March 6, 1997, E.C.B. Control No. 56/92/135
(61 L.C.R. 9)
McKinnon and Doreen McKinnon|
Board of Trustees of School District No. 36 (Surrey)|
W. Shorthouse, Chair|
H. Goulden, for the Claimants|
Michael C. Woodward, for the Respondent
The claimants, Stephen McKinnon and Dorreen Annabelle McKinnnon, have applied
to the chair of the Expropriation Compensation Board (the "board") for the following
1. Pursuant to section 44 of the
Expropriation Act, S.B.C. 1987, c. 23 (the "Act"), a determination of the
costs to be paid by the respondent, The Board of Trustees of School District No.
36 (Surrey), to the claimants in this matter;
to section 12 of the Expropriation Compensation Board Practice and Procedure Regulation,
B.C. Reg. 452/87 (the "Practice Regulation"), an order that production be made
of the respondent's accounts for legal services rendered in connection with this
3. Interest; and
of this hearing.
Apart from the section 44
hearing costs themselves, the costs claimed are in respect of accounts rendered
by the claimants' solicitors, the firm of Bull, Housser & Tupper ("Bull Housser"),
as well as by a real estate appraisal firm, Interwest Property Services Ltd. ("Interwest").
They total $46,880.03 inclusive of fees, disbursements, taxes and interest, on
account of which the respondent has previously advanced the sum of $11,497.46.
for costs arises out of the respondent's acquisition in December of 1991 of two
contiguous unimproved lots owned by the claimants in the District of Surrey. The
acquisition, for a school project, was achieved by way of an agreement under section
3 of the Act. At that time the respondent made an advance payment to the claimants
in the amount of $101,900 pursuant to section 19 of the Act. Of this amount $100,000
was the respondent's estimate of the market value of the two lots based upon an
appraisal which it had commissioned. The remaining $1,900 was the respondent's
estimate of the disturbance damages payable. However, on June 22, 1992, the claimants
filed with the board an application for determination of compensation alleging
that the combined value of the lots was actually $156,000. They also claimed an
unquantified amount of disturbance damages, interest and costs. The claimants'
compensation claim in respect of market value was based upon an appraisal report
prepared for them by Interwest. Subsequently, in February 1994, Interwest prepared
a revised report in which the estimated combined value of the lots was adjusted
upward to $170,000. At the compensation hearing, the claimants alleged this higher
amount. Shortly before the hearing began, the respondent, relying upon a further
appraisal report of its own, increased its advance payment on account of market
value to $112,000.
The compensation hearing took place
in Vancouver over a five-day period from March 21 to March 25, 1994. By consent
the claimants' claim was heard together with that of two other owners, Macdonald
Frederick Buchanan and Gwendolyn Anne Buchanan (the "Buchanans"). The Buchanans'
property, which nearly adjoined that of the claimants, was also acquired by the
respondent for the school project. Although the Buchanans and the claimants retained
separate counsel, they utilized the same appraiser. Most of the issues raised
were common to both claims and much of the evidence overlapped.
The board rendered its decision in respect of the claimants' claim on October
13, 1994 (reported at 54 L.C.R. 23). It concluded that the total market value
of the two lots at the date of valuation was $122,500, that is, $10,500 more than
what the claimants had already been paid but $47,500 less than what they claimed.
The board held that the claimants were entitled to interest under both subsections
45 (1) and (4) of the Act. It also said that they were entitled to their actual
reasonable legal, appraisal and other costs pursuant to section 44 of the Act,
adding, however, its opinion that reasonable appraisal costs payable by the respondent
did not include the costs of two appraisal reports from Interwest. The claim for
disturbance damages was disallowed. The board rendered a companion decision in
the Buchanan claim on October 7, 1994 (reported at 54 L.C.R. 43).
3. THE RESPONDENT'S COSTS
At an early stage of the section 44 hearing, the parties addressed the claimants'
motion for an order for production of the respondent's accounts for legal services
rendered in this matter and I made an oral decision, dismissing the application.
The issue of whether an expropriating authority can be compelled to disclose its
costs incurred in a proceeding before the board is sufficiently important for
the future conduct of cost reviews that I consider it useful to set out my reasons
in this written cost decision. I propose to deal with this issue now, before embarking
upon a detailed review of the claimants' costs, because the claimants argued that
the issue bears upon my determination of whether their own costs are reasonable
in the circumstances.
The essence of the claimants' position
was that a comparison of the time and money expended by the respondent in defending
its case ought to be a key factor in my assessment of the overall reasonableness
of what the claimants spent. This, they argued, is consistent with the often stated
purpose underlying the costs regime within the Act which is to place expropriated
owners on a "level playing field" with expropriating authorities. What they sought
in this instance was disclosure of the respondent's legal accounts.
The claimants asserted their right to discovery of the respondent's legal accounts
pursuant to Rule 26 of the Supreme Court Rules which has been adopted in section
12 of the board's Practice Regulation. It was their position that the legal accounts
were or could be relevant and that, at this stage of the proceedings, they were
not protected by solicitor-client privilege. At the least, they submitted, the
global numbers involved ought to be produced. They referred me to section 171
(4) of the School Act, S.B.C. 1989, c. 61, which requires the financial
statements of a school board to be published for distribution to the public. They
also cited a cost decision of the Nova Scotia Supreme Court, Stevenson
v. Lawrencetown (Village) (1994), 54 L.C.R. 91, in which the Court had
compared the appraisal costs incurred by the expropriating authority with those
incurred by the expropriated owner in arriving at a determination of the reasonableness
of the owner's costs.
The respondent submitted that on
a section 44 application the onus remains at all times with owners to prove, on
a balance of probabilities, the reasonableness of the costs they have incurred
in asserting a claim for compensation. There is no legal onus cast on the expropriating
authority, by producing its own accounts, to show that the accounts tendered for
payment by an owner are not actual or reasonable costs. The respondent questioned
whether its own costs were relevant in the sense that they would somehow assist
in my determination. In any case, the respondent argued, there was no authority
to suggest that I had jurisdiction to order production of the respondent's legal
accounts which, it maintained, fell within the scope of a continuing solicitor-client
privilege. According to the respondent, the privilege which attached to the school
board's legal file in this matter, including the aggregate amounts billed for
legal services, was unaffected by the provision of the School Act which
merely addresses the publication of financial statements. The Stevenson case,
said the respondent, does not stand for the proposition that anyone has authority
to order disclosure of an expropriating authority's accounts. In that instance,
it appears, the authority had voluntarily put its own appraisal costs in evidence.
Moreover, according to the respondent, there was a distinction to be drawn between
appraisal accounts and legal accounts, the former of which may not enjoy a common
law or statutory privilege from disclosure whereas the latter clearly would.
Having considered these submissions, I dismissed the claimants' application on
several grounds. First, on the narrower issue of privilege, the claimants offered
no authority for the proposition that accounts rendered to the respondent client
by its solicitors, the disclosure of which was not waived by the client, did not
properly form part of the protected information in the solicitor's file. Nor did
they cite authority to show that any such privilege would be lost once matters
reached the stage where the main compensation decision had been rendered and that
what remained was simply a decision as to the claimants' costs. In the absence
of such authority, I was persuaded that the respondent's legal accounts were,
and remained, subject to a claim of solicitor and client privilege. Accordingly,
even if I had jurisdiction generally to order the disclosure of the respondent's
accounts, I would not order the legal accounts to be produced.
Second, on the broader issue of jurisdiction, there is nothing in the Act which
expressly directs or authorizes a review of the expropriating authority's costs
as part of the process of determining the necessity and reasonableness of the
costs which an expropriated owner has incurred. I am not convinced that such jurisdiction
would arise by necessary implication. In my view, neither section 171 (4) of the
School Act nor the Stevenson decision assisted the claimants on this application.
Third, even if I was in error on the issues of jurisdiction and privilege, I nevertheless
remained unpersuaded that the respondent's legal accounts would offer a particularly
useful or relevant body of evidence to assist me in the determination which I
must make. The considerations involved in defending against a compensation claim
may be quite different from those which underlie the presentation of the claim.
A mere comparison of the global costs incurred would, in my view, pose more questions
than it answered. Only a thoroughgoing examination of both the respondent's and
the claimants' accounts might reveal whether their respective solicitors approached
and conducted the case in a manner sufficiently parallel to make comparison meaningful.
It was my conclusion that I would be embarking upon a very time-consuming exercise
probably to little or no avail.
It occasionally happens
in cost reviews before this board that an expropriating authority voluntarily
discloses its own costs and asks the chair or vice chair to take those costs into
account. Not surprisingly, this has usually been the case where the authority
considers the costs it has incurred to be modest in comparison with those which
the expropriated owner is claiming. Absent objection from the other side, such
information has generally been received. However, I am unaware of any decision
of this board indicating that the expropriating authority's costs ought to play
a role, or have in fact figured, in determining the necessity or reasonableness
of those of an owner.
Finally, as I also noted in my oral
decision, the board has established a considerable body of jurisprudence on the
issue of whether particular costs incurred by owners for the purpose of asserting
their claims for compensation or damages are reasonable costs in relation to the
common law and statutory considerations that I am to take into account. Although
the jurisprudence on costs before the board continues to develop, in my view it
is unnecessary to extend the reach of the cost review to embrace a whole new body
of evidence comprising the respondent's legal accounts the probative value of
which I consider to be lacking.
THE CLAIMANTS' COSTS
4.1 Statutory Considerations
I have already noted that the board,
in its compensation decision, awarded the claimants their reasonable legal and
appraisal costs. When fixing those costs, I am required to consider certain statutory
criteria. These are set out in section 44 (11) of the Act as follows:
44. (11) In a determination of costs under subsection (9)
or (10), the following considerations shall be taken into account:
(a) the number and complexity of the issues;
(b) the degree of success, taking into account
(i) the determination of the issues, and
(ii) the difference
between the amount awarded and the advance payment under section 19 (1) and (11)
(c) the manner in which the case was
prepared and conducted.
It is the
respondent's position that the legal and appraisal accounts presented for payment
in this matter are, as respondent's counsel phrased it, "grossly excessive taking
into consideration the very small amount at stake, the very small degree of success,
the simplicity of the issues, the very small difference between the advance payment
and the ultimate result, and the manner in which the case was presented."
I will consider the manner in which the claimants prepared and conducted their
case, pursuant to section 44 (11) (c), when examining each of the legal and appraisal
accounts in detail. Before turning to those accounts, however, I make the following
observations about how the criteria set out in sections 44 (11) (a) and (b) apply
to this matter. They are based upon my assessment of the submissions made at this
cost hearing as well as my reading of the compensation decision.
First, I am inclined to agree with the respondent that this was a comparatively
simple case. In fact, I did not understand the claimants to seriously challenge
that proposition. The case involved a determination of the highest and best use
and market value of the claimants' two unimproved contiguous lots as of December
20, 1991, the agreed valuation date. There was no shortage of appraisal data available
to assist in making those determinations and nothing to suggest that the exercise
was other than routine, but for one factor. That factor was the claimants' assertion
that the value of their lots had been negatively impacted by "project influence",
that is, that the respondent's acquisition of the two lots was part of a larger
scheme for park and school development the planning for which predated the acquisition
by several years. It was the claimants' position that, but for the scheme, their
lots would have been serviced or in the process of being serviced by the valuation
date because they were in the "eventual path" of residential development in the
neighbourhood. They therefore invoked the application of section 32 (d) of the
Act which states that, in determining the market value of land, no account is
to be taken of any increase or decrease in its value resulting from "the development
or prospect of development in respect of which the expropriation is made." The
claimants argued that, in the circumstances, their lots should be valued as though
serviced and imminent for development through use of the development approach.
On this point, I should perhaps observe that the applicability of section 32 (d)
was not a novel issue before the board when this case was heard; it had been considered
in two earlier expropriation decisions. Apart from the market valuation issue,
the case also involved a determination of disturbance damages, but that claim
was limited to the issue of whether the claimants were entitled to compensation
on account of property purchase tax and conveyancing costs for each of the lots.
Second, on the determination of the issues at the compensation hearing, it is
apparent that the claimants enjoyed little success. For them the central issue
was the applicability of section 32 (d), but the board was not satisfied on the
evidence that "project influence" had impacted the highest and best use or market
value of the lots. Instead, the board found the highest and best use of the lots
at the valuation date to be "their existing use; that is, residential holding
lots subject to rezoning and awaiting services." (p. 33). In determining market
value, the board rejected the development approach. It accepted to a large degree
the estimation of value derived by the respondent's appraiser in utilizing the
direct comparison approach. Whereas he had opined a total value of $112,000, the
board initially concluded a total value of $112,400 based upon its own analysis
of the comparable sales. At p. 40, however, the board went on to find as follows:
Allowing for the reasonable delay necessary for rezoning,
the board is satisfied that the market would have been prepared, at the date of
valuation, to pay a premium of 9% for these Properties because of the more immediate
potential for development, but for the scheme. Thus, the board concludes a value
of $61,258 per Lot for a total value for the Properties of $122,516, rounded to
The only other issue was disturbance
damages. In that respect, although the claimants had already received from the
respondent an advance payment towards disturbance damages, the board disallowed
their claim under this head of compensation at the hearing. It accepted the respondent's
argument and held that the claimants had failed to meet the onus of proving that
they had actually incurred or paid expenses in the form of either conveyancing
fees or property purchase tax.
Third, in measuring the
degree of success by the difference between the amount awarded ($122,500) and
the amount of the advance payments made ($113,900), I consider that the claimants'
success was modest indeed. It is true that the board, in awarding compensation,
did not exercise its discretion under section 44 (5) so as to deny the claimants
any part of their reasonable costs. However, in assessing what quantum of costs
are reasonable in the circumstances, I take note of the observation made by a
former chair of this board that the Act implies some reasonable relationship between
the costs claimed and the difference between the amount awarded and the advance
payment: see Gerestein v. Abbotsford (District) (1990), 43 L.C.R.
262 at p. 268.
4.2 The Legal Accounts
The claimants retained the firm of Bull Housser in June of 1991, some six months
prior to the date of acquisition, to represent them in this matter. Bull Housser
has continued to act for them throughout all stages of the proceedings since that
time, including the compensation hearing which concluded in late March of 1994.
The firm rendered five statements of account, each of which was forwarded for
payment to the respondent, and which now form the subject of this cost review.
At the cost hearing the claimants made some minor adjustments to the accounts
as presented to reflect their acceptance of changes to certain hourly rates and
disbursement charges and to correct one arithmetical error. The billing summary,
which takes those adjustments into account, is as follows:
Nov. 29, 1991
Mar. 31, 1992
Apr. 7, 1993
Feb. 17, 1994
Oct. 27, 1994
At one stage or another a total of six lawyers and a student recorded billable
time on this file, although several of them had only a peripheral involvement.
A.K. McKinnon had initial contact with the clients, billing 0.2 hours at $175
per hour. Ms. Jeanne Watchuk spent 1.2 hours at $175 per hour to render tax advice.
Mr. David Bursey recorded 8.5 hours at $185 per hour (adjusted at the cost hearing
to $175 per hour) reviewing documents and preparing an opinion. Mr. James Goulden
provided general assistance in preparing the matter for hearing for which he billed
5.5 hours at $120 per hour. Seven hours of student time were devoted to study
of the law mostly at $70 per hour.
The two main practitioners
involved were Mr. Robert Seeman and Mr. Daniel R. Bennett. Mr. Seeman, a junior
solicitor with the firm having been called to the bar in 1990, had general conduct
of the claimants' file from June of 1991 until July of 1993. He negotiated the
section 3 agreement and attempted to settle the matter on behalf of the claimants.
He also prepared the application for determination of compensation, handled document
discovery, and initially arranged for and reviewed the first appraisal report
from Interwest. Mr. Seeman logged a total of 41.5 hours, of which he billed the
first 11.7 hours at the rate of $120 per hour, the next 16.2 hours at $125, then
9.4 hours at $135, and the last 4.2 hours at the rate of $140 per hour.
Mr. Bennett was called to give evidence and was cross-examined at length during
this cost hearing. At the time that he took over conduct of the file, he was a
lawyer of five years' experience, practising in the civil litigation area before
both courts and tribunals, and about to be made a partner of the firm. Although
the present case was the first full hearing in which he appeared as lead counsel
before the board, Mr. Bennett had previous involvement with expropriation matters.
Even so, he testified that only five per cent or less of his practice at the relevant
time actually concerned expropriation; the larger focus was on the field of municipal
law generally. Mr. Bennett's tasks on this file included reviewing documents,
including a large number from the City of Surrey obtained under order of the board
after a contested application, attending at examinations for discovery, meeting
on-site and elsewhere with the claimants' appraiser and reviewing the appraisal
reports of both parties, preparing for hearing, and conducting the claimants'
case during five full days of hearing. In all, Mr. Bennett recorded 96.5 hours
of billed time, approximately half of which fell within the five-day period of
the hearing itself. He testified that his usual fee rate to clients after becoming
a partner in February of 1994 was $175 per hour but that, in recognition of what
the firm understood to be the board's guidelines on fees, he had reduced it on
this file. Accordingly, 4.7 hours were billed at the rate of $165 per hour in
the Bull Housser account dated February 17, 1994 and the remaining 91.8 hours
were billed at $160 per hour in the account dated October 27, 1994.
In summary, the legal accounts presented for review reveal that counsel for the
claimants billed a total of 160.4 hours in the prosecution of this case at an
average effective rate of about $146 per hour. The claimants say that these fee
costs reflect an efficient handling of the file and are entirely reasonable for
a matter that lasted over three years and culminated in a five day hearing before
The claimants cite two earlier cost decisions
of the board in support of their position. In Tidmarsh v. Comox-Strathcona
(Regional District) (1994), 54 L.C.R. 13, the pleadings disclosed a compensation
claim for $21,261, net of costs and interest, which was settled without the aid
of discovery or a compensation hearing for $15,000. The claimants presented for
review legal accounts detailing 197 hours of billed time and totalling $30,331.63
in fees, disbursements and applicable taxes. The disbursements included the cost
of $2,200 for the claimants' appraisal. The chair, who held that the case was
not complex and that the numbers involved did not warrant time billed equating
to over $23,000 in fees, fixed the reasonable legal and appraisal costs, including
relevant taxes, at $23,000. In Branscombe v. British Columbia (Minister
of Transportation and Highways) (1994), 54 L.C.R. 1, the claimants were allowed
nearly 300 hours of billed counsel time amounting to almost $50,000 for what their
counsel described as a "pretty average run of the mill case" which, nevertheless,
led to a seven and a half day hearing and resulted in an award for market value
some $69,500 above the $200,000 advance payment, together with further compensation,
interest and costs.
The respondent objects to the size
of the legal fee account by reference to both the mandatory considerations set
out in the Act and previous cost decisions which have pronounced on the reasonableness
of particular fee charges. With respect to section 44 (11), apart from pointing
out that the case was simple and the degree of success small -- observations which
I have already considered and accepted -- the respondent also says, in effect,
that the presentation of the case by claimants' counsel was so flawed as to justify
a reduction in legal fees. As to the reasonableness of the fees charged by particular
lawyers on the file, the respondent argues that there was unnecessary duplication
of effort and that the hourly rates charged are excessive.
In the respondent's submission, this case warranted no more than 70 hours of legal
counsel time comprising 10 seven-hour days -- five days for preparation and five
for hearing. The respondent says that an appropriate blended fee rate for the
lawyers engaged on this file was $135 per hour at most. Allowing additionally
the small amount charged for tax advice, the respondent submits that the appropriate
global award for legal fees, even had the claim been wholly successful, calculates
only to the sum of $9,660 rather than the sum of $23,553.50 actually charged.
A review of the board's reasons in this matter lends weight to the respondent's
assertion that the claimants' case was flawed in the manner in which it was prepared
and conducted. Primarily, the problem was an evidentiary one and it related to
both of the issues before the board at the compensation hearing. The claimants,
to support their theory of "project influence" and bring into play the application
of section 32 (d), needed to show that, but for the scheme, the progress of neighbouring
subdivision developments would have offered them the opportunity, before or near
the date of taking, to co-operate with developers in securing service connections
to their own lots. However, the board observed at p. 33 of its decision:
If such a premise were to be supported, one would have expected
to hear from developers in the area who had indeed adjusted their development
or pursued alternative subdivisions accordingly. There was no evidence before
the board that the developers who were involved in the nine subdivisions identified
would have done anything differently, but for the scheme, whether that be in relation
to the park or the school site. Similarly, there was no evidence that any co-operative
development proposal by individuals had been considered but abandoned as a result
of the impact of the scheme.
disallowing the claimants' disturbance damage claim, the board stated at p. 41:
"No evidence was led to establish that either a conveyance fee or property purchase
tax has been incurred or paid by the claimants."
contention that there was unnecessary duplication of effort among lawyers conducting
the claimants' case stems from the fact that Mr. Bennett took over from Mr. Seeman
and had to spend time acquainting himself with the file. As I understood the argument,
either Mr. Seeman, who was a solicitor rather than a litigator, should not have
involved himself with the matter or he should have seen it through to its conclusion.
Citing the decision of former chair Harvey of this board in 343146 B.C. Ltd.
v. British Columbia (Minister of Transportation and Highways) (1993), 50
L.C.R. 221 at pp. 227-8, the respondent says that where legal services are provided
by more than one lawyer within a firm, a respondent cannot be expected to be responsible
for the additional time necessary to ensure that co-counsel or replacement counsel
are current on the file.
I have already outlined the discrete
tasks performed by the respective lawyers involved. In my opinion, those tasks
were appropriate to their specialized areas of practice. The fact is that Mr.
Seeman left Bull Housser in the early summer of 1993 to run for political office
and, although he evidently returned to the firm briefly toward the end of the
year, he departed again in the spring of 1994. The circumstances are such that,
in my view, it was reasonable and perhaps unavoidable for the claimants to change
counsel. In any case, from my review of the legal accounts in this matter, I am
unable to identify any significant element of duplication.
Arguing that the fee rates charged by both Mr. Seeman and Mr. Bennett are excessive,
the respondent submits that, in the case of legal counsel without particular or
extensive experience in expropriation matters, hourly rates must be set at levels
which reflect the actual experience. Since Mr. Seeman was only in his second year
of practice when he assumed conduct of the file, the respondent suggests that
his initial billing rate of $120 should be reduced to what the board in Tidmarsh
considered appropriate for one junior associate, that is, $100 per hour. As for
Mr. Bennett, who had six years' practice experience at the date the compensation
hearing concluded and charged $160 per hour for his services, the respondent again
cites the cost decision in 343146 B.C. Ltd. where a rate of $125 per hour
was held to be appropriate for one lawyer who was at the time a six year call.
I agree that prior cost decisions fixing hourly rates offer a useful guide to
what the board considers reasonable although each determination turns on its own
facts and, in particular, on the state of the evidence as to an individual lawyer's
experience and as to what is commonly being charged in the marketplace. In a letter
written some months after the conclusion of this cost hearing, Mr. Goulden, counsel
for the claimants, brought to my attention the cost decision of the board's vice
chair in Summit Enterprises Ltd. v. Kamloops (City) (1995), 57 L.C.R.
24. He submitted, on the basis of that decision, that I should take into account
an extract from a 1994 survey of legal rates for British Columbia undertaken by
the Canadian Bar Association which he said supported the claimants' position that
the hourly fee rate charged by Mr. Bennett on this file was reasonable. Mr. Woodward
for the respondent wrote to object to the admission of this evidence, but no formal
application followed from either party. The board has since held in other decisions
that such evidence may be admitted, subject to weight, as at least some indicator
of current hourly rates in the marketplace.
From my review
of the evidence available to me on this cost application, as well as of other
cost decisions of the board, I conclude that some adjustment should be made in
the hourly rates. I would be inclined to allow Mr. Seeman's reasonable time at
$100 per hour in 1991 when his involvement with the file began, rising to perhaps
$130 per hour by 1993 when it concluded. I consider that an appropriate hourly
rate for Mr. Bennett's reasonable time would be on the order of $150 per hour.
Consistent with what I have determined in respect of these lawyers, I would also
adjust the hourly rate for Mr. Goulden, newly called in 1993, to $100 per hour.
Although I agree with the respondent that this was a small and simple case, both
initially and throughout, I am unable to accept the respondent's submission that
claimants' counsel could reasonably have prosecuted the matter from start to finish
in only 70 hours. I am satisfied that the time entries in the legal accounts reflect
neither avoidable duplication of effort nor an overly time-consuming approach
on the part of claimants' counsel to the matters at hand. In my view, the expenditure
of approximately 160 hours of counsel time was not unreasonable in the circumstances
of this case.
An appropriate adjustment in the hourly
rates would result in the total allowable legal fees being reduced from $23,553.50
to just over $22,000. However, taking into account evidentiary deficiencies in
the manner in which the case was prepared and conducted and the small degree of
success actually achieved, a further reduction is indicated. Accordingly, I allow
the legal fee costs in this matter at $18,000.
The disbursements of $1,040.67 itemized
within the legal accounts seem modest and did not attract much criticism from
the respondent. The only issue pursued at the hearing had to do with facsimile
costs. Mr. Bennett testified that Bull Housser normally charges out facsimiles
at $2 per page but that he had reduced the charges on this file to $1 per page.
In total, the claim for facsimile costs amounted to $44. Mr. Woodward for the
respondent cited the decision in Tidmarsh where the chair allowed fax charges
at $0.20 per page. Later cost decisions of the board have allowed $0.35 per page.
Before the hearing concluded, the parties agreed that an appropriate adjustment
should be made, and accordingly, I would reduce the amount recoverable on facsimile
costs to $15.40. Otherwise, the disbursements are allowed as presented.
It follows that goods and services tax and provincial sales tax, where applicable,
will need to be adjusted on the legal costs which I have allowed, comprising $18,000
in fees and $1,012.07 in disbursements. A precise recalculation of provincial
sales tax is difficult because it applied only to the last two of the legal accounts
rendered. For the sake of simplicity and certainty, I propose to make an allowance
for it on those two accounts pro rata to the total amount of fees allowed. Therefore,
goods and services tax is allowed in the sum of $1,329.71 and provincial sales
tax in the sum of $999.68 for a total of $2,329.39 on account of taxes.
4.3 The Appraisal Accounts
firm of Interwest, first retained by or on behalf of the claimants in August of
1991, rendered three invoices in respect of its services. The account summary
is as follows:
Dec. 6, 1991
Oct. 6, 1992
Mar. 31, 1995
Mr. D.H. Hall, AACI, a junior appraiser with the firm, initially took on the assignment
of appraising the claimants' lots. He completed a first draft of the appraisal
report just before the section 3 agreement was concluded, in December of 1991.
In the succeeding months, he refined and upgraded his analysis which included
giving some consideration to the section 32 issue. Mr. Hall assisted in finalizing
what I will refer to as the claimants' first appraisal report dated April 13,
1992. His involvement in the file thereafter was peripheral. Mr. Hall recorded
54.75 hours of billable time for his services, 48.25 hours of which he charged
out at $75 per hour and the remainder at $80 per hour.
Mr. Danny R. Grant, a principal of Interwest, eventually superseded Mr. Hall in
carrying forward the appraisal assignment. He was examined and cross-examined
extensively at this cost hearing. Mr. Grant, who is designated SR/WA by the International
Right of Way Association, has been a fee appraiser since 1967 and has a long history
of involvement in expropriation matters, including numerous attendances in the
role of expert witness at hearings before the board. He testified that he became
involved in this case originally in a supervisory and review capacity, co-signing
with Mr. Hall the first appraisal report. Later, when Mr. Hall returned to England
to deal with a family tragedy, Mr. Grant assumed full conduct of the file. His
tasks included researching subdivision developments in the vicinity with an eye
to the section 32 issue, researching and analyzing further comparable sales, reviewing
the respondent's appraisal reports, doing site inspections together with claimants'
counsel and assisting in preparation for the compensation hearing. He prepared
what I will refer to as the claimants' second appraisal report, dated February
18, 1994. Mr. Grant was qualified as an expert witness and gave evidence at the
compensation hearing in relation to that report. In total, Mr. Grant recorded
58.7 hours of billable time, the initial nine hours of which he charged at the
rate of $150 per hour, and the remainder at the rate of $165 per hour.
Additionally, two employees of Interwest recorded a total of 39.5 hours engaged
in such matters as updating information, ordering and compiling data, reviewing
searches, structuring the appraisal report, and performing general office functions.
C.C. Chan recorded 3.5 hours at $50 per hour, and Devin Grant logged 36 hours
at $40 per hour. Mr. Grant testified that their work was in the nature of a research
rather than a clerical function.
In summary, the Interwest
accounts presented for review reveal that the appraisal firm billed a total of
152.95 hours for its services in this matter at an average effective rate of about
$100 per hour. The claimants say that, although the appraiser's bills are "admittedly
significant", they are reasonable based on the evidence. That Interwest also acted
as appraiser to the neighbouring Buchanans in their compensation claim, charging
them a much lower amount, is also a factor which in the claimants' submission
goes to the question of overall reasonableness.
initial objection to the Interwest accounts is founded on the premise that Mr.
Grant was not qualified under the Act to prepare the appraisal reports tendered
and therefore no appraisal costs respecting him were, as a matter of law, available.
Respondent's counsel acknowledged that Mr. Grant's credentials were not challenged
during the compensation hearing. He nevertheless now referred me to section 44
(8) which provides that appraisal costs are "those reasonable costs incurred by
a person who has been accredited by an institute or body prescribed by the Lieutenant
Governor in Council." Section 8 of the Expropriation Act General Regulation, B.C.
Reg. 451/87 (the "General Regulation") states:
8. For the purpose of section
19 (2) of the Act, the following persons may prepare appraisal reports:
(a) a person designated A.A.C.I. by the Appraisal Institute
(b) a person designated as a Certified Appraiser
R.I. (B.C.) by the Real Estate Institute of British Columbia;
(c) in respect of partial takings only, a person designated SR/WA by the International
Right of Way Association.
holds neither of the designations AACI nor RI (B.C.) and, although he is designated
SR/WA, this matter involved a full rather than partial taking.
I am unable to accept the respondent's submission in this respect. In my opinion
section 8 of the General Regulation is clearly limited to appraisal reports which
an expropriating authority, pursuant to section 19, is required to prepare and
serve on an owner at the time of expropriation in connection with the making of
an advance payment. There is no other regulation in place pursuant to section
44 (8) of the Act prescribing the required credentials of appraisers. Absent any
such regulation I conclude that it is for the panel hearing a compensation claim
in each instance to decide, on the basis of evidence provided, whether a person
tendered by the claimant as an expert in the field of appraisal possesses the
necessary formal qualifications or experience to give opinion evidence in relation
to an appraisal report that he or she has prepared. As I have already noted, Mr.
Grant was so qualified, and it follows that his costs fall within the scope of
The respondent's alternative position is that
an appropriate award of appraisal costs should comprise no more than what was
contained in the first two invoices rendered by Interwest, totalling $6,009.18
(which the respondent has already reimbursed), together with Mr. Grant's reasonable
time for testifying at the compensation hearing, calculated to be seven hours
at $150 per hour, for a grand total of $7,132.68. This contrasts with the claimants'
claim for appraisal costs totalling some $17,135.88.
respondent objects to the overall size of the appraisal accounts presented on
the following grounds:
(1) The board's expressed
opinion (at p. 42 of its compensation decision) that one appraisal report, carefully
researched and drafted, rather than the two reports actually prepared, would have
served the claimants properly;
(2) The commonality of
the work done in this matter with that in the Buchanan case, the invoicing for
which here amounts to a subsidy of the Buchanans.
The initial use of a junior qualified appraiser, Mr. Hall, at a fee rate of $75
to $80 per hour, followed by the decision to use Mr. Grant as the primary appraiser
at a fee rate ranging from $150 to $165 per hour;
Excessive time spent, given the simplicity of the appraisal exercise involved,
wherein the appraisers for both parties essentially agreed on highest and best
use and selected many of the same comparables;
appraiser's assessment of the section 32 issue and his reliance on the development
approach to valuation, neither of which the board accepted;
(6) The careless, inconsistent and confusing nature of the appraiser's evidence.
In my opinion, some of these objections are well founded while others carry little
or no weight. I will deal with each of them in turn.
As to the first ground, I consider the board's suggestion limiting reasonable
costs to one appraisal report, although not perhaps binding upon my determination
of the issue, to be helpful and persuasive since the panel which heard the compensation
claim was obviously in the best position to assess the utility of the appraisal
evidence provided. To some extent, however, the issue turns upon what the board
actually meant by "one appraisal report". What I have termed the first appraisal
report was produced in April of 1992, the second in February of 1994. I do not
read the board's decision as meaning that the claimants may only seek reimbursement
for the reasonable costs incurred in preparing that first appraisal report and
not the reasonable costs of any additional appraisal research and analysis later
considered to be necessary to the claimants' case. In my opinion, such additional
work reasonably undertaken and performed is recoverable. It was Mr. Grant's evidence,
which I accept, that upon review of the board's compensation decision, he "restated"
the final Interwest account by deleting the time and expense directly involved
in writing and assembling the second appraisal report. It therefore seems to me
that the respondent's first ground of objection has already been addressed.
The second ground of objection flows from the fact that Interwest was retained
by both the claimants and the Buchanans. The respective appraisals were performed
at about the same time. Mr. Grant under cross-examination agreed that there was
a "substantial identity" between the two appraisals. Both dealt with unserviced
municipal lots with the same highest and best use. The same comparables were used
in estimating market value. The only real difference, according to Mr. Grant,
was in the "imminence of development" of the respective properties. Mr. Grant
gave expert evidence in both compensation claims which were, of course, heard
together. He divided his costs for attendance at the hearings evenly between the
Buchanans and the claimants. Apart from that, however, there is a significant
disparity between the amounts charged by Interwest to the claimants and to the
Buchanans. Evidence received in the Buchanan cost claim, which I heard successively
with this matter, indicates that their appraisal costs totalled $7,391.35, only
about 43 per cent as much as the claimants'. One reason for this was that the
Interwest appraiser spent so much more time conferring with claimants' counsel
and assisting in the preparation of their case for hearing than in the Buchanan
matter. The respondent says that Interwest's invoicing in the claimants' case
constitutes a subsidy of the Buchanan claim.
I have some
difficulty with the respondent's position on this point. As the accounts reveal,
the Buchanans did save themselves some money by using the same appraiser as the
claimants and being carried along to a considerable degree by the appraiser's
work on behalf of the claimants. However, I accept the claimants' argument that
the work done on their behalf and for which they were billed was work that would
otherwise have been performed on each of the cases separately. Accordingly, it
seems to me that some overall savings in appraisal costs were very likely achieved.
To the extent that those costs are found to be reasonable and the respondent is
held responsible for reimbursing them, it is the respondent who is the beneficiary
of this arrangement.
As to the third ground of objection,
it is undoubtedly the case that Mr. Hall's replacement by Mr. Grant as primary
appraiser on the file, at roughly double Mr. Hall's hourly rate, greatly increased
the appraisal costs incurred thereafter. However, just as was the case with the
succession of claimants' counsel in this matter, the question is whether the change
was reasonable or avoidable and whether any unnecessary duplication of effort
resulted. Mr. Grant testified that it was common practice within the firm to make
use of junior appraisers wherever feasible as a cost-saving measure to clients.
Mr. Hall, he said, by the spring of 1994 was just reaching the stage in terms
of experience where the firm considered that he would be professionally competent
to give evidence at a hearing. However, he added, it was always the anticipation
that either Mr. Grant or another senior appraiser would testify at the hearing
of this matter. Any doubt on that point was removed with Mr. Hall's temporary
departure from the firm shortly before the scheduled hearing for family reasons.
I accept that the course of conduct followed in this respect was reasonable and,
perhaps, ultimately unavoidable in the circumstances. I am also satisfied that
Mr. Grant at all times during Mr. Hall's tenure on the file acted in a supervisory
and review capacity such that, when he assumed primary conduct, no significant
duplication occurred since he was already well acquainted with the case. His fee
rate at the relevant time, while certainly at the upper end of what the board
has previously considered reasonable, seems supportable for a person of Mr. Grant's
The fourth ground of objection is, in my
view, more compelling. I accept that this case involved an appraisal exercise
simple in scope and enlarged only by the claimants' focus on the "project influence"
issue. Indeed, Mr. Grant under cross-examination acknowledged that there was "nothing
exotic or terribly difficult" about it and that even the section 32 issue did
not make it "overly complex". No planning evidence was assembled and no technical
feasibility study or the like prepared. The first appraisal report was completed
by April of 1992 following the total expenditure of around 64 hours of appraisal
time resulting in just over $5,400 in professional fees. These are itemized in
the first two Interwest accounts. All of the remaining time (nearly 90 hours)
and fee cost (close to $9,900) itemized in the third Interwest account was incurred
in the seven or so weeks prior to and including the compensation hearing. A large
part of it reflects Mr. Grant's efforts to find and analyze other properties and
developments, or to re-analyze existing ones, in light of the underlying assumptions
which informed his second appraisal report. Even allowing for reasonable time
spent on other necessary matters related to the hearing, it seems to me that the
third Interwest account reflects excessive time spent in the circumstances of
It is instructive to compare the third Interwest
account of March 31, 1995, with an earlier Interwest account dated March 8, 1994,
which the respondent produced in evidence at this cost hearing. The earlier account,
which was evidently prepared for settlement purposes, was not formally before
me for review because, as Mr. Grant testified, it had been subsumed within the
later "restated" account. My copy of the March 8, 1994 account contains no itemized
time entries, but it does summarize the hours spent on the file by each individual
at Interwest during the billing period. In that account Mr. Grant is shown to
have recorded 18.5 hours of billable time during the period up to when the account
was rendered. The restated account of March 31, 1995 itemizes all time entries.
During the same billing period as in the earlier account, Mr. Grant is now shown
to have recorded 32.8 hours of billable time. This apparent discrepancy was not
addressed by either party during the cost hearing, but in my view lends weight
to the perception that some of the later appraisal costs seem inflated.
The respondent's fifth ground of objection goes to the degree of success achieved
on determination of the issues at the hearing in relation to the time spent and
expense incurred. Clearly, a good deal of Mr. Grant's time was devoted to his
investigation and assessment of alleged "project influence" which the board found
was not proven. This is a result which I must take into account in assessing the
reasonableness of the Interwest accounts. It is somewhat unclear to me whether
the genesis of the theory rested with Mr. Grant or whether he simply proceeded
on an assumption provided to him by claimants' counsel. In any case, the theory
foundered for lack of evidence, the responsibility for which can only partly be
laid at the feet of the appraiser. The other part lay in the claimants' failure
or inability to call witnesses at the hearing to support it.
The board also rejected the development approach to valuation upon which the claimants'
appraiser had ultimately relied. At p. 36 it stated:
The board is not persuaded on the evidence that the required degree of imminence
[of development] was prevalent in this case, despite the optimism of the claimants.
Respondent's counsel cited the decision of the board in Devick v. British
Columbia (Minister of Transportation and Highways) (1994), 52 L.C.R. 212 at
p. 232. In that case an appraiser's "wildly optimistic report", which relied on
the development approach, was found to have been of no assistance to the board
and its cost was disallowed. In this instance both the claimants' and the respondent's
appraisers considered the development approach. As well, both made use of the
direct comparison approach. In awarding costs, the board did not conclude that
the claimants' appraisal report had been of no assistance; it simply expressed
the opinion that a particular limit be placed on the appraisal costs recoverable.
Accordingly, the board's rejection of the development approach advanced by the
claimants' appraisers is relevant to my determination of their reasonable costs,
but it does not indicate a result as severe as that reached in the Devick decision.
Be that as it may, the board was critical of what it found to be several unexplained
inconsistencies leading to confusion in Mr. Grant's evidence on behalf of the
claimants. This leads to the sixth ground of objection to the appraisal accounts.
Three examples will suffice.
First, on the subject of
highest and best use, the board commented at p. 27 of the reported decision:
It is unclear to the board whether the claimants are asserting
that the highest and best use of the Lots was as rezoned serviced lots at the
date of taking, or a continuation of their existing use as residential holding
lots subject to rezoning and awaiting services. Mr. Grant's conclusions, as previously
cited, are inconsistent. If it is his opinion that the "properties would have
been cooperatively serviced by the owners . . . at the time of taking", then the
highest and best use of the Properties must necessarily be serviced lots. Yet
in the same paragraph Mr. Grant says that the highest and best use is considered
as residential holding lots. Further, Mr. Grant valued each as an unserviced lot.
Second, on the subject of market value, the board said this at p. 34:
Clearly, there is consensus on value between the appraisers
retained by the respondent, but the appraiser retained by the claimants appears
to be at odds between his two reports, even though they both have the same effective
date and physically there was no change in the properties.
Third, in arriving at an estimation of market value, Mr. Grant relied heavily
on one comparable which had sold in December of 1989 for $65,000 but was in fact
actually listed at the valuation date of December 1991 for $59,500. The board
noted that the first appraisal report of April 1992 considered this listing of
an unserviced lot at $59,500 as a useful indication of an "upper limit of value"
for the claimants' property. However, the second appraisal report of February
1994 made an upward adjustment of the comparable's value to $88,400. The board
commented at p. 37:
Mr. Grant was unable
to explain to the satisfaction of the board why he relied on an adjusted value
of $88,400 when the comparable was listed for $59,500 at the valuation date.
Such glaring inconsistencies by an experienced appraiser on issues central to
the board's determination at the compensation hearing reflect negatively on the
manner in which the claimants' case was prepared and conducted and, in my view,
should reasonably lead to cost consequences. In so deciding, I refer to my discussion
of the principles which apply to expert costs in Bill's Frontier Restaurant
Ltd. v. British Columbia (Minister of Transportation and Highways)
(1996), 58 L.C.R. 204, a section 44 decision rendered after the hearing of this
cost matter. The relevant passages are at pp. 221 and 222.
In summary, I accept in large measure the last three of the respondent's objections
to the overall size of the appraisal fee account and conclude that a substantial
reduction is warranted in the amount which I should allow. I fix the reasonable
fees recoverable from the respondent with respect to the Interwest accounts at
$9,000, which is roughly 60% of the fee cost claimed.
As with the legal accounts,
the facsimile charges were the only items of disbursement within the appraisal
accounts which drew any objection from the respondent. Interwest appears to have
charged faxes at $1 per page. The amount at issue is $75. I fix the amount allowed
for faxes at $0.35 per page, which has the effect of reducing the disbursement
account by $48.75. Accordingly, total disbursements recoverable amount to $661.83.
It follows that goods and services tax will need to be adjusted on the appraisal
costs which I have allowed, comprising $9,000 in fees and $661.83 in disbursements.
I calculate the adjusted amount to be $676.33.
My review of the claimants' costs in this
matter is summarized below:
From this review I have determined
that there remains owing to the claimants on account of their reasonable legal
and appraisal costs pursuant to section 44 the sum of $20,187.16.
4.5 Interest on Outstanding Accounts
next question is whether the claimants should be awarded interest on the unpaid
balance of the accounts which I have allowed and, if so, from what date and at
what rate. Since the decision of the Supreme Court of British Columbia in Tidmarsh
v. Comox-Strathcona (Regional District) (1995), 55 L.C.R. 81, 54 A.C.W.S.
(3d) 696, it is clear that reasonable interest expenses incurred on professional
accounts are recoverable under the Act. However, as respondent's counsel asserts,
and I accept, Tidmarsh is also authority for the view that an award of interest
on costs is discretionary. The availability of such an award depends upon the
particular circumstances of each case. Cost decisions of the board rendered after
the date of hearing of this application have also set out certain principles and
guidelines for determining the appropriateness of an interest award, albeit in
the context of an application for advance costs pursuant to section 47: see Roadmaster
Auto Centre Ltd. v. Burnaby (City) (1996), 58 L.C.R. 305 at pp. 311-319;
El & El Investments Ltd. v. School District No. 36 (Surrey)
(1996), 59 L.C.R. 200 at pp. 207-212; El & El Investments Ltd. Stephanie
Perla Chuchman and George Chuchman v. The Board of School Trustees of School
District No. 36 (Surrey), unreported, E.C.B. No. 17/94/126, October 24, 1996,
at pp. 19-22.
The claimants assert a claim for interest
on the outstanding legal accounts on the basis that the respondent failed to meet
its statutory obligations with respect to advance payment of costs and that the
claimants have, accordingly, incurred interest charges on those unpaid accounts.
Each of the Bull Housser invoices contains the following clause:
This account is payable upon receipt. If it is unpaid within
30 days after the invoice date, interest will be charged at an annual rate of
15%, charged monthly.
The claimants did not
ask for interest on the outstanding appraisal account, presumably because it had
only been rendered about one month before the final cost hearing.
The respondent argues that no interest should be awarded on the accounts because,
on the evidence at this cost hearing, the claimants' retainer with their solicitors
did not address interest, the claimants have not been asked to pay and have not
paid any interest, and the respondent made generous advance payments of costs
pursuant to section 47 along the way. In the circumstances of this case, the respondent
says, it was reasonable to withhold payment on later accounts presented to it
until after the board rendered its compensation decision and, also perhaps, until
after I rendered my decision on costs.
I am unable to
accept the first two of the respondent's arguments. Although there was no separate
written retainer agreement, in my view the clause which appears in each of the
Bull Housser accounts is evidence of a standard retainer agreement covering interest.
Although the claimants have not actually paid any interest pursuant to that agreement,
in my opinion they have incurred an obligation to do so. Accordingly, I determine
that the claimants have established a threshold entitlement to interest.
In dealing with the respondent's other arguments, it is useful first to review
the chronology of the various accounts presented for payment and the manner in
which the respondent addressed them.
The respondent has
paid in full the first three of five legal accounts rendered to the claimants
by Bull Housser. The payments totalled $5,488.38 and no question concerning interest
arises in respect of them. The fourth account dated February 17, 1994, in the
amount of $3,943.75 (later adjusted) was presumably forwarded for payment to the
respondent approximately one month prior to the start of the compensation hearing.
This account therefore fell within the scope of section 47 of the Act. Section
47 (1) provides that an owner may, before the compensation hearing has commenced,
submit a written bill to the expropriating authority consisting of the reasonable
legal, appraisal and other costs that the owner has incurred up to the time the
bill is submitted. Pursuant to section 47 (2), the respondent had an obligation
either to pay the bill promptly or to apply to have it reviewed by the chair.
In this instance, the respondent did neither. The fifth account, in the amount
of $18,147.48, is dated October 27, 1994, more than seven months after the conclusion
of the compensation hearing. It was not therefore subject to the provisions of
section 47 and, as with the previous account, the respondent has made no payment
with respect to it.
Although the question of interest
did not arise in connection with the appraisal accounts at this cost hearing,
the respondent's treatment of those accounts is nevertheless germane to my determination
of the interest issue. The respondent has paid in full the first two Interwest
accounts totalling $6,009.08. I noted earlier that, in March of 1994, Interwest
rendered a further account in the sum of $5,325.42 which was later subsumed in
the much larger third and final bill dated March 31, 1995. The March 1994 account
was presented for payment to the respondent about one week before the compensation
hearing began. The respondent paid nothing at the time and continued to resist
requests for payment on the basis that it was awaiting the board's compensation
decision. Mr. Woodward, counsel for the respondent, wrote to Mr. Bennett, claimants'
counsel, on May 17, 1994 as follows:
of the School District's application under Section 44 (5) of the Act on conclusion
of the hearing, and in view of the earlier, without prejudice, advance payments
of legal and appraisal costs made to your client, we do not intend to take any
action in respect of this matter at the present time. We will contact you regarding
this matter once the Board's decision is in hand.
The board's decision was rendered on October 13, 1994, and although it had discretion
under section 44 (5) to award the claimants less than all of their costs, the
board did not exercise its discretion to do so. Nevertheless, the respondent made
no further payments on account of either appraisal or legal costs. Mr. Woodward
wrote again to Mr. Bennett on October 19, 1994 to say:
Certainly the costs paid to date strike us, in terms of the amount in issue, and
in terms of what the Board has had to say about Mr. Grant's work, as "reasonable".
Beyond suggesting that what had already been paid by way of costs was "reasonable"
in the circumstances, the respondent at no time prior to this cost hearing set
out its objections to the unpaid accounts. At the cost hearing itself, respondent's
counsel (as I understood him) submitted that an appropriate award of legal costs
should be on the order of $9,600 for fees and about $1,000 for disbursements together
with the applicable taxes. This contrasts with what the respondent had already
paid to the claimants to date on account of legal costs of slightly less than
$5,500. In other words, there was an appreciation on the part of the respondent
that it likely would be required to pay more toward costs than it had already
I accept that it was reasonable in the circumstances
for the respondent to await the board's compensation decision before deciding
whether to make any further payment on account of costs. However, upon the board's
determination awarding actual reasonable costs, I am not satisfied that it was
reasonable for the respondent to do nothing further if it wished to avoid incurring
liability for interest. In my view, the claimants are entitled to be indemnified
for the reasonable interest costs they have incurred on the amount of the outstanding
legal accounts which I have allowed. Accordingly, interest will run on the amount
of $15,858.08 from October 27, 1994, the date of the last legal invoice and some
two weeks after the board's decision was rendered, until paid. Under the circumstances,
no interest will be assessed on the outstanding appraisal costs which I have allowed
in the amount of $4,329.08 provided that amount is paid promptly, that is, within
30 days of the date of this decision.
As to the rate of
interest charged, the cost decisions of the board referred to above have considered
what constitutes a reasonable rate of interest and I am satisfied that the conclusions
reached in those cases are applicable to this matter. Accordingly, I allow as
reasonable from my review of all the circumstances of this claim a simple rate
of interest of 12% per annum.
4.6 Section 44 Costs
The final cost review in this matter occupied the whole of one hearing day and
portions of two subsequent days. Both Mr. Bennett, principal counsel for the claimants,
and Mr. Grant, the claimants' appraiser, were called to give evidence and, because
Mr. Bennett testified, his associate Mr. Goulden presented the claimants' case
The claimants take the position that they should
be entitled to the reasonable costs of preparation for and attendance at the section
44 cost hearing, including the costs of their failed application for an order
for production of the respondent's legal accounts. Even though that application
did not succeed, they submit that it raised an arguable issue of general importance.
The claimants suggest that I should allow them a fixed amount of $3,000 to take
into account both Mr. Goulden's preparation and attendance time as well as witness
fees for Mr. Bennett and Mr. Grant. Their actual costs, they say, will likely
exceed that figure.
The respondent submits that no costs
should be awarded to the claimants in respect of their application for document
production which, the respondent argues, wasted in excess of half a day at the
hearing. With respect to the rest of the hearing, the respondent says that no
costs ought to be awarded for the attendance of either Mr. Bennett or Mr. Grant
because the claimants' retainers with both Bull Housser and Interwest are silent
as to witness fees. In the respondent's submission, a global award in the amount
of $400 would be appropriate compensation for the claimants' section 44 costs.
I am persuaded that it is desirable where possible to fix a global award of costs
for a section 44 review in order to avoid the still further protracted process
of having a hearing into the cost of a cost review. In this instance, the claimants
broke down their estimated costs as follows: $1,500 to $2,000 for Mr. Goulden's
preparation and attendance as counsel; $850 for Mr. Grant's preparation and attendance
as witness; and $650 for the time Mr. Bennett spent as witness. For the purpose
of making my determination, I accept these amounts as a reasonable estimate of
the actual costs incurred.
It seems to me that the statutory
considerations under section 44 (11) also have relevance to my determination of
section 44 hearing costs. In that regard I would observe, firstly, that despite
the lamentable length of this decision, the issues raised on this cost review
were, for the most part, neither particularly novel nor overly complex. Only the
accounts of one law firm and one firm of appraisers were before me for review.
Although they spanned a three year period, the accounts were neither numerous
nor lengthy. Disbursements were scarcely at issue. The interest question, argued
in light of the judgment already rendered in Tidmarsh, was not pursued in depth.
There were perhaps two novel issues, one raised by the respondent involving the
qualifications of the appraiser and the other raised by the claimant concerning
production of the respondent's legal accounts. Neither received what I might describe
as probing legal analysis. I am therefore inclined to question whether this matter
fully justified the expenditure of upwards of $2,000 of legal counsel time.
Secondly, it is apparent that the claimants' success was somewhat divided on determination
of the issues at this cost hearing. The claimants did not persuade me on authority
that I could or should order production of the respondent's legal accounts, although
I accept that the question itself was of some importance to the future conduct
of cost reviews before the board. As to their reasonable costs, the claimants
have been allowed $31,679.62, which is $13,078.97 less than what they claimed
but $20,187.16 more than what the respondent paid them in advance. These figures
are exclusive of interest, and on that issue, the claimants also largely succeeded.
In the result, it appears to have been necessary and reasonable for the claimants
to proceed to a section 44 review.
Thirdly, in the preparation
for and conduct of their case at this cost review, the claimants' decision to
call Mr. Bennett and Mr. Grant to give viva voce evidence, rather than
simply obtaining their affidavits, doubtless had the effect of increasing the
actual costs incurred. However, the respondent had not particularized its objections
to the accounts in question prior to the hearing, and it seems to me that the
claimants acted prudently in the circumstances in incurring some additional cost.
The testimony of both witnesses proved useful to my determination of costs. I
am not persuaded by the respondent's argument that witness costs somehow fell
outside the scope of the respective retainers of Bull Housser and Interwest.
Taking into account all of the foregoing considerations, I allow the reasonable
costs incurred by the claimants on this section 44 hearing in the amount of $2,000
inclusive of fees, disbursements and tax.