By: Samuel Park, Student at the Faculty of Law, University of Alberta
Introduction
This post centers on a fundamental issue within Canada’s legal system: the significant disparity in access to justice faced by the middle class. The proposed solution of tax credits presents a promising way forward by addressing both the financial constraints encountered by middle class litigants and the limited capacity of law firms to take on pro bono work. Further, mandating a portion of cost awards to be donated to local legal aid groups ensures an equitable approach while alleviating the tension between pro bono and legal aid. Ultimately, implementing tax credits to incentivize more pro bono work paves the way for an inclusive legal system that serves all Canadians, irrespective of their financial status. This reaffirms the fundamental purpose of the courts in resolving citizens’ disputes.
The Canadian Legal System
Canada has one of the best legal systems in the world.1 Unfortunately, most Canadians cannot afford to use it. The Canadian legal system is often said to be open to two groups – wealthy individuals and corporations at one end of the spectrum and the extremely impoverished at the other. The first group has money, while the second has legal aid. Former Chief Justice Beverley McLachlin remarked in 2007 that this leaves average Canadians outside the system, whose options are either to use up the family assets in litigation, become their own lawyers, or give up.
Almost half of Canadians will experience a legal issue in any given three-year period, yet many people are unable to resolve their legal matters with the assistance of a lawyer due to the high cost of legal services.2 There is a large discrepancy in the legal market for those who cannot afford a lawyer but are too “wealthy” for legal aid.
According to the results of the Canadian Lawyer’s 2021 Legal Fees Survey, the average cost of civil litigation up to trial in Western Canada was $29,714 for two days, $83,420 for five days, and $104,740 for seven days. This stands in contrast to the 2020 median after-tax income in these provinces, which was $68,975 on average.3
The inaccessibility of legal aid to the middle class raises major political economy issues. Middle income taxpayers find themselves supporting a system from which they do not directly benefit, but only contribute to, despite facing similar denials of access to justice themselves.4 These barriers to justice effectively impose undue hardship and interfere with the courts’ intended purpose of solving citizens’ legal disputes in a manner similar to the hearing fees deemed unconstitutional in Trial Lawyers Association of British Columbia v. British Columbia (Attorney General) by the Supreme Court of Canada in 2014.
Therefore, the crucial issue that begs to be addressed from this dilemma is how to assist middle income earners access the legal services that they are paying for and have a right to access. This post suggests that granting tax credits to law firms that contribute a minimum threshold number of pro bono hours towards individuals “stuck in the middle” – people who do not qualify for legal aid but are below the high-income earner threshold – as a possible solution.
The Economics of Pro Bono Litigation
There is a strong tradition among Canadian litigation lawyers for pro bono, or “no fee”, litigation work. The purpose of pro bono work is seen as part of the professional duty of a lawyer to promote access to justice. Many large, national Canadian law firms have pro bono programs in which they respectively contribute thousands of hours yearly towards pro bono work.5
At the same time, law firms are also businesses that have financial objectives to be met. Firms will generally allow lawyers to contribute their pro bono hours towards their yearly billable target. However, from a pure business perspective, one hour towards pro bono work is one hour lost towards billable client work.
Further, legal aid and pro bono have tended to exist in tension with one another.6 As such, it can be argued that giving tax credits to law firms diminishes the pool of public funding available for legal aid. Thus, this proposed tax scheme would be no more than an exercise in shifting access to justice costs from one group to another.
However, in 1465778 Ontario Inc v 1122077 Ontario Ltd [Cavalieri], Pro Bono Law Ontario encouraged the court to consider the fact that parties or their counsel may wish to donate costs awarded in pro bono cases to charitable organizations on a cy près basis.7 This concept was borne out recently when a Vancouver lawyer structured his pro bono engagement to obtain costs in order to donate cost awards to a legal aid group.8 While this practice is not yet widespread, there is a growing trend of pro bono counsel inserting clauses into their agreements with their pro bono clients to obtain costs if they succeed with the case.
Moreover, the Court of Appeal for Ontario in Cavalieri held that Ontario’s fee-shifting scheme, which allows a prevailing party in a lawsuit to recover their counsel’s fees and litigation costs from the losing party, operated even when counsel is acting pro bono. One of the justifications the court provided was that allowing pro bono counsel to seek costs would enhance access to justice by attracting more counsel to take on such cases. The proposed tax credit scheme in this post is grounded on similar justifications. Coupled together, it would further encourage pro bono work, improve access to justice, and continue the trend of donating cost awards to legal aid groups.
Tax Credits
The idea is that law firms that contribute a minimum threshold number of pro bono hours towards middle income earners would be eligible for a tax credit. The tax credit would effectively compensate law firms for the forgone revenue that would have been billed to their regular clients. The dollar amount of tax saved through these credits would be roughly equal to the value of the pro bono hours that the firm contributes towards helping middle class taxpayers access justice. The only other qualification of eligibility for the tax credit would be that if costs are awarded following litigation, then at least part of those costs must be donated towards local legal aid groups.
The tax credit addresses one of the biggest challenges to participation in pro bono work: firm capacity and availability of lawyers.9 This structure would create a more favorable environment for lawyers to alleviate the financial challenges that the middle class have in accessing justice. From the firm’s perspective, it would equalize the hourly value of pro bono and billable client work, lowering the opportunity cost of pro bono work. In theory, this should create an increase in supply of legal services that the average Canadian requires. It would also help ease the dual responsibilities that lawyers must balance between ensuring public access to the rule of law while simultaneously serving clients and running a business.
- World Justice Project, Rule of Law Index 2022 (Washington, D.C.: World Justice Project, 2015), online: WJP Rule of Law Index | Global Insights (worldjusticeproject.org) (Canada is given a global ranking of 12). ↩︎
- Farrow, Trevor C. W.; Currie, Ab; Aylwin, Nicole; Jacobs, Lesley; Northrup, David; and Moore, Lisa, “Everyday Legal Problems and the Cost of Justice in Canada: Overview Report” (2016). Osgoode Legal Studies Research Paper Series. 150. ↩︎
- Statistics Canada, Median after-tax income, Canada and provinces, 2016 to 2020, online: Median after-tax income, Canada and provinces, 2016 to 2020 (statcan.gc.ca) ↩︎
- Janet Walker, et al, The Civil Litigation Process, 9th ed (Emond Montgomery, 2022) at 76. ↩︎
- Canadian Lawyer, “Best Pro Bono Law Firms in Canada | 5-star Pro Bono Firms 2023” Canadian Lawyer, online: Lawyers taking on pro bono work encouraged to ask for costs awards and improve access to justice | Canadian Lawyer (canadianlawyermag.com) [Best Pro Bono Law Firms] ↩︎
- Lorne Sossin, “The Public Interest, Professionalism, and Pro Bono Publico” (2008) 46:1 Osgoode Hall LJ 131 ↩︎
- Cy près awards allows for distribution of damage awards to a third-party charity, particularly in class action litigation, where it is impossible to determine each plaintiff’s actual damages or when plaintiffs fail to collect their portion of the award. This has garnered criticism for conflicting with the compensatory nature of civil justice. It entails courts exercising judicial power to compensate a third party that does not have legal rights at stake without providing any direct compensation to the involved plaintiffs. Cy près in the context of costs awards is distinguishable because it is not mutually exclusive with plaintiffs being awarded damages or costs. Further, counsel have more discretion to decide which charitable organization to donate to, aligning with the pro bono ethos of supporting broader legal assistance initiatives. ↩︎
- Zena Olijnyk, “Lawyers taking on pro bono work encouraged to ask for costs awards and improve access to justice” Canadian Lawyer, online: Lawyers taking on pro bono work encouraged to ask for costs awards and improve access to justice | Canadian Lawyer (canadianlawyermag.com) ↩︎
The views expressed in these blogs do not necessarily reflect the views of the Faculty of Law at the University of Manitoba and should not be construed as legal advice or endorsement.