated they would do so. Salima Alibhai, managing consultant at ZSA Legal Recruitment, says the figures are "very much in line with what's coming across from clients. We're also getting firms saying we used to use [a bigger, more expensive law firm] and now want to downsize and are looking at firms that are more mid-level." The belt-tightening by clients stems from concerns about gloomy economic growth forecasts, she believes. In April, the Bank of Canada sharply lowered predicted growth in 2013 by half a percentage point to 1.5 per cent. The economy isn't expected to return to full speed until mid-2015, largely due to sluggish growth in China and the prolonged European financial crisis. Many survey respondents appear to believe that, after several years of fee increases, the market simply won't put up with further fee hikes. A sole practitioner respondent in Ontario said: "There is only so much I can charge my clients. Even as my overheads continue to increase, I have to respect my clients' ability to pay." A senior lawyer in a rural area felt fees had "hit a ceiling," while a lawyer in a mid-sized firm in British Columbia said: "We are pricing ourselves out of the reach of ordinary people and their disputes." One respondent from a firm of more than 100 lawyers said: "I think fees will be static for quite some time. We need to compete with in-house counsel." However, a significant number (41 per cent) of firms still plan to raise fees, though for the most part by only a relatively small proportion. Nearly three quarters of the firms planning fee increases envisage rises of up to five per cent; 18 per cent are pushing them up by between five and 10 per cent; and nine per cent expect an increase of 20 per cent or more. Higher overheads continue to be a major factor in firms' decisions to raise fees, though some also cited a desire to help impecunious clients, or referred to the increased complexity of their work. Only three per cent of respondents plan to reduce fees; most stated they were doing so just to maintain clients. Alibhai says clients are still willing to pay big fees for niche areas such as intellectual property or cases involving complex litigation, but this is no longer the case for more "general, runof-the-mill arrangements and contracts." Many clients are also demanding different structures, with some refusing to pay for work unless it's on a flat-fee basis, she says. This is borne out in the survey, in which block fees, unbundling, capped hourly rates, means-tested, and contingency fees all emerged as popular alternatives to billable hours. Canadian Bar Association first vice president Fred Headon says firms face a dual challenge; as well as finding that fees have reached a "saturation point," they are dealing with increasingly informed and sophisticated clients. Many clients now expect to "pick and choose the work that's being done, and have more predictability in the costs they will have to bear," he says. That's www.CANADIAN L a w ye r m a g . c o m June 2013 33

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