Thunder Bay Judges Don’t Want to See Pyramids

Pyramids.jpg There’s something afoot among the judges in Thunder Bay. Madam Justice Helen Pierce and Mr. Justice George Smith, colleagues on the Superior Court in that city, have both released rulings in which they have complained about what they call “pyramid billing”. This apparently refers to the practice of “hiving off” (to use Justice Pierce’s expression) overhead expenses and charging them separately as fee items in order to “enhance” the hourly rate of the lawyer.

Justice Pierce’s remarks appeared in Beerthuizen et al v. West Arthur Place  while those of Justice Smith can be found in Paulin v. P.C.M. Collections Limited (Professional Collection Management).

Both decisions concerned awards of costs. In Beerthuizen, a personal injury action, a jury had dismissed the plaintiffs’ action in the fourth week of trial. Pierce J. agreed that the defendant was entitled to costs, but one component of the costs sought by the defendant was for the services of a law clerk. Justice Pierce observed:

There is no indication of her education, training or function in relation to the conduct of the litigation. A review of the dockets suggests that she performed secretarial functions such as making and receiving telephone calls, collating material and the like. Claims for her services at $85 per hour are disallowed.

Her Honour also disallowed some other expenses that the defence had claimed, including the cost of a “legal assistant” and a “litigation analyst”. She also disallowed disbursements for long distance charges, courier, facsimile, laser printing, postage and computerized legal research, on the basis that the tariff did not provide for them.

Speaking more generally, Pierce J. explained her concerns about “pyramid billing”: 

Except as authorized by the Rules of Civil Procedure or the jurisprudence, claims for a lawyer’s staff fall under his hourly rate which contemplates overhead. Overhead includes staff. Counsel ought not to enhance his true hourly rate by hiving off overhead costs and charging staff time separately This “pyramid technique” of claiming costs is not contemplated either by the rules or by the jurisprudence and can only serve to inflate a bill of costs beyond what is reasonable to recover from the opposing party.

The decision in Beerthuizen was dated January 8. Three days later, on January 11, Justice Smith released his reasons in Paulin. It was a much shorter trial (three days), this time won by the plaintiff. But Smith J.’s criticisms of “pyramid billing” bore a strong resemblance to his colleague’s comments in Beerthuizen. He said:

20]      Pyramid or cumulative billing of this nature is not uncommon. Prior to the inception of this practice Bills of Cost included only the time of the solicitor having carriage of the file. Secretarial costs and office overhead was subsumed in the solicitor’s hourly rate. Now it is frequently added to the Bill as either the work of a law clerk or as a disbursement.

[21]      This practice has increased the size of Bills of Cost to such a degree that I am often left wondering how any client of average means could possibly afford to litigate.

[22]      The effect of this practice has been to restrict access to justice to those possessing above average financial resources.

[23]      Before the cost regime was modified by the introduction of the costs grid, costs were dealt with quickly and modestly. Now, it is not uncommon to see large cost briefs involving hours of work that inevitably get charged to the client.

[24]      Costs have spiraled out of control. It is time for the courts to send a message to the Bar that no matter how much time is spent on a file, reasonable limits will be imposed by the courts. If law firms engage in cumulative or pyramid billing this is something that ultimately they will have to resolve and justify with their clients. The cost regime should not be viewed as a way to pass on to an unsuccessful litigant excessive charges.

[25]      Mr. Justice Killeen in Pagnotta v. Brown has this to say about escalating costs and proportionality:

                        From my perspective, if lawyers wish to expend such grossly inordinate amounts of billable hours on relatively routine cases, they may feel free to do so subject to their client’s approval, but they cannot expect judges to encourage such inefficient expenditures of time when their costs are to be fixed following trial. Judges and assessment officers have a duty to fix or assess costs at reasonable amounts and in this process they have a duty to make sure that the hours spent can be reasonably justified. The losing party is not to be treated as a money tree to be plucked willy nilly by the winner of the contest.                        

[26]      The Bill of Costs in the case at bar includes time for 9 individuals described as ‘Law Clerks’. The credentials of these individuals are unknown as is the nature of the work that each performed. The hourly rates for these individuals ranges from $20 to $90 per hour.

[27]      I am not prepared to accept any Bill of Costs that includes the time of a ‘law clerk’ unless precise details of the qualifications and work performed by that individual are provided. A ‘law clerk’ is not a person performing secretarial work. It is someone possessing the necessary training and qualifications and someone who has performed non-secretarial work on a file.

The comments of Pierce and Smith JJ. strongly suggest that counsel seeking to recover costs for time expended by law clerks should spend some time spelling out the qualifications of the clerk, as well as the nature of the work that he or she performed on the file.

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