December 27, 1995, E.C.B. No. 11/95/101 (58 L.C.R. 147)

 

Between: 402847 B.C. Ltd.
Claimant
And: Her Majesty The Queen in Right of the Province of British Columbia as Represented by the Minister of Transportation and Highways and the City of Nanaimo
Respondents
Before: Fiona St. Clair, Vice Chair
Appearances: Cora D. Wilson, for the Claimant
Alan V. W. Hincks, for the Respondent Ministry

 

1. THE APPLICATION

The claimant, 402847 B.C. Ltd., has applied under s. 47 (3) of the Expropriation Act, S.B.C. 1987, c. 23, for a review of a number of bills for legal and other professional services. The claimant seeks advance payment of these bills from the respondent, Her Majesty The Queen in Right of the Province of British Columbia as represented by the Minister of Transportation and Highways, and seeks no relief in this review against the other respondent, the City of Nanaimo.

The claimant has retained two law firms. Cora Wilson of the firm of C.D. Wilson & Associates is the claimant's chief counsel, and Colin McIver of the firm of Fraser & Beatty acts in an advisory capacity to both Ms. Wilson and the claimant. The claimant has also retained the services of Brian Chatwin of Chatwin Engineering Ltd. to perform planning and construction cost services to assist in determining the amount of compensation the claimant seeks. Finally, the claimant has retained Ken Rogers of Kenneth Rogers Appraisals Ltd. for appraisal services in connection with the compensation claim.

The claimant presented 17 accounts for my review. Their dates and amounts are as follows:

1.  Legal Accounts
  a. C.D. Wilson & Associates
    January 3, 1995
$3,588.37
 
    March 18, 1995
$4,020.45
 
    April 28, 1995
$692.55
 
    June 25, 1995
$2,870.47
 
    September 2, 1995 $6,486.04  
    Sub-total: $17,657.88  
         
  b. Fraser & Beatty (Colin McIver)
    December 22, 1994 $5,169.47  
    Total: $22,827.35  
         
2.  Engineering Accounts — Chatwin Engineering Ltd.
    April 30, 1994 $7,949.94  
    May 31, 1994 $1,348.20  
    June 30, 1994 $1,251.90  
    July 31, 1994 $2,134.65  
    August 31, 1994 $9,956.30  
    September 30, 1994 $3,760.99  
    October 31, 1994 $711.55  
    November 30, 1994 $1,321.45  
    December 31, 1994 $711.55  
    January 31, 1995 $813.20  
    Sub-total: $29,959.73  
         
3.  Appraisal Account — Kenneth Rogers Appraisals Ltd.
    June 19, 1995 $5,885.00  
    OVERALL TOTAL:   $58,672.08
         
The amounts that the province has paid towards these bills are:
    to Wilson's accounts $3,500.00  
    to McIver's account $2,500.00  
    to Chatwin's accounts $5,000.00  
    TOTAL: $11,000.00  
This leaves the sum of $47,672.08 outstanding under the various bills. $47,672.08

 

2. BACKGROUND

The claimant's compensation claim arises from the province's expropriation of about 34 of a total 180 acres owned by the claimant, for the construction of a parkway through the City of Nanaimo. The land taken cuts a more or less diagonal swatch through the claimant's lands. The claimant advised that the taking has had the effect of cutting off the road access to much of the remaining land, and interfering with the proposed commercial development of the property.

Also causing problems for future development, according to the claimant, is a by-law passed by Nanaimo. This by-law was apparently enacted in response to the province's plans regarding the parkway, and requires that 15 metres on either side of the parkway be kept clear of any development for a "character protection zone." This is in addition to an earlier by-law that required 20 metres on either side of such a roadway to be kept clear for a "tree protection zone."

 

3. THE ISSUES

The issues to be dealt with on this review are the determination of whether the accounts presented are necessary and reasonable, and the determination of the amount to be paid by the province to the claimant as an advance payment of costs under s. 47.

The province objected to some of the amounts claimed for these stated reasons:

a. The team approach adopted by the professionals on this file has resulted in some duplication of effort and thus of fees, for which it should not be responsible. This was particularly the case, it maintained, with regard to the legal fees.

b. A number of the services performed by the various professionals relate to claims against Nanaimo. Following the decision of the Chair of the board in Whitechapel Estates Ltd. v. British Columbia (Ministry of Transportation and Highways South Coast Region) (1994), 55 L.C.R. 140, the province should not be responsible for paying for those services.

c. Also following the Chair's decision in Whitechapel, some of the professional fees charged are more properly characterized as items of disturbance damage to be determined in a compensation hearing, rather than as costs items to be awarded in a s. 47 review.

d. The province should not be required to pay Goods and Services Tax on the accounts, because the claimant is a GST registrant and will obtain a refund of the GST charged as an input tax credit.

 

4. THE LEGAL ACCOUNTS

To date, Ms. Wilson has prepared and filed a lengthy and detailed Application for Determination of Compensation, including claims against both the province and Nanaimo. She has also received and reviewed the Reply to Application for Determination of Compensation filed by each respondent. She has received a demand for discovery of documents and a notice to produce from the province's counsel, and has prepared a list of some 180 documents in response. She has also prepared for this costs hearing.

Mr. McIver's services include reviewing various documents and proposals, performing legal research and drafting opinions, and consulting with Ms. Wilson and the other experts retained by the claimant on various aspects of the proposed development and the expropriation.

None of the legal accounts specifically sets out an hourly rate, but an examination of the accounts indicates that Ms. Wilson's time has been billed at $150 per hour, and Mr. McIver's at $225 per hour.

The claimant filed a document that breaks down the various aspects of Ms. Wilson's billed services in terms both of the amount of time spent in certain areas and the percentage of the total. Ms. Wilson has estimated that 8.6 hours, or approximately 9% of her total time billed represents either duplication of legal services, matters more properly characterized as elements of disturbance damage, or matters relating specifically to Nanaimo. Amounts billed under these categories have all been disallowed in previous decisions of the board in other cases, and Ms. Wilson conceded that these amounts were not properly claimed. The claimant also filed a much shorter and less detailed document relating to Mr. McIver's services, in which it is estimated that approximately 12% of his time falls into one of these three categories of service. The province contends that a good deal more than the amounts itemized by the claimant for both counsel falls under one of these three headings.

I have reviewed all of the legal accounts, and I have concluded that there does appear to be a considerable amount of duplication of costs arising from the "team approach" chosen by the claimant. While this team approach may suit the claimant and the experts it has retained, it appears to me at this stage to be a more expensive one than the province should reasonably be required to pay for. It also appears from the itemization of services listed in the accounts that both Ms. Wilson and Mr. McIver have spent time on items relating specifically to Nanaimo rather than to the province, and also on items that relate to the alteration of the development plans themselves and thus to the heading of disturbance damages.

I also have some concerns about the claimant having retained both litigation counsel and consulting counsel. My review of the accounts indicates that Ms. Wilson has billed for 95.9 hours and Mr. McIver for 20.08 hours, for a total of 115.98 hours of legal time spent on a file that has not even been taken to examinations for discovery yet. I am not convinced that the services of both counsel here were in every instance necessary, and I conclude that there has been some redundancy in services as a result. For example, both Mr. McIver and Ms. Wilson have billed for numerous conferences and telephone calls with each other, as well as for reviews of each other's correspondence. Even though this matter does appear to be one of some complexity, the total number of hours billed to date is, in my view, excessive, given the progress of the matter.

Finally, I am not prepared to make an award of costs on the basis of the hourly rates that have been charged by counsel here. Mr. McIver has been practising law for approximately 12 years, and his main areas of practice appear to be real estate and land development. While his curriculum vitae indicates a good deal of focus in these areas, including expropriation, it does not indicate a specialized expertise in the field of expropriation law. In other words, this area of the law does not appear to constitute a sizable proportion of his practice. Ms. Wilson, while admitted to the bar in 1981, has only been actively engaged in the practice of law (as opposed to various academic research positions) for the past approximately 9 years. In my as yet unreported reasons for decision in Summit Enterprises Limited v. City of Kamloops (E.C.B. No. 79/92/94), I discussed whether previous decisions of the board, and particularly the decision in Gerestein v. Abbotsford (District) (1990), 43 L.C.R. 262, established a "ceiling" of $175 per hour for senior counsel experienced in expropriation matters. I concluded that there was no such upper limit, and that I have discretion to award costs based on hourly fees in excess of $175, if I was presented with compelling evidence about the reasonableness of a particular hourly rate for a given counsel in a given market situation.

I do not have any such evidence here, and I do not view either Ms. Wilson's or Mr. McIver's experience in expropriation law to be sufficient to qualify them in the same category of seniority or specific relevant experience as the lawyer for whom I allowed the $185 per hour charge in Summit.

With all of these considerations in mind, I order that the province pay to the claimants 75% of all fees and disbursements billed by Ms. Wilson to date, and 50% of all fees and disbursements billed by Mr. McIver.

 

5. THE ENGINEERING ACCOUNTS

The claimant stated that it retained Chatwin Engineering Ltd. "to perform planning and construction cost services to determine the amount of compensation payable." It indicated that Chatwin performed before and after taking lot layouts for the development of the project in order to assist the appraiser, and that it came up with construction costs and costs for servicing the properties associated with the development, again for the use of the appraiser.

The province maintained that significant amounts of Mr. Chatwin's time were spent on other matters, such as advising the claimant on how it should proceed with the proposed subdivision development after the expropriation (as opposed to simply preparing after-taking layouts for the purpose of advancing the compensation claim) and the completion of the parkway. This is not, the province argued, a cost incurred for the purpose of asserting the claim for compensation, and therefore should not be the responsibility of the province.

In addition, the province contends that much of Mr. Chatwin's work relates to the "team approach". Examples of this include reviewing and discussing items generated by others on the team. Finally, the province expressed its general concern that too many hours (313.25) have been billed by Chatwin Engineering Ltd. overall.

The claimant produced a document in which it estimated that the total number of hours spent by Mr. Chatwin that can be characterized as disturbance damages is 19.6, or .063% of the total 313.25 hours billed. As with the legal time referred to earlier, the claimant conceded that this portion of the engineering account was not properly claimed.

I note that 165.75 hours of the total hours billed by Chatwin Engineering were logged by Carmi Simpson, a civil engineering technologist whose only listed qualification is a diploma in civil engineering earned in 1990. The claimant indicated that Ms. Simpson is the computer technician who produces the engineering drawings for Mr. Chatwin. Ms. Simpson's hourly rate is $65 per hour, which I find high in comparison with Mr. Chatwin's $95 per hour as a professional engineer in practice in Nanaimo since 1976. In addition, disbursements in the amount of $3,873.75 are attributed to "computer -- general" and "computer usage -- CADD/386". (CADD stands for computer assisted design drawings.) The claimant maintained that this method of charging for the operation of specialized computer equipment is standard practice in the engineering field, whereas the province argued that the standard practice is to build this type of expense into the professional's hourly rate and not to bill for it separately.

I do not have sufficient evidence before me about the nature of the work performed by Ms. Simpson or the reasons for billing both her services at an hourly rate and a separate sizable disbursement for the operation of the computer, to warrant ordering that the province pay for all of these items of expense. Upon a final s. 44 review, should it become necessary, it may well be that the claimant can convince the chair or vice chair that Ms. Simpson's charges, both fees and disbursements, are appropriate, but I have inadequate evidence on that point to satisfy myself at this s. 47 review.

In addition, I am satisfied, upon reviewing the accounts themselves, that a significant portion of the engineering firm's time was spent on disturbance damage-related services and on redundant and duplicative "team approach" reviews, meetings and telephone conferences. In light of these considerations, I am awarding 60% of the fees and disbursements billed by Chatwin Engineering Ltd.

 

6. THE APPRAISAL ACCOUNT

The claimant retained the appraisal company, Kenneth Rogers Appraisals Ltd., to perform an appraisal of the fee simple value of the property taken, and of the reduction in value to the remainder. Mr. Ken Rogers of that firm, I was informed, is a developer himself as well as a professional appraiser, and has significant knowledge of the Nanaimo real estate market.

I have before me Mr. Rogers' invoices and a separate time breakdown of his work into subject categories. Mr. Rogers' hourly rate is not separately set out, and an examination of his time breakdown indicates that it ranges anywhere from $72 to $125, depending on what type of service was provided and whether a daily rate was charged. The province did not take issue with Mr. Rogers' rates, nor with the necessity of having the appraisal done. It did suggest, however, that $3,500 would be a more reasonable amount to award than the $5,885 sought, because $3,500 is the amount that the province says it paid its appraiser in this case for the same type of report. I have no evidence before me about this, and I am not satisfied that this type of comparison is generally helpful in any case .

In addition to its overall objection to the total fee, the province was concerned about the fact that Mr. Rogers, whose office is in New Westminster, had made two trips to Nanaimo to collect sales and listings for his report. The province suggested that it should not have to pay for the travel time of an appraiser from the mainland, when competent appraisers are available on the island. It also objected to the time Mr. Rogers spent in Nanaimo collecting and inspecting his comparables.

Rogers' account lists an item of travel for 5.5 hours for a stated total of $400 in fees. Although neither his account nor his time breakdown is clear on this point, it looks to me as though he only billed for travel in one direction. This is in accordance with the board's previous rulings that travel time will normally be granted at one-half a professional's standard hourly rate. The time breakdown also lists 2 days from 6 a.m. to 10 p.m. billed for these purposes: "to collect sales and listings for report … review and inspect sales and listings to be used and considered in the final report (4 different zonings)." The amount of $1,650 was billed for these two days, on top of the travel time already referred to.

While I am aware that there are competent professional appraisers on Vancouver Island, I am not convinced, for the purposes of a s. 47 application, that it was unreasonable of the claimant to engage the services of Mr. Rogers in this case. First, he apparently has some specialized expertise regarding the Nanaimo area. Secondly, I do not know that the travel expenses of an appraiser located somewhere else on the island other than Nanaimo would be substantially lower than those charged by Mr. Rogers.

Taking these matters into consideration along with the apparent complexity of this case, I consider the overall amount of the appraisal account to be reasonable for the purposes of a s. 47 review, and I therefore award 100% of the amount billed by Kenneth Rogers Appraisals Ltd.

 

7. GOODS AND SERVICES TAX

The province provided me with a copy of the Excise Tax Act, R.S.C., c. E-13, an extract from a Revenue Canada publication entitled "GST -- Memorandum -- TPS: Input Tax Credits", and extracts from two handbooks on the Goods and Services Tax prepared by accounting firms. These materials indicate that certain individuals and corporations are entitled to become registrants under the Excise Tax Act for the purpose of obtaining "input tax credits" for the GST that they have paid during any given reporting period. The refundable input tax credits are available for GST paid on purchases to the extent that they were acquired for consumption, use or supply in a commercial activity. Legal and other professional services are included in the definition of purchases, provided that they can properly be considered expenditures incurred in the course of carrying on the commercial activity of the registrant.

Ms. Wilson acknowledged that the claimant is a GST registrant. It seems on the face of it that all of the professional fees and disbursements incurred by the claimant would probably be considered to have been incurred in the course of carrying on its commercial activity, which must be proven to qualify for the input tax credit. There seems also to be no personal, as opposed to corporate, aspect to the expenses, which is a factor that might disentitle a registrant to all or a portion of their credits. In addition, I do not believe that it is in dispute that the properties in question were held by the claimant for development purposes, and that the claimant is in the business of developing properties such as these.

Based on the very generic information available to me regarding this GST issue, I conclude on a balance of probabilities that the claimant will be able to receive input tax credits for the full amount of all of the GST charged on these accounts. If that is the case, then the province should not have to pay the GST to the claimant, as requiring it to do so would result in a windfall to the claimant of the amount of the GST. Since this is a s. 47 costs application, and since any misapprehension regarding this issue is capable of correction before the compensation and any final costs hearings are ultimately concluded, I will not order the province to pay the GST on these accounts now.

 

8. INTEREST

The claimant asked that the province be required to pay interest at the rate of 9% per year on any of these accounts submitted more than 60 days before the date of this review and that remain unpaid. It maintained that the province is in breach of s. 47 (2) of the Act in that it neither paid the bills promptly nor applied to have the bills reviewed here. Section 47 provides in part as follows:

47. (1) An owner may, from time to time after an expropriation notice or an order under section 5 (4) (a) has been served on him, submit a written bill to the expropriating authority consisting of the reasonable legal, appraisal and other costs that have been incurred by him up to the time the bill is submitted.

(2) On receiving a bill under subsection (1), the expropriating authority shall either promptly pay the bill or apply to have the bill reviewed by the chair.

(3) Where the expropriating authority fails to comply with subsection (2), the owner who submitted the bill may apply to the chair to have the bill reviewed.

In this case, the claimant set this application down for hearing under subsection (3). The proper consequence of this alleged breach on behalf of the province, in the claimant's view, is the payment of interest on the overdue accounts.

The province, on the other hand, maintained that any delay in the payment of the accounts was primarily the result of the claimant failing to produce acceptable further particulars of the accounts in a timely manner. The claimant's filed materials include the rather lengthy recitation and reproduction of much of the communication between the parties regarding questions about the accounts.

I agree with the claimant that the province is not dealing with these advance costs in the way the statute anticipates. It only made advance payments of less than one-fifth of the amount claimed, it has sought particulars from the claimant in a manner that indicates it has almost taken on the role of reviewer of costs itself, and yet it has not done as directed by s. 47 (2) and set the matter down for hearing. The oldest of these accounts goes back to April 30, 1994. It is difficult to see how the claimant will manage to enjoy the "level playing field" that the advance payment of costs scheme is meant to afford it, if the province takes this approach.

In some instances it does appear that the claimant has taken a longer time to respond adequately to all of the queries raised by the province than would be ideal, but the province's demands for particulars at this advance costs stage seem to me to be too detailed.

Nonetheless, I am aware of nothing in the Act that provides me with the jurisdiction to award interest on an advance costs review on what might be characterized as a punitive basis. My jurisdiction under s. 47 is to review a written bill setting out "the reasonable legal, appraisal and other costs that have been incurred by [the claimant]." I am to "tak[e] into account all relevant circumstances", "assess the reasonableness of the bill and [I] may make an order with respect to its payment, accordingly." If interest on an outstanding account consists of a reasonable cost incurred by the claimant, then I may make an order for its payment. The Supreme Court of this province made it clear in its decision in Tidmarsh v. Comox-Strathcona (1995), 55 L.C.R. 81, that even when interest charges have not yet been paid by the claimant, the task of the reviewer of costs is "to consider … the reasonableness of the interest expense incurred by the claimant" (p. 87). It does appear to me, however, that the length of time an account submitted to an expropriating authority for payment remains substantially unpaid may sometimes be a factor to be considered in determining the reasonableness of an interest expense.

In this case, I have affidavit evidence before me to the effect that interest is being charged to the claimant on the Wilson accounts at the rate of 18% per year, on the McIver account at the rate of 9% per year, and on the Chatwin accounts at the rate of 12% per year, all on accounts outstanding for more than 30 days. I have no evidence regarding any interest charged on the Rogers account.

The claimant, at the costs review, sought interest on all outstanding accounts at the rate of 9% per annum. Given the rates being charged to the claimant on all but one of these accounts, the rates generally charged by professionals on their accounts, and the length of time the bulk of the accounts have remained largely unpaid by the province, I conclude that interest at the rate of 9% is a reasonable cost incurred by the claimant, on those accounts where interest is being charged.

I therefore award interest on the amounts I have ordered to be paid, with the exception of the Rogers account, taking into account any moneys already paid by the province as advance costs, on any accounts submitted to the province that remain unpaid 60 days after they were sent to the province. I stipulate 60 rather than 30 days because the province must have a reasonable period of time within which to review the accounts and to attend to payment. Interest shall be calculated on each such account from the date 60 days after its submission to the province for payment, at the rate of 9% per year.

 

9. COSTS

I calculate that my award of costs amounts to about $37,000 out of the total $58,672.08 claimed. By contrast, the province has only paid $11,000 towards these costs. This amounts to about 30% of the amount I have awarded.

It was reasonable for the claimant, in light of the province's approach to advance costs in this case, to set this application down for hearing. Since it has been substantially successful here, I award the claimant its reasonable costs of this review.

Counsel did not make any representations as to what would constitute a reasonable amount for the costs of the s. 47 review. I am therefore not prepared to fix an amount here, and will leave it to counsel to come to an agreement as to the appropriate amount. Failing an agreement, either party may apply to the board to fix an amount. I note from reviewing Ms. Wilson's most recent account, dated September 2, 1995, that approximately nine hours of her billed time appears to relate to preparing for this hearing. That nine hours represents $1,200 of the total fees, of which I have already allowed 75%, or $900. This should be taken into account by both counsel when determining a reasonable costs figure for the s. 47 review.

 

 

Government of British Columbia