August 30, 1995, E.C.B. No. 79/92/94 (57 L.C.R. 24)

Between: Summit Enterprises Limited
Claimant
And: City of Kamloops
Respondent
Before: Fiona St. Clair, Vice-Chair
Appearances: Jeffrey G. Frame, for the Claimant
Leonard S. Marchand, for the Respondent

 

1. THE APPLICATION

I heard this application in Kamloops on February 9, 1995. The application, for a final costs award, was brought by the claimant, Summit Enterprises Limited ("Summit"), pursuant to s. 44 of the Expropriation Act, S.B.C. 1987, c. 23 ("the Act"). Both Summit and the respondent, the City of Kamloops ("Kamloops") were represented by counsel.

Mr. Frame, of counsel for Summit, presented an amended bill of costs to January 25, 1995, for my consideration. The bill of costs claimed reimbursement for four legal accounts and two appraisal accounts. The legal accounts were as follows:

1. Webber Gillespie Renkema Burke of
September 26, 1991 

$832.41
2. Gillespie Renkema Burke of October 26, 1992 $1,646.43

3. Gillespie Renkema Burke of August 31, 1994 $5,808.16

4. Gillespie Renkema Burke of November 16, 1994 $889.25

  Total: $9,176.25

Kamloops had paid the first account in full, and had paid $1,494.16 towards the second account, leaving only the sum of $152.27 unreimbursed on that account. It had paid nothing towards the third and fourth accounts.

The appraisal accounts that were presented to me were:

1. D.C. Cavazzi & Associates of June 30, 1993 $3,981.48

2. Interwest Property Service of August 19, 1994 $8,943.01

  Total: $12,924.49

Kamloops had paid the Cavazzi account in full at the time of the hearing, but had not made any payment towards the Interwest account.

The evidence at the hearing was presented by Summit through the filed affidavit of Reinhard Burke, its legal counsel, and by Kamloops through the filed affidavit of its legal counsel, David A. Handy.

 

2. BACKGROUND

These costs arose out of compensation proceedings commenced following the execution on September 23, 1991, of an agreement under s. 3 of the Act. Mr. Marchand, of counsel for Kamloops, advised me that the amount of property acquired was approximately .289 of an acre out of a 3.53 acre parcel. The s. 3 agreement provides for the dedication of those lands belonging to Summit as highway, and for the amount of $80,000.00 to be paid to Summit by Kamloops in return. It further provides that if the parties cannot agree on the final amount properly payable to Summit within a year, Summit may apply to the Expropriation Compensation Board ("the board") for compensation under the Act. It also requires that Kamloops provide Summit with a copy of an appraisal report of Aarkay Seel Appraisal Co. Ltd. dated November 14, 1990, "and any other documentation upon which the estimated amount [i.e. the $80,000.00] was based."

No further agreement having been reached, Summit commenced these proceedings on October 14, 1992. In its Form A, it claimed $203,883.20 as compensation for the lands and $100,000.00 for the diminution in value of its remaining neighbouring land. Hearing dates were set for September 12 through 16, 1994, but the parties eventually adjourned the hearing and settled the matter, ultimately filing a consent order on September 30, 1994. The consent order provides that Kamloops pay Summit a total of $88,000.00 compensation (inclusive of the $80,000.00 already paid), plus specified interest and costs to be determined.

 

3. THE LEGAL ACCOUNTS

Before dealing with his specific objections to the individual accounts, Mr. Marchand set out Kamloops' overall objections to the global amounts of the accounts. Referring to the terms of ss. 44 (11) (a), which provides that the person reviewing the account must consider the "number and complexity of the issues", Mr. Marchand suggested that in this case the issues were "few and simple." Dealing with the required consideration of "the degree of success" set out in ss. 44 (11) (b), he pointed out that whereas the Form A claimed a total of approximately $303,000, the settlement was only for $88,000. This, he suggested, indicates a low degree of success. He stated that he would deal with ss. 44 (11) (c), which requires a consideration of "the manner in which the case was prepared and conducted", when he addressed his specific concerns about each account.

Finally, he referred me to ss. 44 (5). That provision states:

"Where the compensation awarded to an owner is 115% or less of the amount paid by the expropriating authority under section 19 (1) and (11) or otherwise, the board has a discretion to award the owner all or part of his costs."

Even though the amount of compensation in this case was arrived at through a settlement between the parties, Kamloops' position was that a consent order is an "award" of the board, and that ss. 44 (5) therefore applies to this case. Mr. Marchand made it clear that he was not arguing that Summit should receive no costs by the application of this subsection. Rather, he wanted me to view ss. 44 (5) as an "important marker regarding what is reasonable" in terms of costs. Pointing to the fact that Kamloops' original payment to Summit was in the amount of $80,000, Mr. Marchand argued that it was unreasonable for Summit to incur approximately $22,000 in costs in order to arrive at a settlement of only an additional $8,000 over the amount of the s. 19 payment.

In response to these arguments, Mr. Frame, of counsel for Summit, argued that the conduct of Kamloops throughout the negotiations was not conducive to a quick, inexpensive settlement. He reminded me that Summit agreed to the final settlement within only five days of its receipt of the Flynn Mirtle Moran appraisal from Kamloops, and that Kamloops had had that appraisal since September 20, 1993, nearly a year prior to the date of the settlement. He cited Kamloops' refusal to provide the report except through an exchange of reports, and its original contention that costs were not available to Summit under a s. 3 agreement. He maintained that overall, the costs claimed by Summit were reasonable ones in light of these factors.

Mr. Frame also argued that ss. 44 (5) does not apply to settlements. In support of this, he pointed out that ss. 44 (9) deals specifically with costs arising from settlements, which it provides "shall be determined by the chair" in the absence of agreement by the parties. His argument was that reading ss. 44 (5) as applying to settlements would provide a disincentive to a claimant to settle for less than 115% of the amount of the advance payment under s. 19, as in doing so the claimant would risk losing its right to recover its costs. He characterized the Act as being intended to encourage settlements, and urged me not to interpret ss. 44 (5) as Kamloops suggested, so as not to thwart this legislative intent.

Subsection 44 (9) states that where there has been a settlement regarding compensation or damages but not regarding costs, then the chair shall also determine the costs in such cases. I do not find this subsection helpful in the analysis of whether ss. 44 (5) should be read as applying to settlements. I read ss. 44 (9) merely as being parallel to ss. 44 (10), which provides that where the board determines the compensation, the chair shall determine the costs.

I do, however, agree with Summit's submission that interpreting ss. 44 (5) to refer to settlements would create a disincentive for some parties to settle their claims. In my view, the intention of ss. 44 (5) is to discourage the lengthy and expensive prosecution, through hearings, of cases of little merit. In other words, if a claimant persists in involving the board and the expropriating authority in a hearing that results in very little more being awarded than was originally paid by the expropriating authority, the board has a means, through ss. 44 (5), of denying that party some of its costs that would otherwise have been awarded. The possibility of the board making such an order is designed as a disincentive to the prosecution of cases that could readily and reasonably have been settled. This logic would not, of course, apply to settlements, and I agree with Summit that reasonable settlements should always be encouraged.

Even if I am incorrect about the proper interpretation of this subsection, this is not a case in which I would have applied ss. 44 (5) if it were applicable. I am equally disinclined, for the reasons set out above regarding the intent of ss. 44 (5), to take up Kamloops' suggestion that I view the subsection as a benchmark of reasonableness in this case.

3.1 Webber Gillespie Renkema Burke Account Of September 26, 1991

3.1.1 Fees

This account charges fees of $735.00, based on 4.2 hours at $175.00 per hour. The lawyer involved in the account was J. Roger Webber, who at the time of the application was no longer a partner in the firm. Although the account was paid in full, counsel for Kamloops advised me that the payment had been made on a "without prejudice" basis. He pointed out that the fees charged are at the top rate allowed by the board to date for experienced counsel, and stated that he did not know whether Mr. Webber was experienced in this area of the law or not. He also stated that the individual items of service outlined in the account "seemed standard", and that he would "leave it with [me] whether they should take 4.2 hours".

Counsel for Summit proposed that, viewed on a global basis, a fee of $735.00 for the negotiation and preparation of a s. 3 agreement was reasonable. He also indicated that since Mr. Webber is a very senior solicitor with a great deal of experience in land transactions, the hourly rate of $175.00 is warranted. I note that, although I was provided with evidence as to Mr. Burke's and junior counsel's years of call and areas of expertise, I had no such evidence before me regarding Mr. Webber, only the advice of counsel in oral argument. I find that 4.2 hours was a reasonable amount of time to spend negotiating and drawing up the s. 3 agreement in this matter. However, the onus is on the claimant to prove the reasonableness of both the time spent and the hourly rate upon which the fee is calculated. I note that I have no evidence regarding Mr. Webber's experience and practice in the area of expropriation law to support the hourly rate charged in this account. I am therefore reluctant to permit the hourly rate of $175.00, which is, to date, the highest rate allowed by the board for senior solicitors experienced in the field of expropriation law. I accordingly reduce the hourly fee to $150.00, which when multiplied by the 4.2 hours gives a revised total of $630.00

3.1.2 Disbursements

Kamloops objected to Summit seeking to recover reimbursement for photocopies charged at $0.35 per page. The board has previously, in recent costs decisions, allowed these charges at $0.15 per page. Summit did not provide me with any evidence as to why $0.35 is a reasonable charge per page, and I intend to apply the same rate as previously allowed by the board in other cases, in this matter. This means that the allowed photocopy disbursements for this account will be 69 pages at $0.15 per page, for a total of $10.35 instead of the $24.15 claimed.

3.2 Gillespie Renkema Burke Account of October 26, 1992

3.2.1 Fees

When Mr. Webber left the firm of Webber Gillespie Renkema Burke in late 1992, Mr. Burke took over Summit's file from him. The interim account dated October 26, 1992, is Mr. Burke's account, and it covers a period of less than one month, between October 8 and October 26, 1992. Mr. Burke's fees are charged at $185 per hour for 7.1 hours, for a total of $1,313.50. The time spent by Mr. Church, then an articled student, is charged at $85 per hour for 0.75 hours, for a total of $63.75. The total fees in this account are $1,377.25.

Mr. Marchand argued that 2.3 hours should be deleted from the account, representing the time described on the related prebilling report as "to reviewing Roger Webber's file, to preparing to meet with you, to letter to Roger Webber, to ordering various missing materials." He cited the board's decision in Gerestein et al. v. Abbotsford (District) (1990), 43 L.C.R. 262 in support of the excision of this time, on the basis that the board in that case disallowed additional costs incurred as a result of the claimants' election to change law firms. Mr. Frame argued in response that Summit had not changed law firms in this case, but rather that it had moved from dealing with a solicitor to dealing with a litigator when the progress of its claim warranted that change of expertise. Moreover, he pointed out that Summit did not change law firms; rather, it was Mr. Webber who left the law firm whose services Summit had originally retained. These factors, he maintained, distinguish this situation from Gerestein.

I agree with Summit's counsel on this point. I accept that it was reasonable for Summit to approach a solicitor experienced with land transactions in the Kamloops area, at a time when it thought it possible to negotiate an agreement with Kamloops. I also accept that it was reasonable for Summit to switch to dealing with Mr. Burke when it became clear that litigation was called for, and when Mr. Webber left the firm. Finally, I do not view a situation in which a party's counsel leaves a law firm as being the same as a situation in which the party discharges the services of one law firm in favour of another within the same area of practice. I therefore allow the 2.3 hours to which Kamloops objected.

Kamloops also took issue with the .75 hours of articled student's time on this account. The prebilling report indicates that this time was made up of .4 of an hour attending at City Hall to obtain by-laws, .25 of an hour serving documents on the City Clerk, and .1 of an hour swearing an affidavit of service. Kamloops maintained that these services could all have been provided less expensively by a runner, or by a mail or courier service. Kamloops' counsel suggested that I reduce the $63.75 charged for the articled student's time to $5.00 or $10.00, which he estimated would be the disbursement cost for obtaining the services elsewhere. In the absence of real evidence as to the cost of having these matters attended to by someone other than an articled student, I am not prepared to conclude arbitrarily that it could have been accomplished for less than the $63.75 charged. I find the time spent to be reasonable for the services performed, and therefore allow the time charged for Mr. Church of .75 of an hour.

Kamloops also objected to the hourly rates charged on this and all subsequent accounts. Mr. Burke's time has been charged at the rate of $185 per hour, and the services of the firm's articled student and first year associate have been charged at $85 per hour. Counsel for Kamloops directed me to the board's decisions in Jesperson's Brake & Muffler Ltd. v. Chilliwack (District) (1993), 51 L.C.R. 62, Branscombe v. Minister of Transportation and Highways (1994), 54 L.C.R. 1 and Tidmarsh v. Comox-Strathcona (Regional District) (1994), 54 L.C.R. 13. In Jesperson's, the former Chair Harvey accepted the respondent's submission that $175 was an appropriate hourly rate for the time spent by claimant's counsel, rather than the $200 claimed. I note that the decision does not reflect what evidence, if any, was led regarding what the appropriate rate should be.

Branscombe was a case involving Mr. Burke as counsel for the claimants. In that case, Mr. Burke billed his time at $175.00 per hour. The former Chair accepted this hourly charge for Mr. Burke's time, and stated at p. 5 of the reported decision:

"I am satisfied, having regard both to the previous decisions of the board and the hourly rate being charged by senior counsel on the file at $175, that the reasonable hourly rate to be billed for student hours necessarily incurred is $60.

In Tidmarsh, former Chair Harvey discussed the respondent's argument that the various hourly rates should be reduced, "… based on the board's previous 'ceiling' of $175 per hour for experienced counsel," but she ultimately decided that case on the basis that the cumulative time on the file was excessive, and declined to determine with precision the hourly rates to be allocated to the various counsel involved.

This "ceiling", which is often referred to by counsel for respondents in costs reviews before the board, had its genesis in the decision of the former Chair Heinrich in Gerestein v. Abbotsford (District) (1990), 43 L.C.R. 262. At p. 271 of the reported decision, he drew the following conclusion:

"The respondent suggested that the hourly rate of $175 charged by senior counsel could only be justified by a practitioner experienced in this field. I would agree."

Following this decision, there have been no reported decisions of the board in which an hourly rate of more than $175 per hour for senior counsel experienced in expropriation law has been allowed. I note that in Gerestein, however, former Chair Heinrich was dealing with counsel who by his own admission was "inexperienced in expropriation matters", and who had charged $175 per hour for his time. The comment cited above was made in the context of deciding that $175 per hour was excessive for inexperienced counsel.

Counsel for Summit referred me to the decision of the Ontario Court of Justice in 131843 Canada Inc. v. Double "R" (Toronto) Ltd. (1992), 11 C.P.C. (3d) 190. That case involved a solicitor and client taxation in a bankruptcy matter. Mr. Frame argued that the Act I am applying, in providing for the reimbursement to claimants of their "actual reasonable legal, appraisal and other costs", can reasonably be compared to solicitor and client taxations in superior courts. At p. 192 of the decision, Blair J. refers to another judicial definition of what is involved in fixing costs as between parties on the solicitor and client scale. The guiding principle in that exercise

"is that the solicitor and client scale is intended to be complete indemnification for all costs (fees and disbursements) reasonably incurred in the course of prosecuting or defending the action or proceeding but is not, in the absence of a special order, to include the costs of extra services judged not to be reasonably necessary.">

I agree that this is very similar to the review of costs under the Act that I am applying.

Counsel for Summit specifically highlighted an extract from the decision found at p. 195, as follows:

"In fixing costs as between parties on a solicitor-and-client scale, the court is seeking to provide complete indemnity to the successful party, within the parameters set out above. In such circumstances, provided the rates charged by counsel bear some reasonable relationship to those prevailing in the relevant marketplace for counsel of comparable skill and experience, it is not the function of the court, in my view, to act as arbiter of what the fees charged by counsel and solicitors in that marketplace should be or to impose a different (and lower) rate deemed to be "reasonable". Judges are insulated from the business factors that come into play in the setting of such rates and, because they no longer practice law, are not attuned to the niceties of balancing those various factors in carrying on such a practice. Within these guidelines, the court should be wary about imposing its own views of what may be reasonable."

I do not read the Gerestein decision as purporting to set a "ceiling" for experienced senior counsel. Moreover, if counsel can provide me with compelling evidence as to the reasonableness of their charged hourly rate in what Blair J. referred to as "the relevant marketplace for counsel of comparable skill and experience," I view such evidence as more persuasive than previous decisions of the board dealing with different fact situations, different counsel and often different economic times. Like Blair J., I am of the view that the marketplace is a better indicator of what is "reasonable" than any arbitrary amount I might settle on, based upon my own past experience as a lawyer and my subjective views on the matter.

In this case, counsel for Summit presented me with evidence in support of the hourly rates charged. Mr. Burke's affidavit sets out the following statements on this topic:

"22. The firm of Gillespie Renkema Burke has endeavoured to remain knowledgable [sic] of the market for legal services and to maintain a level of competitiveness within that market. To this end, our office obtained a copy of the 1994 survey of standard charge out rates for lawyers in the province of British Columbia a copy of relevant excerpts of which is attached and marked as Exhibit "I" to this my affidavit.

23. I was called to the Bar in 1972 and I have developed a specialized practice in the area of expropriation. I have kept myself informed of the rates charged by my colleagues of similar experience both in and outside the area of expropriation. Through these inquiries I have satisfied myself that the rate charged by me to the Claimant was within the range of rates charged by my colleagues.

24. Before I render an account to a client, it is my practice to review the work done and the hours spent both by myself personally and others within the firm. Before rendering the accounts attached to this affidavit I reviewed them and satisfied myself that the rates and hours spent were justified and reasonable."

Exhibit "I" is a copy of certain pages from a survey done by the Vancouver Association of Legal Administrators, B.C. Branch, Canadian Bar Association. It is identified as Survey #2, 1994 Standard Charge-Out Rate and Benefits Survey (data as of October 1, 1994). The results are divided according to firm size and location, as well as among solicitors, litigators and general practitioners. One of the pages included sets out standard charge-out rates for lawyers called to the bar between 1971 and 1975. Counsel for Summit directed me to the figures on this page corresponding to litigators in the B.C. Interior/Vancouver Island, in firms of six lawyers and larger. The range of charges is between $185 and $200 per hour. The average rate is cited as $192, and the median as $190. Counsel for Summit also directed my attention to the figures for articled students in the same location and for the same size of firm. Those figures indicate a range of $50 to $85 per hour, an average of $72 and a median of $75.

Counsel for Summit argued that the reasonableness of the hourly rates charged should be determined in the context of the prevailing market place, and that this survey is good evidence of the reality of that market place. I agree with this submission. Although the only survey results I was given relate to 1994, and the account presently under consideration dates from 1992, I note that Mr. Burke's hourly rate falls at the very bottom of the range for 1994. Mr. Burke is well known to the board as a very senior litigator with a great deal of experience in matters before the board. He is, in addition, one of the few lawyers in the province whose practice is exclusively or almost exclusively in the area of expropriation law. On that basis, and using the survey figures as a useful frame of reference, I find his hourly rate of $185 per hour to be reasonable. I also find the time spent on this account to be reasonable, and therefore allow his time on this account at that rate.

As far as the charges for the articled student are concerned, I was not provided with any evidence about the particular individual whose time is charged on this account. I am therefore unable to assess whether his time should be charged at the top, middle or bottom of the range for articled students in the locality. I note that $85 is the top of the survey range for 1994, and that I was not provided with evidence about 1992 rates. I am therefore unable to conclude that $85 is warranted for Mr. Church's time, and reduce the fee for his services to $60 per hour. I find the time spent by Mr. Church to be reasonable.

I therefore allow all of Mr. Burke's time on this account at the hourly rate charged of $185 per hour, for a total of $1,313.50. I allow all of Mr. Church's time of 0.75 of an hour, but at the reduced hourly rate of $60, for a revised total of $45.00.

3.2.2 Disbursements

The only objection to the disbursements on this account related to the per page cost for photocopies. As with the previous account, I allow these charges at $0.15, which means a reduction from $43.04 for 123 pages to $18.45. The other disbursements on this account are allowed as billed. This brings the total disbursements allowed to $39.59, down from the amount claimed of $64.19.

3.3 Gillespie Renkema Burke Account of August 31, 1994

3.3.1 Fees

Counsel for Kamloops took issue with the hourly rate charged on this account for Mr. Burke. Mr. Burke's time was charged at $185 per hour, and for the reasons set out above, I accept that hourly rate for this account.

Kamloops did not object to the hourly rate of $85 for Mr. Frame, who was a first year associate at the time this account was prepared. However, Kamloops submitted that all of Mr. Frame's time (6.85 hours) on this account should be disallowed. The prebilling report for the account indicates that Mr. Frame's time was spent "researching the compensability of tax implications arising from expropriation" and "researching tax implications of land trade in expropriation context." Counsel for Kamloops maintained that providing Summit with tax advice was an "ancillary service" to the compensation matters. He also argued that the tax implications of the expropriation are irrelevant to the issue of compensation. Finally, he pointed out that the account itself does not reflect the fact that any tax research was included in the time charged for. He indicated that when the account was submitted to Kamloops the prebilling report, which does itemize Mr. Frame's services, was not included, and maintained that this was inappropriate.

Mr. Frame argued that the tax implications of any compensation settlement are a "live issue", and that the research is a properly reimbursable item. I agree that advising a client on the tax implications of a settlement in a compensation matter can be part of a competent lawyer's necessary services, and I am not willing to disallow the time altogether as being unnecessary. As for the number of hours involved, counsel for Kamloops made no representations about this, choosing instead to argue for the disallowance of the entire block of time. I therefore have no evidence or arguments about the 6.85 hours being unreasonable, and in light of Mr. Burke's sworn statement that the time spent was in his view "justified and reasonable", I will allow the time claimed. I tend to agree with Mr. Marchand's observation that a description of these services should have been part of the account originally forwarded to Kamloops, but I do not consider the failure to list those services in the statement of account to be fatal to an award for their reimbursement.

Counsel for Kamloops objected to the amount of time billed by Mr. Burke, but in very vague terms. He indicated that he would "leave it with [me] generally" as to whether 23 hours (or, as he put it, 3 full 8 hour days) was reasonable for the services listed on the account. He referred me to his opening statements, which dealt with Kamloops' overall concerns about the amounts of the accounts.

I note that the account covers the period from October 23, 1992 to August 24, 1994. In light of the lengthy time frame of this account, the contents of the itemized list of services performed on the prebilling report, Mr. Burke's sworn statement about the reasonableness of the times, and the very general objection taken to the time by Kamloops, I find no basis on which to reduce the number of hours claimed for Mr. Burke's time.

The fees charged on this account are therefore allowed in their entirety at $4,837.25.

3.3.2 Disbursements

Kamloops made the same objections to the per page photocopying charges on this account that it did to the first account dealt with here. For the same reasons, and using the same per page amounts, I reduce the allowable photocopy charges from $161.00 to $69.00.

In addition, Kamloops, relying on the same case authority, argued that the per page fax charges should only be allowed at $0.35 per page, and not at $5.00 per page as charged. For the same reasons stated above regarding the photocopy charges, I agree, and reduce the allowable "telecopier fee" from $30.00 to $2.10, for 6 pages.

This has the effect of reducing the disbursements allowed, from the $272.32 claimed to $152.42.

3.4 Gillespie Renkema Burke Account of November 16, 1994

3.4.1 Fees

At first, counsel for Kamloops indicated that he had no problem with the number of hours charged on this account, on the basis that the prebilling report showed 5.55 hours, whereas the account itself billed only 3.8 hours. When counsel for Summit responded to Kamloops' submissions, however, he indicated that the deletion of the 1.7 hours related to extracting the time spent preparing for this application, on the basis that that time should more properly be considered in determining the costs of this application rather than in determining the costs of the compensation proceedings. Upon hearing this clarification, counsel for Kamloops revisited his position and took issue with the October 6 and 19 services recorded by Mr. Burke. These involved reviewing interest calculations and preparing revised calculations for 1.2 hours. I note that the 1.2 hours also included the review of a letter from Mr. Handy, and the drafting of two letters to Mr. Handy. I do not accept Mr. Marchand's argument that a more junior member of the team should have attended to these tasks, and I do not find that 1.2 hours for the services listed in the prebilling report to be unreasonable. I therefore accept the time charged on this account as well. In accordance with the reasoning set out above, I allow the hourly rate claimed of $185, and allow the fees as claimed at $703.00.

3.4.2 Disbursements

Once again, the per page "telecopier fees" and photocopy disbursements were raised by Kamloops. As with the other accounts, I disallow the amounts claimed and allow the amounts of $0.35 and $0.15 per page, respectively. This will decrease the telecopier fees from $15.00 to $1.20, and the photocopy disbursements from $25.26 to $11.25. The total disbursements allowed on this account will therefore be $52.90, rather than the $80.71 claimed.

3.5 GST & PST

All of the changes which I have ordered in the amounts of the fees and the disbursements on the various accounts, will, of course, result in consequential adjustments to the GST & PST payable by Kamloops on the revised amounts.

3.6 Summary

The amounts allowed for the various legal accounts, fees and disbursements, are summarized as follows:

1. Webber Gillespie Renkema Burke
of September 26, 1991
$630.00 fees
$  23.55 disb.
$653.55 total
 

2. Gillespie Renkema Burke of October 26, 1992 $1,358.50 fees
$     39.59 disb.
$1,398.09 total
 

3. Gillespie Renkema Burke of August 31, 1994 $4,837.25 fees
$   152.42 disb.
$4,989.67 total
 

4. Gillespie Renkema Burke of November 16, 1994 $703.00 fees
$  52.90 disb.
$755.90 total
 

  Overall total: $7,797.21

 

4. THE APPRAISAL ACCOUNTS

4.1 The Reports

Mr. Burke's affidavit goes into considerable detail regarding the timing of the preparation and exchange of the various property appraisals. It sets out the following scenario. In November of 1992 Mr. Burke's firm retained the services of both David Cavazzi of Cavazzi and Associates ("Cavazzi") and Danny Grant of Interwest Property Service ("Interwest"). Mr. Burke believed that two appraisal reports were necessary, due to the amount involved in the claim, and the fact that the Aarkay Seel appraisal was, in his opinion, out of date. (When Mr. Burke received that appraisal in September of 1991 it was approximately 10 months old.) In June of 1993 Mr. Burke reviewed Cavazzi's draft report and "formed the opinion that [Mr. Cavazzi] had made a serious error with regard to the issue access [sic] to the dedicated portion of the Lands." He also became aware "that Mr. Cavazzi was working for the respondent on other matters." For these reasons, he did not request a final report from Cavazzi and decided to proceed on the basis only of Interwest's report. On September 28, 1993, Kamloops, wrote to Mr. Burke indicating that they had an updated appraisal report and that they would provide it to him only on the basis that the parties exchange appraisals. Although Mr. Burke had the unfinished Cavazzi report in hand at that time, he did not choose to provide it to Kamloops, presumably because he was not intending to rely on it himself. In the end, Mr. Burke did not receive a copy of Kamloops' report or find out what its contents were until August 11, 1994. The report that he received on that date had been completed on September 20, 1993 by Flynn Mirtle Moran, and gave an appraised value of $88,000.00. Five days after Mr. Burke received that report, the settlement was achieved for the amount set out in the Flynn Mirtle Moran appraisal.

The dates and estimated values set out in the four appraisals are as follows:

1. Aarkay Seel Nov. 14, 1990 $82,800
2. Cavazzi draft June 28, 1993 $75,600
3. Flynn Mirtle Moran September 20, 1993 $88,000
4. Interwest August 2, 1994 $57,300.

4.2 The Accounts

D.C. Cavazzi & Associates billed the sum of $3,981.48 for its services on June 30, 1993. On December 6, 1994, Kamloops reimbursed Summit for the full amount of that account. At the application Kamloops did not maintain that the payment had been made on a "without prejudice" basis, and did not seek any reduction of the amount paid. Presumably because of this, neither Summit nor Kamloops filed a copy of the Cavazzi invoice.

I do, however, have a copy of the Interwest account and the related computer-generated client billing worksheets. Interwest's account is dated August 19, 1994, and charges $7,640 for 114.5 hours of professional services, plus $717.95 in disbursements, plus taxes, for a total of $8,943.01. Kamloops had, at the date of the application, made no payment towards this account.

Kamloops took the position that it should only be responsible for the Cavazzi account, and that it should be required to pay nothing towards the Interwest account. Its counsel maintained that Cavazzi is a well-respected firm and that the draft appraisal is thorough and reasonable. This latter point, he submitted, is evidenced by the fact that its final estimate of value falls within the mid-range of the four appraisals obtained.

Despite the fact that Kamloops did not dispute its liability to reimburse the amount of the Cavazzi invoice, its counsel took issue with Mr. Burke's sworn allegation that he felt Cavazzi had made a serious error in dealing with the issue of access, and he also suggested that there was no substance to Mr. Burke's suggestion in his affidavit that Cavazzi had some conflict of interest in appraising the Summit property due to the other work it was doing for Kamloops. Kamloops' counsel also suggested that Mr. Burke could perhaps have canceled Cavazzi's retainer earlier than he did.

With regard to the Interwest report, Mr. Marchand suggested that when Mr. Burke received the Cavazzi draft, he could or should have canceled Interwest's retainer, since Cavazzi's opinion was more favourable to Summit. The Cavazzi draft report is dated June 28, 1993, and Interwest's client billing worksheets indicate that at that point Interwest had only completed its compilation of data, and had not yet started drafting its report. Presumably, it had not yet arrived at its conclusion as to value. Since Mr. Burke had decided not to proceed with Cavazzi's report for the reasons set out in his affidavit, I do not see how it would have made sense for him to have canceled the Interwest report as well, since it appears that he was intending to proceed to a hearing with only the Interwest report in hand. He would almost certainly not have known at the time he received the Cavazzi report that Interwest's opinion as to value would be so much lower.

Counsel for Kamloops argued in the alternative that the Interwest report was "grossly overpriced," and that in the event that I find it to have been necessary and reasonable to incur the costs of the Interwest report, I should reduce the allowable cost by at least 50%. He compared the Interwest report to the Cavazzi report, which cost less than $4,000 including disbursements and taxes. He also directed my attention to the award for appraisal costs in Tidmarsh, which was $2,200. He suggested that the facts in Tidmarsh are similar to the facts in this case, and that I should use the Tidmarsh award as a benchmark of reasonableness.

In response, counsel for Summit argued that since the Cavazzi report was never put into final draft form, it would be misleading to compare its cost with the cost of the Interwest report. With regard to the termination of Cavazzi's services, Mr. Frame stated that the error regarding access referred to in Mr. Burke's affidavit involved an issue of law rather than an issue of appraisal expertise, and that I should accept Mr. Burke's sworn statement about this. He also directed my attention to paragraphs 10 and 11 of Mr. Burke's affidavit, in which Mr. Burke explains why he chose to retain Mr. Danny Grant of Interwest (his substantial personal knowledge and experience with real estate in the Kamloops area), and why he originally felt that two appraisals were necessary.

Mr. Frame maintained that providing an appraisal completed 10 months before the s. 19 payment is not within the spirit of s. 19, and that it is unfair of an expropriating authority to expect an owner to rely on an outdated appraisal. Referring to ss. 19 (2), which provides that the date of the valuation provided to an owner "must be within 6 months of the date of the endorsement by the registrar under section 7 (1)", Mr. Frame suggested that in cases involving s. 3 agreements, the appraisal should be dated within 6 months of the agreement. Although he did not state it in so many words, I gathered that Mr. Frame's position was that if Kamloops had provided Summit with a timely appraisal, then Summit could have ordered only one additional appraisal, with the result that it would have had two current appraisals upon which to assess its compensation claim. Having been provided with a 10 month old appraisal, Summit could only arrive at that same position by ordering two appraisals itself, or by seeking to have Kamloops update its first appraisal.

Mr. Frame also pointed to the fact that Kamloops' advance payment under s. 19 was not in the amount of its appraisal, but rather was $2,800 less than that amount. This, he submitted, suggested that Kamloops itself was unsure about the validity of its own appraisal, which added to the necessity of Summit obtaining a second appraisal itself.

In my view, there may be circumstances in which it is reasonable for an owner to commission two up to date appraisals in a case involving a claim that exceeds $300,000. In this case, I accept Mr. Frame's interpretation of s. 19, and his conclusion that Kamloops started its expropriation by providing Summit with an appraisal that was 4 months older than the statute provides for. On the topic of the Cavazzi report, the only evidence before me is the uncontradicted evidence of Mr. Burke, setting out his opinion that Mr. Cavazzi "had made a serious error" about the issue of access to the dedicated portion of the lands. Although Kamloops questioned this in oral argument, there is no evidence from, for example, Mr. Cavazzi, suggesting that no such error existed. Under these circumstances, I have no reason not to accept Mr. Burke's sworn statement about the problems with the Cavazzi report. Finally, it is not disputed that Kamloops did not provide Summit with the September 20, 1993 appraisal report of Flynn Mirtle Moran until August 11, 1994, by which time the Interwest report was completed. David Handy, swearing an affidavit on behalf of Kamloops, attested that Mr. Burke would not participate in an exchange of expert reports in September of 1993 when Mr. Handy suggested it, and that Mr. Burke "did not mention the existence of an Appraisal Report from D.C. Cavazzi & Associates Inc." I assume that Mr. Burke did not mention the Cavazzi report because by then he had already rejected it in terms of planning to place any reliance on it either in the course of negotiations or at any eventual hearing. In all of these circumstances, I do not give any credence to Kamloops' complaints about the fact that Summit proceeded to have Interwest complete its report.

I therefore conclude that in this case the commissioning of two appraisal reports was "necessary" within the meaning of s. 44, and that it was reasonable for Summit to have Interwest conclude its report. Having made this determination, I must turn to a consideration of the overall reasonableness of the appraisal accounts.

It is difficult for me to assess the reasonableness of the Cavazzi account, because I have not seen it. I have only the fact that Kamloops, despite the various complaints it raised about the account, does not dispute its overall cost. Despite this, however, I do have some concerns about the account. Mr. Burke himself has attested to his finding some fundamental error in the report. He decided not to proceed any further than obtaining a draft of it, and clearly had no intention of relying on Cavazzi's valuation, having terminated Cavazzi's retainer prior to the completion of the report. Under these circumstances, I have some difficulty in understanding why Kamloops should have to pay for it, and I am left wondering whether Kamloops' preference for this report over the other may have more to do with their respective costs than with their merits.

I am in a better position to assess the reasonableness of the Interwest report, having not only the report itself but also Interwest's account and client billing worksheets to refer to. I do not find Mr. Marchand's suggestion that I compare the Cavazzi and Interwest costs to be useful. I note that the Interwest report is 78 pages long, while the Cavazzi report is 22 pages long. It is true that 34 of the Interwest pages are addenda, but the addenda are relevant and useful, and the main body of the report is 44 pages long versus the 22 pages of the Cavazzi draft. In addition, the Interwest valuation uses 10 comparable properties and goes into more detail about them than does the Cavazzi report about its 7 comparables. Finally and most obviously, the Interwest report is complete whereas the Cavazzi report is a draft.

I also did not find it useful to refer to the Tidmarsh decision by way of comparison, as counsel for Kamloops suggested I should do. There is only a passing reference to the cost of the appraisal in Tidmarsh, and its cost is merely one factor in the global consideration of all the costs of the matter in that decision.

I have no reason to take issue with any of the hourly rates applied in the Interwest invoice, but I am required to take into account the overall cost (and implied in that is the overall number of hours spent) in light of the factors outlined in ss. 44 (11). This case was not a complex one, and I believe that both counsel agreed on that point. I must also consider the degree of success achieved. Since the matter was settled by the parties, I am not able to consider the determination of the issues, but I can look at the difference between the amount awarded (or in this case, the amount of the settlement) and the advance payment under s. 19. Here, the difference was $8,000, which is not considerable. It is interesting to note that the difference between the advance payment and the ultimate settlement is almost $1,000 less than the cost of the Interwest appraisal. I must also consider the manner in which the case was prepared and conducted, and in my view this includes the manner in which the appraisal report was completed. I think it is reasonable to expect that, under normal circumstances, the cost of preparing the appraisal report should bear some relation to the value of the property being appraised. A simple example of this is that a responsible appraiser would not normally spend hundreds of hours and tens of thousands of dollars appraising a right of way that was worth $1,500. While this case is clearly not that extreme, I do question the reasonableness of spending 114.5 hours, and $7,640 in fees, to appraise property at $57,300. This degree of disproportionality still exists when one considers the $8,000 excess of the settlement over the advance payment, alongside the overall appraisal costs of both accounts of $12,924.49.

Bearing in mind the ss. 44 (11) factors referred to above, and my previously stated concerns about the Cavazzi report under this particular set of circumstances, I conclude that a more reasonable amount for appraisal costs (for both reports) would be $7,000, inclusive of disbursements and taxes.

 

5. INTEREST

Neither party made any submissions regarding interest, and I note that Summit has not claimed the payment of any interest in its pleadings. There was in addition only incomplete evidence before me regarding the date or dates when the accounts were presented to Kamloops for payment. I will therefore not make any award as to interest other than to award interest on the total sum awarded here if payment is not received within 30 days of the date of this decision.

 

6. COSTS OF TAXING COSTS

Kamloops asked me to fix the costs of this hearing at $500.00 for legal fees. It argued that this costs hearing is similar to the one in Tidmarsh, where no costs were allowed to the claimant for one costs hearing after the claimant presented many of the same types of items at the hearing that had been denied at an earlier hearing in the same matter. Kamloops pointed out that Mr. Burke's accounts were reviewed in Branscombe, and that his claims in that case for photocopy and fax charges were presented at the same per page rate as in this case, and that the amounts were reduced in Branscombe. In anticipation of my applying the same reductions here (which as it turns out I have done) Kamloops maintained that Summit should be penalized in costs.

Kamloops also sought a reduction in costs due to the fact that Summit did not provide it with pre-billing reports corresponding to its submitted accounts until "the eleventh hour."

Summit, in response, pointed to the fact that the entire amounts of the last two legal bills and the entire amount of the Interwest account were unpaid by Kamloops, in support of the reasonableness of its presenting the accounts for review at a hearing. It would not, it argued, have run the hearing merely over the cost of photocopies and faxes.

Summit did not, however, make any representations to me about what a reasonable sum might be for the costs of this hearing.

I accept Summit's argument that, under the circumstances, it was reasonable for it to require a hearing, and I am satisfied that it is entitled to its reasonable costs associated with this hearing. I have reviewed its last account and related pre-billing report, and I conclude that all of the preparation time for this hearing was not included in that account. I therefore, in the absence of further submissions from Summit, am not prepared to fix an amount for the costs of preparing for and attending this hearing, and leave it to counsel to come to an agreement about costs. If no agreement is reached, then either party may seek a determination of those costs.

THEREFORE IT IS ORDERED THAT

(1) Pursuant to s. 44 of the Expropriation Act, the claimant's reasonable legal fees and disbursements are hereby allowed at $7,797.21 plus applicable GST and PST, with adjustments to take into account any moneys paid by the respondent either to, or on behalf of, the claimant;

(2) Pursuant to s. 44 of the Expropriation Act, the claimant's reasonable appraisal costs are hereby allowed at $7,000.00 for fees and disbursements, plus applicable GST and PST, with adjustments to take into account any moneys paid by the respondent either to, or on behalf of, the claimant;

(3) Interest shall be paid as of September 30, 1995 on the amounts set out in items (1) and (2) above, with adjustments to take into account any moneys paid by the respondent as costs either to, or on behalf of, the claimant. Interest shall be payable equal to the prime lending rate of the banker to the Crown in right of the province at the annual rate then prevailing as of August 30, 1995.

(4) The claimant is entitled to its costs of, and incidental to, this application, and leave is granted for either party to apply for a determination of such costs in the event that an agreement is not reached between the parties.


 

ADDENDUM TO REASONS FOR DECISION
PRONOUNCED ON AUGUST 30, 1995

On August 20, 1995, the board issued a decision in this proceeding respecting a final costs award under s. 44 of the Expropriation Act. The parties have drawn to my attention a contradiction between the body of the decision and the order granted at its conclusion, and have sought clarification on that point. At page 20 I conclude that a reasonable amount for total appraisal costs would be $7,000 "inclusive of disbursements and taxes", whereas in the order found at page 22 the $7,000 is awarded "plus applicable GST and PST."

The words "and taxes" at page 20 of the decision are a typographical error, and should be deleted. It was my intention that the taxes be awarded, as set out in the order at page 22 .

 

 

Government of British Columbia