October 23, 1997, E.C.B. No. 42/93/148 (62 L.C.R. 291)

Between: Zofia Ferancik, William Rudolf Ferancik and Vladimir Ferancik
Claimants
And: The Corporation Of The Township Of Langley
Respondent
Before: Fiona M. St. Clair, Vice Chair
Appearances: Bruce Melville, Counsel For The Claimants
James H. Goulden, Counsel For The Respondent

 

1. THE APPLICATION

The claimants, Zofia Ferancik, William Rudolf Ferancik and Vladimir Ferancik, have applied under s.45(10) of the Expropriation Act, R.S.B.C. 1996, c.125 ("the Act") for a determination of the costs to be paid to them by the respondent, Corporation of the Township of Langley, in this proceeding. They also seek interest and the costs of this hearing.

The costs claimed are in respect of bills rendered by the Feranciks' lawyers, the firm of Peterson Stark, as well as by a real estate appraiser, John Rack, and a real estate appraisal firm, Cunningham & Rivard. The total amount claimed here, inclusive of fees, disbursements, taxes and interest, is $81,993.33. Langley has to date advanced the sum of $29,839.39 on account of these bills, pursuant to a number of s.48 claims made by the Feranciks. These payments leave the sum of $52,153.94 outstanding.

I conducted the s.45 cost hearing in my capacity as vice chair of the board and in exercising, pursuant to s.26(6) of the Act, the powers and jurisdiction of the chair.

 

2. BACKGROUND

The claim for costs arises out of the consensual transfer to Langley, under s.3 of the Act, of 2.25 acres belonging to the Feranciks within the Walnut Grove area of the Township of Langley. The purpose of the transfer was the creation of a neighbourhood park. The lands were unimproved at the date of transfer, and were zoned RS-2 Suburban Residential. In 1985 Langley designated the property as park land in the Northwest Langley Official Community Plan and also in the more local Walnut Grove Community Plan.

Once Langley made the designation, the Feranciks approached the Township from time to time offering to sell their property. In 1990, Langley advised the Feranciks that it was no longer interested in the property as a park. The Feranciks thereupon proceeded with an application for rezoning for an 11 lot residential subdivision in July of that year. In September 1991 Langley changed its mind, and turned down the application for rezoning on third reading.

At that point, the Feranciks began negotiations with Langley for the purchase of the property, but were unable to come to an agreement. They entered into a s.3 agreement under which Langley paid the Feranciks $380,000, and which preserved the Feranciks' right to seek further compensation from the board. The Feranciks transferred the property to Langley under the agreement on October 7, 1992. Langley made a further advance payment in February 1995, bringing the total paid in advance to $395,000.

The four day compensation hearing took place in Vancouver from September 30 to October 3, 1996. The Feranciks called one expert witness -- an appraiser, John Rack -- to testify on their behalf. Mr. Vladimir "Walter" Ferancik also testified for the claimants. Langley called four witnesses in total, including three experts -- an engineer, a planner and an appraiser, Mr. Lyle Anderson. At the compensation hearing, the parties agreed that the land should be valued as though the property could be upgraded to permit development of a number of single family dwelling units.

The board rendered its decision on October 25, 1996. It concluded that the total market value of the land taken at the date of valuation was $460,000. It also awarded the Feranciks a further $11,518 by way of disturbance damages, for a total compensation award of $471,518. This was $76,518 greater than the advance payments made, but $158,482 less than the Feranciks had claimed. The board also awarded the Feranciks interest on the compensation award under what is now s.46(1) and (4) of the Act, but denied them interest for the period between May 8, 1995, and September 30, 1996, further to what is now s.47 of the Act. Section 47 is in essence a penalty provision, applicable at the discretion of the board where one party has caused an "unreasonable delay" in the proceedings. In this case, the board concluded that the Feranciks, through the actions of their first lawyer, had caused such a delay. Finally, the board granted the claimants their "actual reasonable legal, appraisal and other costs to be determined by the chair under [s.45] of the Act."

 

3. AREAS OF AGREEMENT BETWEEN THE PARTIES

Mr. Melville, counsel for the Feranciks, advised me that the parties had reached agreement on a number of issues, as follows:

  • The hourly billing rates for the Feranciks' lawyers should be the lesser of the rates actually charged and the applicable Canadian Bar Association/Vancouver Association of Legal Administrators ("CBA/VALA") survey rates;

  • The outstanding legal assistant time should be valued at $1,500;

  • Photocopies should be reimbursed at the rate of $0.15 per page for a total photocopy cost of $739.50;

  • Fax transmissions should be reimbursed at the rate of $0.35 per page for a total fax cost of $168.35;

  • Langley agrees that the amount of the Cunningham & Rivard appraisal of $2,519 is reasonable, but does not agree that this expense was a necessary one.

  • The remaining disbursements should be reimbursed as claimed.

The original accounts that I have before me in evidence set out the amounts first claimed, and not these adjusted amounts. Mr. Melville, however, has prepared and submitted a series of schedules that recalculate the claim based on these agreed figures. These schedules include a claim analysis, which breaks down the amounts claimed by the persons who billed on the file by type of disbursement, by taxes and by totals. They also include a summary of claim hours by lawyer/legal assistant, a summary of claim rates for each lawyer/legal assistant, and finally, a summary of the interest claimed. I have found these schedules extremely useful in my analysis of this cost claim, and it is the adjusted fee amounts that they set out to which I will be referring in this decision.

 

4. THE ISSUES

This leaves me with the following issues to determine:

  • whether the Feranciks are entitled to claim legal expenses incurred between 1987 and the signing of the s.3 agreement on October 6, 1992;

  • whether the 18 legal accounts billed between October 8, 1992 and December 13, 1996, totalling $50,116.92 inclusive of fees, disbursements, GST and PST, were reasonable and necessary, and the appropriate amount that Langley should be required to reimburse on their account;

It should be noted here that the exhibit evidence I had before me on this hearing (in the form of the schedules referred to above) set out different amounts for some of the legal accounts than I have included in my calculation of the total here. This is because they included both the Rack and Cunningham & Rivard accounts as disbursements. For the purposes of this decision, I have separated out the amounts of these experts' fees, and will deal with the remaining amounts of the legal accounts, as adjusted by agreement between the parties.

  • whether the following Cunningham & Rivard accounts, inclusive of fees and GST, were necessary, and whether Langley should be required to reimburse anything on their account:

    March, 1990 $1,000.00
    April 30, 1992 $1,625.33
    TOTAL: $2,625.33
     
  • whether Mr. Rack's two appraisal accounts, inclusive of fees, disbursements and GST, were reasonable and necessary, and the appropriate amount that Langley should be required to reimburse on their account:

    September 27, 1996 $17,641.63
    October 30, 1996 $6,522.55
    TOTAL: $24,164.18
     
  • whether the interest claimed in the amount of $5,086.89 is a reasonable cost that Langley should be required to pay.

 

5. LEGAL EXPENSES INCURRED BETWEEN 1987 AND 1992

The legal expenses in question are set out in three separate cost claims, dated October 8, 1992, January 4, 1993, and January 10, 1996. Appraisal services provided by Cunningham & Rivard were also incurred during the disputed period, but I will deal with them in the portion of this decision relating specifically to that firm's accounts.

The evidence indicates that the legal expenses were incurred before the s.3 agreement of October 6, 1992, but following the Feranciks' receipt of a letter from Langley dated December 7, 1987. That letter informed the Feranciks of Langley's intention to acquire their property.

Mr. Melville argues that these pre-taking expenses fall within the guidelines set out in the board's reasons in Creative Stretch Fabrics Ltd. v. District of Pitt Meadows (1991), 46 L.C.R. 111. That case held that once an owner receives an indication in writing from an expropriating authority that it intends to acquire their land for a public project, the owner is entitled to seek professional advice, the reasonable costs of which are recoverable once an expropriation has been effected. Mr. Goulden, counsel for Langley, argues that the Feranciks had not adequately proven that the accounts in question fall within the Creative Stretch test. In particular, he points to the bulk of the accounts contained within the January 10, 1996, cost claim, which are headed "Lot 25 Langley (Cross Dispute)." These accounts begin on August 31, 1988 and go right through to at least December 31, 1989. A number of the accounts thereafter are not fully reproduced as attachments to the affidavit before me, and seem to be missing their reference line. Beginning on about June 30, 1990, however, the remaining accounts within the January 10, 1996, cost claim are headed "Langley Park Site Acquisition." Mr. Goulden maintains, therefore, that the Feranciks have not satisfactorily proven that all of the services covered by these accounts relate to the taking in the manner required by Creative Stretch.

In response to these arguments, Mr. Melville states that the incomplete copies of accounts are ones in which his office has "whited out" the charges relating to the cross dispute as being irrelevant to this hearing. He says that all of the remaining charges, although contained in accounts referring to the cross dispute, are properly claimed under the Act as relating to the taking. He refers to the affidavit of Elizabeth I. Olkovick, his firm's legal assistant, which sets out the history of the parties' negotiations for the sale of the land to Langley between December 7, 1987 (when Langley first made an offer to purchase) and June 10, 1992 (when discussions were first undertaken regarding a s.3 agreement). In addition, he refers to the affidavit of Walter Ferancik, which also sets out this history, although in more detail.

Having reviewed the evidence, it seems to me that Mr. Goulden's point rests mainly on the "Re:" line of the accounts, and not on their substance. He did not take issue with the relevance to the taking of the matters outlined in the two affidavits. It seems to me that the activities that took place between December 7, 1987, and June 10, 1992, do fit within the test set out in Creative Stretch, and are properly the subject of this s.45 review. I will deal with the particulars of the accounts in the context of dealing with all of the legal accounts together.

 

6. THE LEGAL ACCOUNTS

6.1 Legal Fees

The total lawyers' and legal assistant's time claimed here is 253.44 hours, and the related fees total $39,917.03. There are 18 separate accounts prepared between October 8, 1992 and December 13, 1996.

6.2 The Parties' Positions

Langley maintains that the overall amount of legal fees claimed by the Feranciks is "grossly excessive and should be reduced significantly." Langley also contends that the fees are too high in light of various factors outlined in s.45 of the Act. It argues that:

  • this was a straightforward case, involving few contested and no complex issues, a relatively small amount of documentation, no examinations for discovery, and only 4 days of hearing;

  • the Feranciks' success was mixed, in that they sought an award of between $530,000 and $610,000 at the compensation hearing but obtained an award of only $460,000;

  • the manner in which the case was prepared resulted in excessive costs being claimed, as there were 7 different lawyers involved in the file at various times, which resulted in a good deal of overlap and duplication, particularly with regard to the time spent on the file by Mr. Hood, one of the Feranciks' earlier lawyers.

Mr. Goulden compares this case to Bill's Frontier Restaurant Ltd. v. Minister of Transportation and Highways (1996), 58 L.C.R. 204. In that case there were claims for real estate losses, loss of profits and disturbance damages, and the hearing took nine days. In addition, extensive examinations for discovery had been conducted. The chair of the board in Bill's Frontier determined that an award for reimbursement of legal fees in the amount of $35,000 was appropriate. In light of this and the other considerations argued, Mr. Goulden submits that the legal fees claimed here should be reduced by 50%.

Mr. Melville, on the other hand, argues that the Feranciks achieved a high degree of success at the hearing. He maintains that at the hearing Langley took the position that the Feranciks were entitled to only $330,000, and points out that the advance payment was in the amount of $395,000. (Mr. Goulden, on the other hand, maintains that his client's position at the hearing was $395,000.) Given the award of $472,000, Mr. Melville says that the difference between Langley's position and what the Feranciks ultimately achieved was $142,000.

Mr. Melville suggests that I consider the legal fees through a "component stages" analysis, as used by the chair of the board in Bill's Frontier Restaurant. This analysis involved a separate consideration of the legal time recorded at each of three stages of handling the case. The three stages identified were the consultation and review stage, the pre-hearing stage and the preparation and attendance at hearing stage. Mr. Melville suggests that these three stages are found in the Feranciks' case, as well as two other stages -- namely, the s.3 negotiation stage and the s.48 cost recovery stage.

Mr. Melville summarizes his analysis of the legal fees by component stages as follows.

  • s.3 negotiations

As indicated previously, there was a lengthy period of negotiation in this case resulting in a s.3 agreement. Legal services rendered up to October 8, 1992, relate to this stage. Legal time billed during this period totals 62.74 hours and amounts to $8,214.23 in fees.

  • s.48 cost recovery

Mr. Melville points out that such costs will often be incurred whether or not any s.48 reviews are actually conducted. In this case, legal time entries total 64.75 hours, for a billed value of $8,512.33.

  • Consultation and review culminating in the filing of pleadings

Mr. Melville indicates that time entries dated between October 9, 1992, and October 4, 1993, relate to this stage. The total time recorded during that period is 6.4 hours, with a billed value of $824.60.

  • Intermediate pre-hearing stage

Mr. Melville advises that the relevant dates for this stage are October 4, 1993, to August 28, 1996. The hours billed during that period amount to 40, and the amount claimed is $5,628.10

  • Preparation for and attendance at the compensation hearing

The hearing of this matter took four days, one day less than was originally scheduled. Mr. Melville submits that the Feranciks' case was efficiently conducted and that the costs associated with this phase were well within reasonable limits. The time entries are between August 29, 1996, and November 29, 1996, for a total of 79.55 hours and $16,737.77 in fees.

6.3 Analysis and Conclusions

The decision of this board in Nygard v. Surrey (District) (1989), 42 L.C.R. 279 discusses the duties of the board in reviewing costs under what is now s. 45. The board's initial objective is to determine whether the nature of the work done was necessary, and if so, to determine whether the amount claimed for it was reasonable. The reasonableness of the amount claimed is to be determined in the context of the statutory directions provided in s. 45(11), and also with a view to the common law criteria for reasonableness as codified in s. 71.1 of the Legal Profession Act, S.B.C. 1987, c. 25. Among the factors to be considered are the number and complexity of the issues involved, the degree of success, the skill and specialized knowledge required of the lawyers involved and the time reasonably expended. The degree of success is to be measured having regard to both the determination of the issues and the difference between the amount awarded and the advance payments.

I find that this case was a relatively straightforward one, involving no unusual or complex issues, and requiring relatively little hearing time. I also find that the Feranciks were successful as a result of the board's decision, within the meaning of s.45. Depending on which party's figures are correct about the position Langley took at the hearing, the Feranciks' award was somewhere between $77,000 and $142,000 more than Langley maintained at the hearing they were entitled to. Taking into account the statutory directive contained in s.45 (10)(b)(ii), the degree of success that must be considered is, at a minimum, $77,000. This seems to me to be an unmixed and fairly substantial degree of success, given the amounts in issue.

With regard to Mr. Goulden's suggestion that the handling of the Ferancik case is characterized by the participation of too many lawyers, resulting in an overlapping of services provided, I note that the evidence shows it to be the practice of Mr. Melville's firm in recent years not to have two lawyers within the firm record, for billing purposes, the time spent on a task in which they were both simultaneously involved. My review of the accounts themselves here confirms this.

Nonetheless, I do find that in the earlier stages of the handling of this file (particularly in the stage Mr. Melville identifies as the s.3 negotiation stage) there were too many cooks and not sufficient progress with the broth in relation to the time charged. The accounts that cover this period deal with a lengthy time frame -- from August, 1988 to October, 1992. During this time there was a protracted series of negotiations between Langley and the Feranciks. The main events of that period were: an offer to purchase from Langley in February of 1990 along with the production of Langley's first appraisal report; a counter-offer by the Feranciks followed by their first appraisal report prepared by Cunningham & Rivard in March of 1990; Langley's second appraisal and second offer to purchase in May of 1990; a period of what Walter Ferancik describes as "stalled" negotiations; Langley's third appraisal in February of 1992 followed by the Feranciks' second appraisal in April of 1992; and finally, the s.3 agreement in October of 1992. Most of the billing entries during this time are for telephone conversations and correspondence. In my view, 62.75 hours for this "negotiation" period (which does not even include the drafting of pleadings) is excessive in this relatively simple case, especially when the result of all of these negotiations was a s.3 agreement which left open the whole issue of the amount of compensation.

In addition, I find that 40 hours is unreasonably high for what Mr. Melville describes as the intermediate pre-hearing stage, even though the entries for this identified stage span nearly a 3 year period. Very little seems to have been accomplished on the file during this stage before 1996, other than some investigation of income tax issues relating to the taking. After January of 1996 the entries become more frequent. Those which do not relate to pursuing cost issues (which are the majority of the entries during this time, but which have been extracted by Mr. Melville and dealt with in a separate category) appear to be routine correspondence and telephone calls, and some dealings with Mr. Rack and his draft appraisal. I am unable to understand, from the accounts, why 40 hours of time were required or how that time advanced the claim, other than the time spent dealing with Mr. Rack.

I also find the 79.55 hours spent preparing for and attending the four day compensation hearing to be excessive in light of the lack of complexity of the issues involved and in light of Mr. Melville's familiarity, as an experienced counsel in the field, with such issues and with the conduct of hearings before the board.

Finally, I find 64.75 hours to be an unreasonably long period of time to spend with s.48 cost recovery issues, particularly in a case in which there was only one s.48 review before the board. My review of the accounts indicates that over 30 hours, with a billed value in excess of $5,000 seems to have been devoted to this one s.48 advance cost review. The sole issue in that review, which took place on June 14, 1996, was the appropriate billing of legal assistant time. Mr. Melville presented expert testimony at that time in support of his position regarding the proper charging of legal assistant time, and both parties expressed the hope that the decision would review in some detail the board's views on that subject. To that extent, the application was somewhat more far-reaching in its implications than an average s.48 cost review. Nonetheless, the time spent, in my view, was excessive.

In addition, I note that Elizabeth Olkovick, the legal assistant to Mr. Melville, has billed on various occasions throughout the conduct of the file for the preparation of cost claims. In the s.48 decision I have just referred to, which is reported at 60 L.C.R. 144, I dealt at some length with the appropriateness of such billings. I decided that, barring some evidence of the specific application of a legal assistant's knowledge of expropriation law to the preparation of cost claims, such charges were not appropriate and would be denied. This, however, I must assume has been taken into account in the agreed-upon reduction in fees related to Ms. Olkovick's time.

I note that, of the total fees sought in this review, 17% -- nearly 1/5 -- relates to cost recovery. It strikes me as unreasonable that, in an unremarkable case such as this one, nearly one hour out of every five spent by counsel and legal assistants should have been devoted to the recovery of costs. There has been no evidence adduced here to indicate that this case presented any unusual cost problems. Certainly the Feranciks are entitled to be reimbursed for the reasonable costs associated with the s.48 cost hearing discussed above and this s.45 cost review, and for any counsel or legal assistant time reasonably spent on cost issues beyond the standard compilation and submission of costs to the expropriating authority. In my view, however, this should not in this case have involved anything like 64.75 hours of professional time.

Each cost review must be decided primarily on the basis of its own facts and on its own merits, keeping in mind the statutory and common law considerations that apply to all cost reviews under the Act. It is often, however, of assistance to the reviewer of costs to consider previous recent cost decisions of the board, for the sake of comparison.

I do not accept Mr. Goulden's suggestion that I should use Bill's Frontier Restaurant as the main benchmark for the appropriate over-all amount of legal fees that should be awarded in this case. It is true that Bill's Frontier Restaurant was a more complex, lengthier case, and therefore one in which one would expect greater costs to be awarded. It is also true, however, that the chair made a number of findings adverse to the claimants in that case when he considered the manner in which the case was prepared and conducted (s.45 (10)(c)). He also concluded, among other things, that some of the hourly rates were too high, that secretarial time had been charged as legal fees, and that unnecessary work had been done or that necessary work had been done in an overly time-consuming manner. This resulted in a considerable reduction in the fees that would otherwise have been awarded in that case. At p. 217 of the decision, the chair stated:

Taking into account, as I must, the considerations outlined in s.44(11), as well as the particular concerns which I have expressed around hourly rates, duplication, excessive time spent, and inappropriate or disallowed items, I conclude that a substantial overall reduction is warranted in the legal fees which the respondent ought to be required to reimburse.

All of these factors make the Bill's Frontier Restaurant decision, in my view, a difficult one with which to compare the Feranciks' case.

I find the decisions of the board's chair, Robert Shorthouse, in McKinnon v. School District No. 36 (Surrey), (1997), 61 L.C.R. 9, Buchanan v. School District No. 36 (Surrey), (1997), 61 L.C.R. 228, and Garnett v. British Columbia (Minister of Transportation and Highways), unreported, June 20, 1997, E.C.B. No. 03/92/142, to provide quite useful comparisons with the Ferancik case.

In McKinnon, the claimants sought reimbursement of $23,553.50 in legal fees. This represented 160.4 hours of billed time. The lawyers involved handled the case for over three years, and participated in a five day compensation hearing before the board. The chair decided that 160 hours of legal time was warranted, but reduced the amount sought in order to adjust for too high hourly rates. In addition, he made another downward adjustment for "evidentiary deficiencies in the manner in which the case was prepared and conducted and the small degree of success actually achieved" (p.24). At the end of the day, he allowed legal fees of $18,000.

The Buchanan case is similar to McKinnon in several respects. Since they were heard at the same time, both involved a 5 day compensation hearing. The chair also describes both cases as being relatively simple and involving no complex legal or factual issues. The law firm involved in the Buchanan case was Peterson Stark, the same firm whose charges are being considered in the instant case. In Buchanan, the claimants sought reimbursement for $18,192.00 in legal fees, representing 153.5 hours of billed time. After making "appropriate reductions in some of the hourly rates as well as adjustments for duplication, excessive time spent, and inappropriate or disallowed items," the chair decided that 95 hours of counsel time and 21 hours of legal assistant time (116 hours total) was reasonable. He made a further downward adjustment for "evidentiary deficiencies in the manner in which the case was prepared and conducted and the lack of success on determination of the issues including the claimants' failure to obtain an award of compensation above what they had already been paid", ultimately awarding $11,000 in legal fees.

The Garnett decision also involved the legal services of Peterson Stark, but in a far more complex case that took up 26 days of board hearing time. The Garnetts' claim was for 679.69 hours of legal time, for a total of $94,132.20 in fees. The chair decided that 550 hours of counsel time would have been reasonable, plus an additional 23 hours of legal assistant time, for a total of 573 hours. He applied a further reduction to this amount because of the deficiencies in the manner in which counsel conducted the case at the hearing and due to the general lack of success achieved. He ultimately allowed legal fees of $75,000.

The Garnett case is more useful as a contrast to the Feranciks' case than as a parallel. It involved far more issues of greater complexity, and took up 6.5 times as much hearing time. The total amount allowed for legal costs, however, was $75,000, compared to the approximately $40,000 sought here. Looked at from the perspective of time billed, the Feranciks are seeking reimbursement for 253.44 hours, as compared to the 573 hours deemed to have been reasonable in Garnett.

The McKinnon and Buchanan cases, on the other hand, are fairly similar to the Feranciks' case in terms of complexity and length of hearing. I note that the fees awarded in each of those cases are considerably less than those claimed here. While this can be explained to some extent by the chair's findings in McKinnon and Buchanan that the presentation of the claims in both cases was deficient and that little or no success was achieved, these differences are not sufficient to bridge the considerable gap between the awards in those cases and the award the Feranciks seek here. In Buchanan, for example, the chair explicitly set out that these two considerations caused him to reduce the amount he would otherwise have awarded by only $2,800.

Taking all of the above factors and the previous agreements of counsel regarding hourly rates into consideration, I have decided to set the amount of reasonable legal fees in this case at $26,000. Taxes will have to be recalculated based on this amount, and disbursements are awarded as agreed to be counsel.

 

7. CUNNINGHAM & RIVARD APPRAISAL ACCOUNTS

As indicated above, Langley does not take issue with the reasonableness of the amounts billed for the two appraisals completed by Cunningham & Rivard. It does, however, maintain that the appraisals were not necessary at the time they were obtained.

Mr. Melville maintains that in both cases the appraisals were required to assist in the negotiations between the Feranciks and Langley. In addition, he says that his clients obtained both appraisals only after Langley had obtained and provided appraisal reports to the Feranciks in support of its offers to purchase their land. The Feranciks provided Langley with both Cunningham & Rivard appraisals as soon as they were in receipt of them.

Mr. Walter Ferancik, in affidavit testimony, swears that he commissioned the first Cunningham & Rivard appraisal report after Langley, on the basis of its own appraisal, refused to accept the Feranciks' counter-offer and advised them to obtain their own appraisal report. The first Cunningham & Rivard appraisal valued the land at $360,000, and Mr. Ferancik says that he offered to sell the property to Langley for that amount. Less than two months later, Langley provided him with its second appraisal report showing a value of $300,000 and offered to purchase the property for $250,000. The Feranciks rejected the offer.

Mr. Ferancik testifies that negotiations did not resume until 1992, when Langley presented him with a third appraisal report valuing the land at $300,000. Not believing that Langley's report was reliable, Mr. Ferancik commissioned the second Cunningham & Rivard appraisal, which valued the property at $410,000.

Mr. Melville points out that the Feranciks obtained the second appraisal more than two years after the first. A comparison of the two reports indicates that the market value of the land was rapidly increasing during this period, which leads Mr. Melville to conclude that the first appraisal would have been of no use to the Feranciks in 1992 when they commissioned the second report. Finally, Mr. Melville finds it significant that Langley itself commissioned at least three reports during this time period.

Mr. Goulden, on behalf of Langley, maintains that the preparation of three appraisals in this case is excessive. He says that Langley did nothing to necessitate the second report, which it says was unnecessary. Since the Feranciks chose to ignore the work performed by Cunningham & Rivard and retain Mr. Rack's services for the purposes of the hearing, Mr. Goulden submits that the second Cunningham & Rivard appraisal should be disallowed.

I am satisfied by Mr. Ferancik's explanation as to why the two Cunningham & Rivard appraisals were necessary. Certainly the first would reasonably be required to enable the Feranciks to negotiate from a knowledgeable position with Langley. In fact, Mr. Ferancik's evidence is that it was Langley who suggested that they commission this first appraisal report. As for the second, the account does place it over two years after the first, at a time when I accept that the market was generally rising consistently. Because Langley presented the Feranciks in the meantime with not one but two further appraisals, I do not find it unreasonable or unnecessary for them to have commissioned this second appraisal report.

Regarding Langley's criticism of the Feranciks for "throwing away" the work of Cunningham & Rivard in retaining the services of Mr. Rack, I observe initially that it is clear from the amounts billed for the Cunningham & Rivard reports that neither was intended to be thorough enough to be presented at a board hearing. (Langley's own expert in this review, Mr. Hooker, suggested a range of between $5,000 and $6,000 for the preparation of a report in this case for hearing, a range which is substantially in excess of the amounts charged here.) To that extent, even the author or authors of the first two reports would have had to apply considerable time and effort to bring either of them up to a litigation level of detail and analysis. I note, in addition, that the account for the second report bears the date of April 30, 1992, and that the valuation date for the property was October 7, 1992. This means that, in all likelihood, even the author of the second report would have had to reconsider his comparables and calculations based on the difference in time between the two valuation dates, and might in fact have had essentially to complete a whole new report. The time required to do so would, however, almost certainly have been somewhat less for that individual than for someone who, like Mr. Rack, was starting from scratch. I am not, therefore, satisfied that the choice to retain a different appraisal firm for the final appraisal report under these circumstances was wholly unreasonable. It must, however, have resulted in some additional expense. This overlap would occur in the process of the preparation of the third report, and does not, in my view, affect the Cunningham & Rivard accounts.

I therefore allow the costs claimed for the two Cunningham & Rivard appraisal reports, in the amounts of $1,000 and $1,625.33.

 

8. JOHN RACK APPRAISAL ACCOUNTS

8.1 The Parties' Positions

Mr. John Rack gave oral testimony at this cost hearing in support of his own accounts, reviewing his qualifications and experience, and explaining many of the individual entries in his accounts. Mr. Dale Hooker testified as an expert for Langley regarding Mr. Rack's accounts. Mr. Rack presented his appraisal accounts in the total amount of $24,164.18. (I note in passing that this is very close to the amount that I have allowed here for all legal fees throughout the entire conduct of the case.) He billed a total of $1,575.45 for Goods and Services Tax, and $82.48 for disbursements. The remaining $22,506.25 of the amounts billed relates to Mr. Rack's fees, billed at an hourly rate of $125 (except for fees of $900 charged to produce 6 additional copies of the report, at $150 each). The first account covers 124.7 hours of work, and the second 48.15 hours, for a total of 172.85 hours.

Mr. Rack's designations, as set out in a document entitled "Appraiser's Qualifications," are DAR (Designated Appraiser Residential) and DAC (Designated Appraiser Commercial), both received from the Canadian National Association of Real Estate Appraisers in 1993, and CREA (Certified Real Estate Appraiser), received from the National Association of Real Estate Appraisers in "1989/93". He has not qualified for any designation from the Appraisal Institute of Canada ("AIC"), although he says that he completed all of the requirements, except for the demonstration report, in 1987. Under cross-examination, Mr. Rack admitted that he considers himself a candidate member of the AIC, but does not wish to belong to that association as he feels the fees he would be required to pay would not provide sufficient benefit to him. He also acknowledged that the AIC liability insurance rules require candidate members to have their appraisal reports co-signed by an appropriately designated member, so technically he is in breach of those insurance requirements in having signed the Ferancik appraisal report himself without a co-signer. Mr. Rack stated his opinion that this AIC requirement is a restrictive trade practice.

Mr. Rack has had a long and varied career in various aspects of the real estate field since 1966, including leasing, property administration and land development. Since 1987 he has worked as an appraiser and consultant, but has only been involved in his own independent real estate appraisal and consulting business since 1994. Mr. Rack has appeared once previously as an expert witness before the Expropriation Compensation Board, and twice before the Supreme Court of British Columbia. His standard hourly rate charge on all his accounts at the time of the hearing was $125. Under cross-examination, Mr. Rack acknowledged that when he began working on the Ferancik appraisal, he had only just received his DAR and DAC designations, but he stated that he considers himself an experienced appraiser, having been working as an appraiser since 1987.

Mr. Melville agreed during the hearing that the following time should be deleted from Mr. Rack's accounts, as it was not properly claimed:

  • 10 hours of travel time;

  • 1 hour for the preparation of the cost claims;

  • 6 hours for the printing of six extra copies of Mr. Rack's report, which was included due to a double billing error;

  • 1 hour for non-productive time relating to two telephone calls on December 2, 1994, and January 20, 1995, which involved reminders to Mr. Hood, the Feranciks' previous counsel, that development cost information was required.

After these adjustments -- a reduction by my calculations of $2,250 and 18 hours -- the fee component of Mr. Rack's account comes to $20,256.25, for 154.85 hours of work (I should perhaps interject here that counsel for the Feranciks advised in argument that the reduction was in the amount of $1,625 and that the resulting fee figure was $20,881.25. My calculations, however, result in the figures cited above.) The Feranciks do not claim any interest on this account as Mr. Rack has not charged them any interest.

Mr. Goulden for Langley argues that the appraisal fees claimed by the Feranciks are "grossly excessive and must be reduced accordingly." He points out that the Feranciks had three appraisal reports prepared valuing the land in question. Cunningham & Rivard prepared two reports in 1990 and 1992, costing over $2,500 in total. Mr. Goulden takes the position that the Feranciks should have consulted Cunningham & Rivard for an update of those earlier reports, instead of retaining Mr. Rack to "reinvent the wheel." Instead, they are seeking reimbursement of Mr. Rack's fees for 172 hours for the preparation of an appraisal report, the review of the Anderson appraisal, and attendance at three days of hearing.

Mr. Goulden argues that this was not a complex appraisal case. The parties agreed to the highest and best use. This was a complete taking with no claim for reduction in value to any remaining land. Nor did Mr. Rack have to deal with disturbance damages. He was provided with an engineering report that formed the foundation of his costs listed in the subdivision approach portion of his analysis.

In addition, Mr. Goulden maintains that, while Mr. Rack did undertake both a direct comparison and a subdivision development approach valuation, his analysis was not extensive. Of the 216 pages of the report, Mr. Goulden says that fewer than 30 pages deal with actual analysis. He also points out that Mr. Rack used only three comparables in his direct comparison approach, and only two sets of comparables in his subdivision development approach, both of which he obtained from the Multiple Listing Service. Mr. Goulden also says that Mr. Rack's report does not contain a conclusion as to the main issue in the case, which was the number of lots that could be obtained from the property. Rather, his report simply values both an 11 lot and a 12 lot layout.

Mr. Goulden relies on Mr. Hooker's review of Mr. Rack's appraisal accounts, and maintains that Mr. Hooker's report and evidence provide a useful reference point "as to what the market would pay for the appraisal services utilized by the claimants." Mr. Hooker is an appraiser with the designations AACI and FRI, and 25 years of professional appraisal experience. He is the senior partner in two appraisal firms of over 10 appraisers. As such, he is extensively involved in the financial affairs of these two firms and presents himself as knowledgeable regarding the rates charged for appraisal services in the lower mainland. Mr. Hooker reviewed Mr. Rack's invoices and appraisal report, as well as the board's decision in the compensation matter. He was also in attendance for Mr. Rack's evidence about his accounts at this hearing.

His overall conclusion was "that the invoice submitted by Mr. Rack for his appraisal report significantly exceeds fees that would be charged by [Mr. Hooker's] firm to prepare a report on the same property for the same purpose." During his testimony, he gave his opinion that this was a typical appraisal problem for which he would have charged between 40 and 50 hours at his hourly rate of $125, for a total of between $5,000 and $6,000 in fees for the preparation of the appraisal report. This, Mr. Goulden says, compares to the 111 hours and almost $14,000 charged by Mr. Rack for the preparation of the report itself. Mr. Hooker also testified that his hourly rate of $125 has been in place for the past 2 years, and before that it had been $110 since 1989. In 1989 when he first set the rate of $110 per hour, he had been a qualified appraiser for 17 years.

Mr. Goulden submits that the appropriate hourly rate for Mr. Rack to have charged, based upon his qualifications and experience at the time he did the work in question, is $65 per hour. He maintains that Mr. Rack's first invoice should be reduced to 60 hours from the original 124.7, by reducing it first by 50% of the original time (excluding the review of the Anderson appraisal) to reflect duplication and excessive charges, and then by deducting a further 13 hours for reviewing Mr. Anderson's appraisal, 3.5 hours for travel time, 6 for binding time, and 1 hour for preparation of the cost claim. This, according to Mr. Goulden, would result in a reasonable account of $3,900 plus tax and disbursements. Mr. Goulden also submits that the second invoice should be recalculated at an hourly rate of $65, for a revised fee charge of approximately $3,000. This would result in a total of $6,900.

Mr. Melville submits that the adjusted fees claimed are reasonable and necessary in light of the circumstances Mr. Rack faced and the instructions he was given. On the subject of Mr. Hooker's criticism of Mr. Rack's account, Mr. Melville says that that the specific criticisms contained in Mr. Hooker's report relate solely to the report preparation phase, the cost of producing extra copies and the charge for preparing an invoice. Mr. Rack has recognized the latter two points, which have been adjusted for as outlined above. Mr. Melville argues that, since Mr. Hooker was not involved in the case until this cost hearing, he did not have any knowledge of the instructions Mr. Rack received, and thus is not in a position to evaluate his accounts.

8.2 Analysis and Conclusions

Before turning to the main part of my analysis, I will deal with three points Mr. Goulden raised on behalf of Langley. The first is the issue of whether Mr. Rack is in contravention of the AIC insurance requirements. I do not consider this matter to be germane to my consideration of Mr. Rack's fees. The board, also having heard evidence on this point, accepted his evidence as an expert at the compensation hearing subject to weight. It seems to me that I should therefore not inquire further into such matters, but rather accept his status as an expert as determined by the board and proceed to review the reasonableness of his charges in light of the applicable statutory and common law criteria.

Mr. Rack's lack of a formal AACI designation, however, is a factor that has some relevance to the reasonableness of his hourly rate. In comparison with Mr. Hooker's hourly rate, and also in comparison with the hourly rates of a number of other professional appraisers whose accounts have been reviewed under the Act (see, for example, McKinnon and Buchanan), and given the scope of his appraisal experience, I find Mr. Rack's hourly rate of $125 to be too high. Since I intend to review his accounts on a global basis, I do not intend to fix an alternative hourly rate for Mr. Rack. Rather, I will consider my finding that his rate is too high in the process of adjusting the overall amount to award for his services.

The second point raised by Mr. Goulden concerns Langley's arguments dealing with the numbers of comparable sales used and the number of pages of actual analysis versus overall content. I am not persuaded by Langley's reasoning. It is not reasonable to assess the services of an expert appraiser based on such factors as the thickness of the report or the number of comparables. It is not hard to imagine a compelling and useful professional opinion that was succinctly and sparely written and that zeroed in on a few well-chosen and applicable comparables. Similarly, the board has seen more than one extremely lengthy opinion replete with numerous comparable sales, that has proven ultimately to have been inadequately prepared and analyzed and therefore of little assistance as a piece of evidence. The reviewer of costs needs to be concerned if a report is not thorough, complete or well-analyzed, or if it contains errors such as proceeding on an assumption not founded in the evidence. The reviewer should not, however, be concerned merely on the basis of the length of the report or the number of comparables it uses.

Mr. Goulden's third point was regarding the overlap of appraisal services resulting from the change in appraisal firms. I have considered this argument already in dealing with the Cunningham & Rivard accounts above, and concluded there that, while the Feranciks were entitled to change appraisers at this stage, doing so did result in some overlap of services. In my view, a reduction should be made to Mr. Rack's fees to account for this.

Since Mr. Hooker provided an opinion as to what he would expect an appraisal task such as this one would entail in terms of hours and overall cost, I will begin my analysis with a consideration of the accounts from an overview perspective.

Mr. Hooker's view was that the subject appraisal work would have taken his firm between 40 and 50 hours to accomplish -- that is, for taking instructions, performing site inspections, research and analysis, writing and proofing, and preparing an invoice. He considered the 13 hours Mr. Rack spent reviewing Langley's appraisal report to be reasonable, and was unable, due to his unfamiliarity with the hearing itself, to comment on the 27.15 hours spent preparing for the hearing or the 21 hours billed for attending the hearing.

As I stated earlier in dealing with the Feranciks' legal costs, while each cost assessment must rest ultimately on its own particular facts, it is often helpful to the reviewer of costs to do a quick comparison with other board decisions that share factual similarities. I have already, in the legal fees section of these reasons, set out the similarities and dissimilarities between the Feranciks' case and Bill's Frontier Restaurant, Buchanan, McKinnon and Garnett. In Bill's Frontier Restaurant, the claimants sought reimbursement for 84 hours of expert appraisal time. The decision reduced the fees claimed by 20%, but did not specifically do so on the basis of a reduction in the hours billed. If the same percentage reduction were applied to the hours, however, the number of hours allowed would be 67.2. In Buchanan, the appraiser charged for 65.25 hours. The chair allowed 80% of the total fees billed, which would translate to 48.93 hours using the same logic. In McKinnon, the appraiser's billed time totaled 152.95 hours, and the decision was to reduce the fees by 40%. Forty percent of the hours charged would be 91.77 hours. Finally, in Garnett the chair considered another of Mr. Rack's accounts, which he allowed at 57.75 hours, in the absence of any evidence challenging its reasonableness.

Mr. Rack's accounts total 172.85 hours billed. By comparison with all of these other cases, two of which (Buchanan and McKinnon) involved appraisal tasks of similar scope and complexity, Mr. Rack's overall billing once again appears to be high. The reductions applied in each of these other cases were, of course, peculiar to the facts in those cases. Nonetheless, these cases provide a useful "ball park" with which to compare both Mr. Hooker's estimated range of charges and the amounts billed by Mr. Rack.

I now turn to a break down of the hours billed by Mr. Rack under various categories. In the first account, which bills for 124.7 hours in total, about 4.45 hours deal with telephone conversations with the Feranciks' lawyers. (This was originally 5.45 hours, but one hour has been removed from my consideration by the Feranciks.) Some 12.25 hours were spent reviewing correspondence from the law firm. Three and one-quarter hours are claimed for site inspection and visiting Langley City Hall. (Seven hours of travel were originally included during this period, but are not being sought here.) About 16.75 hours deal with comparable research and analysis, and 2.5 hours with the preparation of exhibits. Forty hours were spent writing the appraisal report and 5 proof-reading it. These items add up to 66.25 hours (including 2 hours of "set-up" time) for the tasks involved in producing the report. In addition, there are entries that add up to 13 hours for reviewing Langley's appraisal report, 3.5 hours for reviewing an engineer's report, and 1 hour for the preparation of an invoice (which latter time has been withdrawn by Mr. Rack). Finally, there are entries for $1,900 for printing and copying the report, which have been reduced by Mr. Rack now to $1,150.00. These printing and copying entries are partly based on hours and partly on a flat fee for copies.

The second account, totaling 48.15 hours, mainly deals with 14.75 hours for Mr. Rack's preparation for the hearing and 21 hours for attending the hearing over a three day period. In addition, a further 9.4 hours (3 hours of travel time having been abandoned as inappropriate) is claimed covering telephone calls, visiting comparables, reviewing aspects of Langley's report and attending at the Land Titles Office.

Bearing in mind the parameters and degree of complexity of the appraisal task in this case, it is my assessment that Mr. Rack has billed for more time than was reasonable. In particular, I find that the amounts billed for reviewing correspondence from counsel, comparable research and analysis, writing and proofing the report, and preparing for the hearing are too high. The hours billed for reviewing Langley's report and for preparing for and attending the hearing I find to be reasonable. I have already found Mr. Rack's hourly rate to be too high, in light of his qualifications and experience. Considering all of this, as well as the comparisons I reviewed earlier, I am prepared to allow the sum of $9,500 on account of Mr. Rack's fees, plus adjusted taxes and disbursements as claimed.

 

9. INTEREST

Neither Mr. Rack nor Cunningham & Rivard has required any interest payment from the Feranciks on their accounts, and therefore no interest is being claimed here on these outstanding accounts. The interest claim before me relates solely to the legal accounts of Peterson Stark, and is based on a written retainer agreement dated May 27, 1992, between the Feranciks and the law firm of Melville & Yeung, of which Mr. Melville was formerly a partner. This agreement contains the following provision:

The Client's account with the Law Firm for professional fees, disbursements and applicable taxes may be billed periodically as the Law Firm determines. The Client shall pay the account in full within thirty (30) days of any statement date and shall pay interest at the rate of 1.5% per month (19.56% per year) on any balance unpaid over thirty days.

The Feranciks seek an order requiring Langley to pay interest at the rate of 18% per year, compounded monthly, on all accounts that it did not pay within 30 days of receipt, calculated from the date of receipt. Mr. Melville introduced into evidence a computer-generated schedule setting out the amounts of the accounts, dates of payment, amounts outstanding on a running basis, number of days outstanding, and a running calculation of interest owing. This schedule shows a total claim of $5,086.89. Mr. Melville advises me, however, that this schedule includes the disbursements for the appraisal reports, and so will have to be modified. Counsel has agreed to attempt to work out the details of the interest calculations themselves on the basis of whatever formula I set down as to the appropriate rate and grace period.

Langley maintains that no interest should be payable on the legal accounts, as it asserts that the Feranciks have not adduced evidence to prove that they have incurred any interest expense except that Mr. Melville has charged them interest. I am satisfied, however, that by the terms of their retainer agreement with Mr. Melville, they have in fact incurred interest expenses. I do not feel that any further evidence is required on this point.

Previous board decisions have set out the principle that, if an authority fails to pay within a reasonable period of time, then it must reimburse the claimants' incurred interest expense. That interest begins to run from the date that the claim for reimbursement was submitted until the date that the costs are paid. A reasonable period of grace for the consideration of each account is applicable, however, so that if the authority pays within that grace period no interest shall run. Different grace periods have been applied to different types of authorities. Langley maintains that 60 days would be appropriate in its case, whereas the Feranciks ask that a 30 day period should be applied. I am satisfied that a 45 day period would be reasonable for a municipality the size of Langley.

Having determined that the expense has been incurred, it remains to be determined whether the particular expense claimed is reasonable. Mr. Melville has referred me to several recent decisions of Robert Shorthouse, the chair of the board, regarding interest on cost awards: Roadmaster Auto Centre Ltd. v. Burnaby (1996) 58 LCR 305; El & El Investments Ltd. v. School District No. 36 (Surrey) (1996), 59 LCR 200; and El & El Investments Ltd. v. School District No. 36 (Surrey) (1996), 60 LCR 41. These decisions all relate to s.48 advance cost reviews, but they deal in some details with the general principles to be applied to awarding interest on costs under the Act. In addition to these cases and since the date of this cost hearing, the chair has issued two further decisions (McKinnon and Buchanan) in which he addresses the issue of interest on s.45 final cost awards. In those two decisions he affirms the principles he set out in the three earlier s.48 decisions.

In the Buchanan decision, the chair considered the very clause of Mr. Melville's retainer agreement dealing with interest that is before me for consideration in this case. At p.21 of the decision, he stated:

The claimants offered no evidence to substantiate that the rate specified in the retainer agreement, which is in excess of 19% per annum, was reasonable. Prior cost decisions of the board 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.

The chair then went on to award simple interest at a rate of 12% per annum.

I find the chair's logic and reasoning in these cases compelling, and in particular I adopt his above-quoted conclusion regarding Mr. Melville's retainer agreement. I also find that the prevailing statutory interest rates during the periods dealt with in those decisions are sufficiently similar to those applicable here to warrant applying the same simple 12% per annum interest rate to the legal account costs awarded here.

Since I have awarded a global amount for legal fees, it may be difficult for counsel to calculate the interest that is required to be paid on each separate account. I have calculated that the total fee amount I have awarded constitutes approximately 65% of the fees sought. Since the areas for which I have made deductions relate to entries made throughout the course of the handling of the file rather than at any one particular point, it seems reasonable to me, in order to facilitate the calculation of the interest payable, for counsel to calculate a 35% reduction on the fee portions of all 18 accounts, and to use these adjusted figures as the base for their calculations. Interest is to be calculated from the date of submission of each account to Langley to the date of payment, except that any amounts paid within 45 days of submission shall not attract any interest.

 

10. COSTS

Mr. Melville has asked that I not determine the matter of the costs properly payable relating to this s.45 hearing, and has sought leave to reapply to the board to make such a determination if the parties are unable to agree on this between them. I accept that this is the appropriate way to deal with the costs of this application, and accede to Mr. Melville's requests.