October 23, 1997, E.C.B. No. 59/91/147 (62 L.C.R. 272)

Between:George Alfred Underhill
Claimant
And:Pemberton Valley Dyking District
Respondent
Before:Robert W. Shorthouse, Chair
Appearances:J. Bruce Melville, for The Claimant
James G. Yardley, for The Respondent

 

1. INTRODUCTION

The claimant, George Alfred Underhill, seeks an order for a final award of the costs necessarily and reasonably incurred by him in asserting his claim for compensation in this matter pursuant to what, at the time of his application, was section 44 of the Expropriation Act, S.B.C. 1987, c. 23, and is now section 45 of the Expropriation Act, R.S.B.C. 1996, c. 125 (the "Act"). The costs claimed are in respect of accounts rendered by the claimant's solicitors and a real estate appraisal firm. They total $35,476.04, inclusive of fees, disbursements, taxes and interest, on account of which the respondent, Pemberton Valley Dyking District, has previously advanced the sum of $17,397.61.

 

2. BACKGROUND

The claim for costs arises out of the respondent's expropriation in August 1987 of statutory rights of way over portions of four legal lots located in the Village of Pemberton, B.C., and owned in fee simple by the claimant. The respondent's purpose was to complete flood protection works in the form of a dyke bordering Pemberton Creek. The expropriation preceded the coming into force of the Act. It was made pursuant to what was then section 851 of the Municipal Act, R.S.B.C. 1979, c. 290, as amended. Under the Municipal Act, the respondent was required to compensate the claimant in respect of the expropriation and, failing agreement, the compensation was to be determined by arbitration. There was no provision for the making of an advance payment or for the service of an appraisal report in support of any such payment, and neither was forthcoming.

Some months prior to the expropriation the respondent offered the claimant the sum of $200, but the parties were unable to reach agreement on the amount of compensation payable. On October 2, 1987, the claimant served on the respondent a notice of claim in the prescribed form, claiming compensation of $60,000 for the land taken, damages and injurious affection, and an additional $8,000 for legal and appraisal costs. No further action was taken by either the claimant or the respondent with respect to arbitrating the notice of claim pursuant to the Municipal Act.

On May 22, 1991, the claimant commenced an action in British Columbia Provincial Court (Small Claims), claiming damages of $9,296 alleged to have resulted from the respondent's expropriation. This action was discontinued in November 1991.

On September 25, 1991, the claimant filed with the Expropriation Compensation Board (the "board") an application for determination of compensation. The application claimed $30,000 for the market value of the land taken, a further $30,000 for the loss in value to the remainder of the lands, $10,000 for disturbance damages, and unspecified amounts for interest on the compensation awarded from the date of taking and for reasonable legal, appraisal and other costs. In its reply to the application, filed with the board on October 29, 1991, the respondent denied that the market value of the land taken was $30,000 or that there was any "injurious affection" to the remaining lands. It held in abeyance the question of whether it would make any advance payment pending receipt of an appraisal report it had commissioned. The respondent also denied that the claimant incurred any disturbance damages, and said the claimant was disentitled to payment of interest on any compensation awarded by reason of what it contended was the claimant's unreasonable delay in applying for compensation under the Act.

Over the ensuing three years, the parties took several steps in proceedings before the board. On two occasions, they brought applications for advance cost reviews pursuant to what is now section 48 of the Act. Those applications were heard by the then chair of the board on January 20, 1994 and April 14, 1994, respectively, resulting in oral decisions awarding partial interim costs. On June 19, 1994, the claimant filed an application to set a hearing date, and the board scheduled a five day period for the hearing of the compensation claim in July 1996. However, during July and August 1994, the parties negotiated a settlement of all matters at issue except for costs. The settlement reached was for compensation in the amount of $12,000 plus costs and included agreed modifications to the terms of the expropriated right of way.

 

3. THE LEGAL ACCOUNTS

The claimant retained the law firm of Melville & Yeung in early September of 1991 to represent him in this matter. Sometime during 1993 the firm name was changed to Melville & Company. Later still, some of the solicitors involved joined the firm of Peterson Stark which also acted for the claimant on this cost hearing. To simplify matters, I intend to treat the various legal accounts rendered as emanating from a single firm which I will refer to throughout as the claimant's solicitors or the claimant's law firm.

The claimant's law firm rendered 16 statements of account to its client while acting on his behalf and these were forwarded to the respondent for payment over the period between November 1, 1991 and July 25, 1995. One of the bills incorporates an invoice rendered to the claimant's law firm by the appraisal firm of Nielsen Realty Research Ltd. and, in turn, charged to the claimant as a disbursement. There is also a sizeable claim for interest on the outstanding balance from time to time. I have removed those items from my discussion of the legal accounts and will consider them separately later. Those adjustments having been made, the claim for legal costs amounts to $20,737, comprising $17,008.50 in fees, $1,623.50 in disbursements, and $2,105 in applicable taxes.

3.1 Legal Fees

A review of the accounts reveals that four lawyers and two legal assistants recorded billable time on the file. Mr. J. Bruce Melville conducted the initial interview with the claimant and supervised the handling of the file throughout. A senior partner in the claimant's law firm, he was called to the bar in 1981 and is well experienced in expropriation matters. For his services he billed 7.75 hours at the rate of $180 per hour and a further 1.25 hours at the rate of $200 per hour. Ms. Shelley Bentley, who was called to the bar in 1984, performed most of the lawyer's work except during a period of approximately six months between May and November 1993 while she was on maternity leave. She billed all of her time from the period of her initial involvement in 1991 through 1993, amounting to some 45.2 hours, at the rate of $125 per hour, and a further 29.5 hours at the rate of $165 thereafter. During her leave of absence, Ms. Bentley's role was assumed on one occasion by Ms. Joscelyn Baker, a junior solicitor called in 1990, who billed 0.42 hours of her time at the hourly rate of $125, and on another occasion by Mr. D. Roderick Hood, also a 1990 call, who billed 2.0 hours at the hourly rate of $135. Mr. Hood continued to have some involvement with the file during 1994, billing 1.8 hours at the hourly rate of $145 and a further 4.7 hours at $150 per hour. Of the two legal assistants involved, Ms. Elizabeth Olkovick billed 47.45 hours of which 1.5 hours was at the rate of $65 per hour and the balance at $60 per hour, and Ms. Maria Aiello billed 0.75 hours at the hourly rate of $60.

In summary, the legal accounts presented for review show that the claimant's law firm recorded a total of 140.82 hours of billed time in the prosecution of this case. An affidavit sworn by Ms. Olkovick and filed in these proceedings deposes on information provided to her by Mr. Melville that the professional services rendered to the claimant included the following: researching the factual history, initial assessment of issues, preparation and filing of a Form A application for determination of compensation, reviewing the respondent's Form B reply to the application, instructing an appraiser, consultations with the appraiser regarding compensation issues, obtaining information requested by the appraiser, negotiation and settlement of the claim for compensation, preparation and follow-up on cost claims, preparation for and attendance at two interim cost hearings pursuant to what is now section 48 of the Act, and advising the claimant throughout with respect to these issues. The accuracy of this list is essentially confirmed by my review of the detailed time entries in the accounts, to which I would add, however, that the claimant's law firm also billed for its role in discontinuing the action commenced in British Columbia Provincial Court.

The respondent raised several objections to the fee accounts. First, it argued, the hours charged by the claimant's law firm were excessive and some of the hourly rates billed by the lawyers involved were too high. Second, it contended, most of the work billed by the legal assistant was in the nature of secretarial duties which would normally form part of the firm's overhead rather than being properly billable as fees. Third, according to the respondent, as a matter of law the claimant was not entitled in proceedings before the board to recover the costs incurred in pursuing matters in another forum, namely the Provincial Court.

During the course of this cost hearing, the second and third objections were resolved. The parties reached agreement that, of the 47.45 hours billed by Ms. Olkovick, the respondent would be responsible to reimburse only three hours at the rate of $60 per hour. Claimant's counsel also advised that his client would abandon any claim for fee costs in relation to discontinuing the Provincial Court action. Most of the fees in that regard were, in any case, charged by Ms. Olkovick. The rest, amounting to perhaps 1.4 hours, were charged by Ms. Bentley.

Accordingly, the reasonableness of the time spent by the claimant's solicitors on this file and their hourly rates are the only fee matters remaining in contention. It is the respondent's position that the claimant's law firm devoted far too much time to minor or routine matters and some of the hourly rates charged are out of line with what the board has previously considered reasonable. In the respondent's submission, the issues in this case were not complex and the amount of compensation at stake was small, as evidenced by the fact that the matter was ultimately settled for $12,000. Settlement was achieved without discoveries nearly two years prior to the scheduled hearing date. The respondent says the only real tasks performed by the claimant's law firm other than in negotiation and settlement were the preparation and filing of a Form A, the consultations with an appraiser who never produced a written report, and perhaps pre-eminently, the efforts to collect advance costs. The respondent suggests that reasonable legal fees recoverable should be on the order of $6,000 rather than the more than $17,000 claimed.

The claimant acknowledges that his claim was small but argues there must be room in the compensation process for bringing such claims, especially in circumstances such as the present where virtually no compensation was offered by the authority for the land taken prior to the negotiated settlement. Claimant's counsel points out that there is a base cost to all litigation, and rejects the notion that the cost of obtaining legal advice must necessarily bear a direct relation to the size of the claim. It is often unclear, he says, what a particular claim may be worth until a considerable amount of legal and other professional work has been done. Moreover, where the case as here involves a partial taking for a right of way, the issues to be explored are often more complex than in a full fee simple taking even though the amount of compensation payable may be far less. With respect to the time spent in recovering advance costs, the claimant says that the respondent's failure either to pay those costs promptly or to apply to have them reviewed under the Act resulted in his having to bring an application for review and for claimant's counsel to spend considerable time in preparing to prove the cost claims.

I accept that it was necessary for the claimant, faced with an initial offer of only $200 for his land and no supporting appraisal evidence, to retain legal counsel to advise him and act on his behalf in advancing his own claim. A claim brought in the amount of $70,000 and ultimately settled for $12,000 obviously raises questions of proportionality when considering the legal costs incurred. However, I also accept the claimant's argument, up to a point, that time spent by counsel to obtain what turns out to be modest compensation could be reasonable in all of the circumstances even though the resulting fee charges approach or perhaps surpass the compensation amount.

It is when separating into its component parts the ways in which the claimant's solicitors occupied their time on this file that I grow wary. Although a significant portion of the overall time evidently relates directly to asserting the claimant's case for compensation, an even more significant portion relates to efforts to recover the costs involved in that exercise. Of the roughly 90 hours of time billed, the lawyers involved spent somewhat less than three hours drafting compensation documents and less than an hour on legal research. Nearly five hours were spent reviewing the file and dealing with correspondence, and a further five hours on conferences within the firm concerning the case. The claimant's solicitors billed more than eight hours for communicating with their client and more than 10 hours in dealing with the appraiser. However, by contrast with the time involved on such apparently mainline tasks, my review of the detailed time entries indicates that over 54 hours of solicitors' time, approximately 60% of the total, were devoted to the issue of payment of costs, mostly advance costs pursuant to what is now section 48 of the Act.

In assessing the overall reasonableness of the legal accounts, I consider it necessary to delve into the advance cost applications that were before the then chair in the early months of 1994. The first of these applications was brought by the claimant and heard on January 20, 1994. Counsel for the parties appeared in person in Victoria. By that time ten legal accounts (one of which included as a disbursement the appraiser's invoice) had been rendered. However, on the morning of the cost hearing, Ms. Bentley for the claimant advised that her client was seeking a review of only the three most recent accounts dated February 12, March 19, and October 26, 1993, respectively. The earliest of these three contained the appraiser's bill totalling $8,553.22 in fees, disbursements and goods and services tax as well as legal fees, disbursements and tax amounting to $332.20. Additionally, there was a claim for $103.70 on account of interest. The other two accounts totalled $1,254.50 in fees, $28.05 in disbursements, $57.91 in taxes, and $1,218.19 in interest charges.

I was provided with a copy of the chair's oral decision on that review, from which it appears that there were no novel or complicated issues of law or fact to be determined. The chair was troubled by the minimal evidence offered to substantiate the reasonableness of the appraiser's costs but awarded those costs nearly in full on an interim basis. With respect to the legal fees, there were routine concerns about the lawyers' hourly rates and the work billed by the legal assistant. The chair evidently had before her no compelling submission from claimant's counsel on the interest question and made no interim award of interest. Of the $1,576.75 claimed for legal fees and disbursements on the three accounts, the chair awarded $980.00 under what is now section 48 of the Act.

To obtain this result, the claimants' law firm billed fees of approximately $4,865. Some 25 hours of billed time translating to roughly $3,950 in fees were spent on preparation alone for the cost hearing. The legal account dated February 22, 1994 itemizing this work formed the subject matter of the second advance cost application which was brought by the respondent and heard by the chair by teleconference on April 14, 1994. The total fee account was for $5,458.75. I was also provided with a copy of the oral decision she gave on that occasion. Her comments are instructive:

Ms. Bentley, who has billed some 32 hours in total -- almost 33 hours -- has already acknowledged or offered a reduction of eight of those hours which she wishes to advance and collect on behalf of her client. However, even twenty-four hours devoted to a cost hearing is, in my mind, unreasonable. ... Having been present at the January 20th hearing, I am satisfied that there were no particularly difficult issues. The presentation of the material as it was provided and any research that may have been necessary to prepare for the hearing should amount to no more than six hours as a reasonable amount of time. I think six hours is generous, in that the argument before the Board was really one of whether or not it was reasonable to have retained an appraiser and whether or not his account in particular was reasonable. I heard the argument put to me, I read the material, and again I think six hours is generous in the circumstances.

In the result, the chair awarded advance payment of costs on the legal fees itemized in the February 22, 1994 account of only $1,400, and went on to recommend that the claimants' recoverable legal costs related to the April 14, 1994 hearing itself be 50% of the actual reasonable costs incurred.

While the chair's foregoing decision is not determinative on a final cost review, I find it highly persuasive. There was simply no evidence before me to justify the expenditure of so much time and effort on a relatively straightforward matter. Assuming that the time claimed in the bill accurately reflects the time spent, the comment of O'Driscoll J. of the Ontario High Court of Justice in Briarfield Acres Development Ltd. v. Ministry of Transportation and Communication (1982), 25 L.C.R. 65 at p. 69 is germane:

This is one of those cases where I feel confident in saying that if the solicitors, clerks and students expended as much time as they claim to have, they spent far too much time on it, for whatever reason.

I also agree with the respondent's submission that, just as a solicitor in the normal course of representation would not expect a client to pay such a fee for such a result, an expropriating authority should not be expected to pay a cost claim in respect of fees that would not otherwise be presented to a client.

From my review of the itemized entries in the legal accounts, I am satisfied that the time spent by the claimant's law firm for the purpose of asserting his claim for compensation, other than compensation for costs, was largely necessary and reasonable. The time devoted to recovering costs was, for the reasons already stated, clearly excessive. Overall, I am prepared to allow as reasonable the expenditure of approximately 60 hours of counsel time on this file: 8.0 hours for Mr. Melville, 44.0 hours for Ms. Bentley, 8.0 hours for Mr. Hood, and slightly under 0.5 hours for Ms. Baker. To this total is added the 3.0 hours of legal assistant's time which the parties have agreed should be reimbursed.

That leaves for determination the issue of hourly rates. Based in part upon earlier decisions of the board concerning the same lawyers, respondent's counsel argued that Ms. Bentley's allowable rate should be fixed at $100 per hour from 1991 through 1993 and at $120 per hour thereafter, and that Mr. Melville's and Mr. Hood's rates should be allowed at $160 and $130 per hour, respectively, throughout. Claimant's counsel, on the other hand, made reference to the cost decision in Summit Enterprises Ltd. v. Kamloops (City) (1995), 57 L.C.R. 24 (B.C.-Exp. C.B.), where the results of a survey of standard legal charge-out rates for British Columbia undertaken by the Canadian Bar Association (the "CBA/VALA survey") were admitted as evidence of the market-place for legal services at the relevant time. Relevant extracts from the CBA/VALA survey for 1993 were included as part of the claimant's affidavit material here in support of the higher hourly rates charged. As I have since observed in my cost decision in Buchanan v. School District No. 36 (Surrey) (1997), 61 L.C.R. 288 at p. 299, I view this evidence as a useful indicator of the hourly rates which lawyers seek to charge but not a determinative indicator of what they effectively receive.

Having reviewed all of the evidence available to me on this cost application as well as other cost decisions of the board, I conclude that an appropriate hourly rate for Mr. Melville's reasonable time was $160 in 1991 when his involvement with this matter began, rising to $180 per hour by 1994 when it concluded. I accept as reasonable the hourly rate of $125 billed by Ms. Bentley during the years 1991 through 1993 and would allow her rate at $135 per hour during 1994. I allow Mr. Hood's reasonable time at the rate of $130 per hour throughout the period of his involvement and Ms. Baker's brief association with the file at the rate of $125 per hour as billed.

In the result, I have determined that recoverable legal fees in this matter should be fixed at $8,180 in respect of services provided by the lawyers involved together with $180 in respect of the work performed by the legal assistant, making a total of $8,360.

3.2 Legal Disbursements

In the course of this cost hearing, claimant's counsel acknowledged that the cost of one round-trip helijet flight from Vancouver to Victoria in the amount of $244 had been double billed. In abandoning the claim for costs with respect to discontinuance of the Provincial Court action, he also necessarily abandoned long distance telephone disbursements related to that matter in the amount of $18.97. After adjustment for these items, the legal disbursements at issue therefore total $1,360.53.

The only contentious items are the photocopying and facsimile charges. The claimant's law firm billed $452.35 for photocopies, mostly at the rate of $0.25 per page. This rate is in excess of what the board has consistently held to be reasonable, namely $0.15 per page, and I find no reason to depart here from what previously has been determined. Accordingly, I would reduce the amount of photocopying costs recoverable by $181.00.

The claimant's solicitors also billed $163 for facsimiles transmitted and received, in each case at the rate of $1.50 per page. In support of this claim, they conducted surveys of fax charges levied by commercial office services located near the law firm's own offices and by other law firms frequently engaged on expropriation matters. The results were included as part of the affidavit material on this application. I have reviewed the survey evidence and consider that it in no way supports a charge of $1.50 per page. Some of the law firms canvassed indicated that they do not charge for transmitting or receiving faxes at all beyond the cost of long distance charges while others either charge $1.00 per page or a flat rate irrespective of the number of pages. Even the commercial offices, which presumably are in the business of making a profit on facsimile services, commonly indicate rates of $1.00 per page or less for both incoming and outgoing faxes. The board in previous decisions has expressed the view that law office disbursements should not be treated as profit centres to the firm. Accordingly, based on the information provided to me on this application and having regard to the board's earlier cost decisions as they relate to this issue, I am prepared to allow fax charges at the rate of $0.50 per page. This has the effect of reducing the amount of recoverable fax costs by about $108.50.

The remaining disbursements reflected in the legal accounts will be allowed as presented.

3.3 Taxes

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 $8,360 in fees and $1,071.03 in disbursements. Provincial sales tax applied on only nine of the 16 legal accounts presented for review, and on three of those accounts the provincial tax was calculated at the rate of 6% and on the other six accounts at the rate of 7%. For the sake of simplicity and certainty, I propose to make an allowance for provincial sales tax pro rata to the total amount of fees allowed. In doing so, I have also taken into account the varying rates. Therefore, goods and services tax is allowed in the sum of $585.20 and provincial sales tax in the sum of $398.36 for a total of $983.56 on account of taxes.

 

4. THE APPRAISAL ACCOUNT

The claimant initially retained the services of Nilsen Realty Research Ltd. ("Nilsen") in connection with the expropriation in 1987. However, the one account rendered by the firm which is before me for review, dated November 27, 1992, brackets work which was performed during the period February through August of that year. A copy of the record of hours spent by the firm also shows entries during the month of October 1987 and for the months of December 1992 and January 1993, but evidently this time was never billed and is not now claimed. What has been billed is 10 hours for Mr. Carl Nilsen at the rate of $120 per hour and 83.5 hours for Mr. Farouk Jamal at the rate of $75 per hour. In total the fee account amounts to $7,462.50 with disbursements of $531.16 for a total of $7,993.66 excluding goods and services tax. Mr. Nilsen, AACI, RI(BC), is a senior appraiser whose experience extends back to the late 1960s in England and who, since 1971, has headed up the appraisal company here which bears his name. Mr. Jamal, who also earned his initial appraisal qualifications and experience in England during the early 1970s, has been accredited RI(BC) since 1977 and AACI since 1987.

According to the affidavit material available to me from an earlier cost application, Nilsen was engaged in 1992 to assess the market value of the statutory right of way affecting the claimant's four lots as well as injurious affection or loss of market value to the remainder of those lots, any ancillary rights and disturbance damages. The work was said to encompass consideration of a number of issues, including complex flooding, drainage, access and loss of use problems, damage to gardens and mobile homes, and the cost of remedial work to correct these problems. A summary of the work performed details meetings with the claimant and his solicitors, site inspections and inspection of comparable properties, discussions with government officials, reviews of pertinent municipal and provincial documents including title documents, deeds and plans, research of historic and current comparable sales, and discussions with realtors, assessors, and other appraisers. Mr. Nilsen, in an explanatory letter to Mr. Hood in November 1993, stated that one of the principal difficulties associated with his firm's analysis of the situation was that research of sales and other materials relating to a date of taking back in 1987 took considerably longer than would otherwise be the case. The peculiar circumstance here is that all of these efforts apparently resulted in no work product in the form either of a draft or final appraisal report.

The respondent acknowledges that it was reasonable for the claimant to retain an appraiser. However, it objects to both the overall size of the account, especially given that no written report was prepared, and to the claimant's failure at this hearing to produce his appraiser's entire file in order directly to substantiate what work was done. I will deal with each of these objections in turn.

To support its objection to the size of the Nilsen fee account, the respondent provided an affidavit sworn by an appraiser it retained, Mr. Thomas Swann, AACI, RI(BC), FRI, of Cunningham and Rivard Appraisals (Vancouver) Ltd. Mr. Swann deposed that beginning in 1991 and concluding in 1993 he had performed appraisal services, including the preparation of an appraisal report in relation to the expropriation of the claimant's property, for total fees and disbursements amounting to $3,275. Respondent's counsel submitted on the basis of Stevenson v. Lawrencetown (Village) (1994), 54 L.C.R. 91 (N.S.S.C.), that it was appropriate for me to compare the appraisal costs incurred by an expropriating authority with those incurred by an expropriated owner in arriving at a determination of the reasonableness of the owner's costs.

I am not persuaded that bare disclosure of the appraisal costs incurred by the respondent materially assists me in the determination which I must make. Mr. Melville for the claimant referred me to the comments of Taxing Officer McBride in Lenjo Enterprises Ltd. et al. v. Municipality of Metropolitan Toronto (No. 3) (1977), 12 L.C.R. 13 (Ont. S.C.). Faced with the submission by respondent's counsel that the claimants' recoverable appraisal costs should not exceed those incurred by the respondent, Mr. McBride observed as follows at p. 15:

I cannot imagine a more obviously irrelevant piece of evidence. How could the amount charged to a large and powerful expropriating authority by its appraiser for his services in responding to a claim for compensation have any bearing on what another appraiser, engaged by the claimant, would or should charge for his services in advancing the claim for compensation?

While I would not perhaps go so far, I have already expressed my own reservations about the usefulness of such comparative evidence in my cost decision in McKinnon v. School District No. 36 (Surrey) (1997), 61 L.C.R. 9 at pp. 15-16. In my view, only a thoroughgoing examination of the scope of instructions provided to the two appraisers and the approaches they adopted might reveal whether there were sufficient parallels to make comparison of costs incurred meaningful. Instead, I have been provided here simply with a copy of the account rendered by the respondent's appraiser and the first two pages of his report, the contents of which evidently have never been produced to the claimant.

With respect to disclosure of the appraiser's file, the respondent cited the decision in Denovan v. Lee (1991), 62 B.C.L.R. (2d) 214 (S.C.). In that case, the defendants applied for an order compelling the solicitors for the plaintiff, who was seeking special costs, to make full disclosure of their file. Master Donaldson noted that, to avail himself of those increased or special costs, the plaintiff must make available to the assessing officer sufficient information and material to enable that assessing officer to properly determine what would be a reasonable fee. After observing that documents not relevant to that issue need not be disclosed, Master Donaldson went on to say this at p. 216:

It would seem however that disclosure of much of the file including the "work product", opinions provided by counsel to the plaintiff, and instructions from the plaintiff to counsel would be items which must be disclosed to enable the assessment officer to make a proper determination of the reasonableness of the fee.

The respondent submitted that a review of costs under the Act was similar to a review of solicitor and client costs or special costs such that substantially all of the contents of the appraiser's file ought to be made available.

I am not prepared to deny the claimant all of his appraisal costs, as the respondent urges me to do, on the basis that the appraiser's complete file was not produced at this hearing. For one thing, the applicability of the Denovan case, if rightly decided, is limited by the fact that the issue there was not whether the plaintiff should be denied its costs outright in the absence of full disclosure but whether a different and lesser scale of costs under the Supreme Court Rules should be applied where there is a refusal to disclose. For another, the respondent made no submissions and offered no correspondence indicating that it had specifically sought disclosure of the complete contents of the appraiser's file prior to the convening of the cost hearing itself. Claimants are placed in an onerous position when preparing for a final cost review as to the minutiae of evidence that will be needed if the respondent does not provide advance notice of the particular cost matters in dispute.

The British Columbia Court of Appeal has considered the question of the evidence required on a taxation of costs under the Supreme Court Rules in Holzapfel v. Matheusik (1987), 14 B.C.L.R. (2d) 135, a case cited by the claimant. There, the particular issue involved disbursements in a party-and-party taxation, a quite different situation from the present. However, I find the approach taken to be instructive nevertheless. Writing for the Court, Macdonald J.A. stated, in part, at pp. 139-40:

I recognize that there are significant practical problems when the party presenting a bill is faced with an intransigent opponent. But when strict proof is demanded there is no alternative to providing it. What it will involve at the minimum appears from this passage in the judgment of Fulton J. in Bereti v. Schuette (1980), 17 C.P.C. 259 at 266-67 (B.C.S.C.):

What the Court of Appeal and other decisions I have cited do make clear, in my view, is that the indispensable requirement is an affidavit from the solicitor responsible for the preparation of the case, as to the nature and extent of the work done and verifying that such work was necessary for the full and proper presentation of the case, and that the fees charged and paid therefor were reasonable in the circumstances.

. . .

While I express no firm conclusion on the matter, for it is not necessary to the decision in the case before me, in my view where the account submitted by the expert itself contains a reasonably detailed outline of the nature of the work and the hours and other items involved therein -- and this is of course desirable -- and such bill is attached to the bill of costs submitted for taxation, then an affidavit from the expert in addition is not necessary: what is required is an affidavit from the solicitor of the nature referred to.

Macdonald J.A. went on to make the following additional observations at p. 140:

But, of course, taxation by ambush should be as much a thing of the past as trial by ambush. If the party presenting the bill for taxation has taken all reasonable steps to disclose his affidavit of justification in good time, and has inquired whether any disbursements will be contested and, if so, which disbursements, and on what grounds, then the opposing party ought to confine his opposition to those disbursements which he has said, reasonably in advance, that he will be contesting, and to those grounds which he has said, reasonably in advance, that he will be making the basis of his objection. The party presenting the bill can then concentrate his evidence, by affidavit or otherwise, on the precise points on which he has received informal notice of intention to dispute.

Although I have rejected the respondent's two main arguments, I continue to be somewhat troubled, as was Chair Harvey in her review of the appraisal account in January 1994, by a bill of this size which produced no written report and for which there is a conspicuous absence of any actual "work product" in evidence. It is unclear from the material before me which of the tasks detailed were undertaken by Mr. Nilsen and which by Mr. Jamal. Mr. Melville submitted that, while settlement intervened before a written report could be prepared, the verbal opinions offered by the claimant's appraiser were useful in the final negotiations leading to settlement. I would simply observe that, if that is the case, a great deal of time and expense was incurred by Nilsen to offer opinions which evidently contributed to a settlement for the sum of $12,000. Doing the best that I can in these circumstances, I am prepared to allow as reasonable 75% of the fee account rendered by Nilsen, which I round to $5,600.

The disbursements contained in the Nilsen account were not specifically disputed and do not appear unreasonable. I would allow them as billed in the sum of $531.16. It follows that goods and services tax will need to be adjusted on the fees and disbursements allowed. I calculate the tax to be $429.18.

 

5. COSTS SUMMARY

My review of the claimant's costs in this matter, including fees, disbursements and taxes but excluding interest, is summarized below:

CategoryCosts ClaimedCosts Allowed
Legal$ 20,737.00$ 10,414.59
Appraisal   8,553.22  6,560.34
Total:$ 29,290.22$ 16,974.93

The claimant has acknowledged that the respondent made advance payments of costs totalling $17,397.61. I have therefore determined that, before taking into account any interest which may be owing on delayed payments, the respondent has overpaid the claimant's reasonable legal and appraisal costs in the sum of $422.68.

 

6. INTEREST ON OUTSTANDING ACCOUNTS

Since the decision of the Supreme Court of British Columbia in Tidmarsh v. Comox-Strathcona (Regional District) (1995), 55 L.C.R. 81, A.C.W.S. (3d) 696, it is clear that reasonable interest expenses incurred on professional accounts are recoverable under the Act. The court left the determination of what is reasonable to the board to be decided on the facts of each case. The board in previous cost decisions has also set out certain principles and guidelines for determining the appropriateness of an interest award.

The claimant seeks an award of interest on what he says were incomplete and delayed payment of advance costs by the respondent. In my view, the fact that I have allowed costs to the claimant on this application in an amount less than what he has already been paid does not necessarily disentitle him to interest. It remains necessary to examine the state of accounts over the history of these proceedings to determine whether the respondent made prompt and adequate reimbursement or whether the claimant was, instead, kept out of his rightful funds such that he should reasonably be compensated by way of interest.

A copy of the legal services retainer agreement, dated September 24, 1991, between the claimant and the law firm of Melville & Yeung was included in the claimant's affidavit material. One of its provisions calls upon the client to pay in full the legal accounts rendered for professional fees, disbursements and applicable taxes within 30 days of any statement date and to pay interest at the rate of 1.5% per month (19.56% per year) on any balance remaining unpaid for more than 30 days. Another provision defines disbursements as expenses incurred by the law firm on the client's behalf which may include, among other things, the cost of retaining experts. It is under that provision that the Nilsen account was included as a disbursement in one account rendered by the claimant's solicitors and on that basis that they charged interest on the amount of the appraiser's bill while payment remained outstanding.

I make the following observations about the course of advance payment of costs by the respondent in this matter. Payments on the first six accounts, dated between October 28, 1991 and September 15, 1992, were made within 30 to 40 days of their having been forwarded to the respondent, a period of time which I consider constitutes prompt payment. The first two of those accounts were paid in full, while from each of the remaining four the respondent made significant deductions, the reasons for which were not explained to me. The next three accounts, dated between February 12, 1993 and October 26, 1993, and in respect of which the respondent made no voluntary advance payments, formed the subject of the first section 48 cost review on January 20, 1994. The respondent paid in full the interim costs awarded slightly under 60 days thereafter, a period of time which is certainly at the outer limit of what might be considered prompt. The tenth account, which was forwarded to the respondent on or about March 10, 1994, was the subject of the second section 48 cost review held on April 14, 1994. The respondent paid in full the much reduced amount awarded less than a month later. The respondent has made only one small advance payment, on May 19, 1995, in respect of the final six accounts dated between May 26, 1994 and July 25, 1995.

There are several peculiarities concerning the claim for interest. First, the claimant seeks interest even on those accounts which were paid in full and which I have found were paid promptly. In fact, of $6,074.32 billed on the first six accounts, the respondent promptly reimbursed the sum of $4,760.06 or more than 78% of the total. In light of my final determination of costs, it seems to me that the respondent acted prudently and reasonably in making those advance payments. I would not make an award of interest in respect of them.

Second, the claimant continues to seek interest with respect to those portions of the accounts which were disallowed at the section 48 cost reviews. Leaving to one side for a moment the Nilsen account which was reviewed at the first section 48 cost hearing, the amounts claimed for legal fees and disbursements on those reviews totalled $7,348.35 of which the chair awarded the sum of $2,445. I consider that it was reasonable for the respondent to have withheld reimbursement of amounts which were earlier disallowed. I venture to say that there has been no significant upward adjustment in the amount found to be recoverable on these accounts as a result of my review. In the result, I would again make no award of interest.

Third, the claimant seeks interest on the long delayed payment of the Nilsen account although the account itself contains no provision for interest. Respondent's counsel referred to the comment in E.C.E. Todd, The Law of Expropriation and Compensation in Canada, 2nd ed. (Toronto, Carswell, 1992), at p. 496 that "interest cannot be recovered in the absence of persuasive evidence that it was a term of the agreement between the owner and the professional." The claimant relies on the legal services retainer agreement referred to above in order to bring the Nilsen account within the agreement's interest provision. To find that provision applicable, I must first be satisfied that the claimant's law firm actually paid the Nilsen account, thereby incurring an out-of-pocket expense. I have no direct evidence that this happened, although I recognize that the rules governing the practice of law in British Columbia require that disbursements, in order to be billed, must first actually have been incurred.

However, even if there is a contractual basis for accruing interest on the Nilsen account, other considerations enter into my evaluation of whether interest is reasonably recoverable in this instance. As the correspondence between counsel reveals, there were ongoing requests from the respondent for further and better particulars of the hours, services, and experience of the claimant's appraisers in order to evaluate the reasonableness of the account. There were also evidently negotiations between the parties aimed at settling the bill without a hearing. This process continued over roughly an 11 month period from the time when the account was first presented to the respondent for payment and the holding of a section 48 review. While the process was certainly protracted, I am unable to say that it was unnecessary or unreasonable in the circumstances such that I should now award interest during that intervening period.

The only items in respect of which I would be inclined to award interest are those five accounts dated between May 26, 1994 and March 22, 1995, totalling $8,081.64, on which the respondent made only one advance cost payment in the amount of $1,116.31 on May 19, 1995. These bills largely concerned the time spent in negotiating the settlement of the compensation claim and more discussions around costs. However, while the advance cost payment in respect of them was inadequate, I am also of the view that any loss in the use of funds suffered by the claimant as a result is reasonably compensated by the overpayment of total costs which I have determined. Accordingly, I make no additional award of interest in that regard.

 

7. COSTS OF SECTION 45 REVIEW

As neither of the parties spoke to the matter of costs reasonably incurred in preparing for and attending at this cost review, I make no order in that regard, pending a further application should one become necessary.

 

 

Government of British Columbia