May 16, 1997, E.C.B. No. 71/92/139
(61 L.C.R. 288)
Frederick Buchanan and|
Gwendolyn Anne Buchanan,
Board of School Trustees of|
School District No. 36 (Surrey)
W. Shorthouse, Chair|
Roderick Hood, Counsel for the Claimants|
J. Bruce Melville
Michael C. Woodward, Counsel for the Respondent
REASONS FOR DECISION
The claimants, Macdonald Frederick Buchanan
and Gwendolyn Anne Buchanan, seek an order for a final award of the costs necessarily
and reasonably incurred by them in asserting their claim for compensation in this
matter pursuant to what, at the time of their 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 claimants' solicitors, who at the relevant
time were carrying on practice initially under the firm name of Melville &
Yeung and later Melville & Company, as well as by a real estate appraisal
firm, Interwest Property Services Ltd. ("Interwest"). They total $32,777.10,
inclusive of fees, disbursements, taxes and interest, on account of which the
respondent has previously advanced the sum of $13,049.28.
for costs arises out of the respondent's acquisition in September of 1991 of an
unimproved lot owned by the claimants in the District of Surrey. The acquisition,
for a school project, was achieved by way of an agreement under section 3 of the
Act. At that time the respondent made an advance payment to the claimants in the
amount of $51,200 pursuant to what is now section 20 of the Act. The payment was
based upon an appraisal report commissioned by the respondent which estimated
the value of the lot as of June 30, 1991 at $50,000. In October of 1991, the claimants
obtained their own appraisal report from Interwest estimating the value of the
lot at $53,100. However, on August 11, 1992, the claimants filed with the board
an application for determination of compensation alleging that the market value
of the lot was actually $76,000 and that, additionally, they had incurred disturbance
damages in the amount of $7,630. In February of 1994, Interwest produced a second
appraisal report. This report placed a value of $82,000 on the lot as of the valuation
date, and the claimants proceeded to the compensation hearing relying on that
higher estimate. Some two weeks before the hearing began, the respondent increased
its advance payment by $3,000 based upon its own further appraisal report now
estimating the value of the lot at $53,000.
hearing took place in Vancouver over a five-day period from March 21 to March
25, 1994. By consent the claimants' claim was heard together with that of two
other owners, Stephen McKinnon and Dorreen Annabelle McKinnon (the "McKinnons").
The McKinnons owned two lots nearly adjoining that of the claimants. Those lots
were also acquired by the respondent for the school project in December of 1991.
Although the McKinnons and the claimants retained separate counsel, they utilized
the same appraisal firm. Generally, the material facts were the same with respect
to both applications and the evidence called in direct examination by counsel
for the McKinnons was adopted by the claimants for purposes of their claim.
The board rendered its decision in respect of the claimants' claim on October
7, 1994 (reported at 54 L.C.R. 43). It concluded that the market value of the
claimants' lot at the date of valuation was $53,500, that is, $28,500 less than
what they claimed and, in fact, $700 less than what they had already been paid.
The board held that the claimants were entitled to interest under what is now
section 46 (1) of the Act. It also said that they were entitled to their actual
reasonable legal, appraisal and other costs pursuant to section 45 of the Act,
adding, however, its opinion that reasonable appraisal costs payable by the respondent
did not include the costs of two appraisal reports from Interwest. The claim for
disturbance damages was disallowed. The board rendered a companion decision in
the McKinnon claim on October 13, 1994 (reported at 54 L.C.R. 23).
I heard the claimants' application for a final review and award of costs in this
matter consecutively with that of the McKinnons. The McKinnons' cost claim is
considered in Stephen McKinnon and Dorreen Annabelle McKinnon v. The Board
of School Trustees of School District No. 36 (Surrey), unreported, E.C.B.
No. 56/92/135, March 6, 1997. Since many of the issues raised are common to both
applications, I intend to foreshorten my discussion here by reference where relevant
to what I said in McKinnon.
Shortly after the cost
decision in McKinnon was released, the parties to this matter by consent
made further written submissions as to the effect which that decision, and other
recent cost decisions of the board, ought to have on my determination of costs
in this case. I have taken into account those further submissions in reaching
CONSIDERATIONS ON REVIEW
The claimants in this matter
were awarded their actual reasonable legal and appraisal costs. However, as I
noted in my cost decision in McKinnon, I am required to consider the statutory
criteria set out in what is now section 45 (10) of the Act when fixing those costs.
The first criterion is the number and complexity of the issues involved. In that
respect, it is clear to me that the claimants' case was virtually identical to
that of the McKinnons', which I found to be a comparatively simple case, both
initially and throughout. It involved a determination of highest and best use
and market value of the claimants' unimproved lot. As in the McKinnon compensation
case, the only factor which made that determination anything but routine was the
claimants' assertion that the value of their lot had been negatively impacted
by "project influence" and that what is now section 33 (d) of the Act
therefore applied. The claimants' case also involved a determination of disturbance
damages narrowly limited to the issue of compensation for costs incurred to acquire
equivalent replacement property.
The second criterion
is the degree of success achieved, taking into account the determination of the
issues at the hearing. As in McKinnon, the claimants here failed to convince
the board on the evidence that "project influence" had impacted either
the highest and best use or market value of their lot so as to call into play
section 33 (d). In determining market value, the board preferred the analysis
of the respondent's expert who had relied on the direct comparison approach. It
concluded an adjusted value for the lot which was only $500 higher than that estimated
by the respondent's appraiser. Just as in the compensation decision in McKinnon,
the claimants' claim for disturbance damages was dismissed.
The third criterion under section 45 (10) is the degree of the claimants' success
measured by the difference between the amount awarded by the board ($53,500) and
the advance payment made by the respondent under section 20 ($54,200). At the
time of the compensation decision, the board was unaware of the further small
advance payment made by the respondent just prior to the hearing. It might have
appeared that the claimants achieved a slight increase in the compensation which
they had received up to that point, whereas in fact they enjoyed no increase at
all. In this respect, the claimants lack of success was more pronounced than in
the case of the McKinnons, who were awarded $8,600 above the advance payments.
The final criterion which I must take into account is the manner in which the
case was prepared and conducted. In the McKinnon cost decision, I accepted
the respondent's argument flowing from the compensation decision itself that the
claimants' case was flawed by evidentiary deficiencies. That argument is no less
persuasive here. On the central question of "project influence" affecting
highest and best use and market value, the board said this at p. 47:
As the board expressed in McKinnon, in circumstances
where nine subdivisions are presented to support a pattern of exclusionary development,
one would have expected to hear from developers in the area who had indeed adjusted
their development or pursued alternative subdivisions as a result of the scheme.
There was no evidence before the board that the developers, who were involved
in the nine subdivisions, would have done anything differently, but for the scheme,
whether that be in relation to either the park or the school site. Similarly,
there was no evidence that any co-operative development proposal by individuals
had been considered, but abandoned, as a result of the impact of either the park
or the school site.
Similarly, the board
found no basis for an award for disturbance, noting at p. 53 that "no evidence
was adduced that either disturbance damages had been incurred or paid by the claimants."
4. LEGAL COSTS
retained the law firm of Melville & Yeung in late July of 1991 to represent
them in this matter. Sometime during 1993 the firm name was changed to Melville
& Company. Later still, after the compensation hearing concluded, some of
the solicitors involved joined the firm of Peterson Stark which acted for the
claimants 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 claimants' solicitors or the claimants' law firm.
The claimants' law firm rendered fourteen statements of account, each of which
was forwarded for payment to the respondent under the date indicated below, and
which now form the subject of this cost review. Three of the bills incorporate
invoices rendered to the law firm by Interwest and, in turn, charged to the claimants
as disbursements. 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 following picture emerges of the true legal accounts:
|Sep. 25, 1991||$
|Nov. 26, 1991||339.30||14.15||24.74||378.19|
|Feb. 5, 1992||842.50||79.44||59.45||981.39|
|Mar. 27, 1992||547.40||10.75||39.07||597.22|
|Apr. 29, 1992||600.00||28.25||43.98||672.23|
|Jun. 10, 1992||510.70||4.50||36.07||551.27|
|Jul. 28, 1992||600.00||57.13||79.07||736.20|
|Nov. 4, 1992||1,138.50||79.25||153.55||1,371.30|
|Feb. 12, 1993||885.70||81.61||120.85||1,088.16|
|Jun. 13, 1993||1,036.00||35.15||74.98||1,146.13|
|Feb. 28, 1994||488.00||286.87||88.40||863.27|
|Mar. 17, 1994||797.50||119.68||120.03||1,037.21|
|Apr. 21, 1994||7,803.00||242.87||1,098.25||9,144.12|
|Mar. 2, 1995||1,247.00||116.04||182.70||1,545.74|
4.1 Legal Fees
A review of the accounts reveals that five lawyers and two legal assistants recorded
billable time on this file. Mr. J. Bruce Melville, the senior partner, maintained
overall direction of the claimants' case, identifying the issues and delegating
tasks within the firm. Mr. Melville, who was called to the bar in 1984, has extensive
legal experience in expropriation matters. For his services he billed 10.86 hours
mostly at the rate of $180 per hour. Mr. Geoffrey Yeung, a solicitor with about
10 years' practice experience at the relevant time, negotiated the section 3 agreement
and handled land transfer matters related to the taking. He billed 5.6 hours at
$125 per hour. Ms. Shelley Bentley, who was called to the bar in 1984 but according
to the evidence commenced practice in 1988 and joined the claimants' law firm
in 1991, had primary conduct of the claimants' file from late 1991 until the spring
of 1993. Her main tasks appear to have comprised maintaining contact with the
clients, liaising with the appraisers from Interwest, reviewing correspondence,
drafting the claimants' Form A application for determination of compensation,
and reviewing document lists. For this she charged out 22.9 hours of her time
mostly at the rate of $125 per hour. A senior litigator in the firm, Mr. David
Harris, recorded 0.4 hours of time at the rate of $150 per hour for strategizing
with Ms. Bentley on some aspect of the case.
late summer of 1993, Mr. D. Roderick Hood had primary conduct of the claimants'
case. Mr. Hood, who appeared as claimants' counsel at this cost hearing, also
took the rather unusual step of giving evidence on behalf of the claimants and
was cross-examined by opposing counsel. He testified that he had been called to
the bar in November 1990 and had been involved in expropriation cases since that
time which included several appearances before the board in a junior capacity.
He estimated that perhaps 70% to 80% of his practice was in the field of expropriation
law. Mr. Hood's tasks on this file included reviewing the appraisal reports of
both parties, reviewing the respondent's documents, attending briefly at an examination
for discovery of one of the claimants, liaising with counsel for the McKinnons,
and preparing for and attending the five-day compensation hearing. After the hearing
he was also engaged in reviewing the board's compensation decision and preparing
for this cost review. Mr. Hood logged a total of 67.6 hours, roughly two-thirds
of which fell within the period of the hearing itself. He billed the first 1.6
hours at the rate of $125 per hour, the next 59.3 hours at $145, and the last
6.7 hours at the rate of $150 per hour.
law firm also billed a considerable quantity of legal assistant time on this file,
all at the rate of $60 per hour. Primarily the work performed was that of Ms.
Elizabeth Olkovick, who holds a paralegal certificate. Her functions ranged from
drafting correspondence, a demand for document discovery, a document list, and
a notice of motion with supporting affidavit, to making and receiving telephone
calls, reviewing invoices, handling and paying out compensation funds, and preparing
detailed cost claims. Ms. Olkovick billed a total of 44.97 hours to the file.
One other legal assistant, Ms. Aiello, added a further 1.25 hours.
In summary, the legal accounts presented for review show that the claimants' law
firm recorded a total of 153.5 hours of billed time in the prosecution of this
case. The average effective rate for the firm was about $118 per hour, and for
the lawyers only who were involved, slightly under $144 per hour. The claimants
say that, of the roughly $18,000 in legal fees incurred, about $7,000 reasonably
relates to the five days required for the hearing of the compensation claim. They
argue that the remaining legal fees totalling $11,000 for attending to all pre-hearing
and post-hearing matters over a period of three years also is not unreasonable.
The respondent views the legal fee accounts in a quite different light. By reference
to the statutory considerations in section 45 (10) which I have already reviewed,
it submits that there should be a substantial reduction in the fees allowed. Moreover,
as to the reasonableness of the fees charged by particular lawyers and legal assistants
on the file, the respondent argues that the accounts reveal an overly time-consuming
approach with much unnecessary duplication of effort, that the hourly rates charged
are excessive, and that some items of work are not properly chargeable at all.
In the respondent's submission, this simple, small and (as events proved) largely
unsuccessful claim warranted no more than 72 hours of legal counsel time comprising
nine eight-hour days -- four days for preparation and five for hearing. The respondent
says that an appropriate fee rate on this file was $125 per hour. This calculates
to legal fees of $9,000 in contrast to the sum of $18,192 claimed.
I am persuaded, essentially for the same reasons set out at length in my cost
decision in McKinnon, that the statutory considerations lead logically
to a reduction here in the legal fees allowable. Furthermore, in contrast to McKinnon,
my scrutiny of the time entries in this matter convinces me that there are significant
elements of avoidable duplication, excessive time spent, and inappropriate fee
On the question of duplication, it was not proven
to my satisfaction that the "team approach" which appears to have been
employed by the claimants' law firm led to efficiencies in the manner in which
the case was conducted. I note, for example, at the very outset of the firm's
involvement, that Ms. Olkovick charged two hours of her time amounting to $120
in fees for handling the new file and the retainer agreement while Mr. Melville
charged a further $135 in fees for what was described as "supervising file
opening". Such intensive treatment accorded to what appears to be a routine
task hardly seems reasonable. Although this was not invariably the practice, there
are also several recorded time entries demonstrating that two lawyers in the firm
billed the file when conferring or strategizing with each other on some aspect
of the case. In my view, what was said by a former chair of the board in Tidmarsh
v. Comox-Strathcona (Regional District) (1994), 54 L.C.R. 13 at p. 18, is
germane to this application:
It may simply
be that the nature of the issues and the size of the claim simply do not warrant
four lawyers strategizing on the file or accumulating hours which are in part
related to keeping each other updated on the file at any given time.
I am also of the opinion that the decision to substitute Mr. Hood for Ms. Bentley
in the course of bringing the claimants' compensation case to hearing resulted
in at least a small element of duplication the cost of which the respondent should
not be expected to bear. The evidence before me was that Ms. Bentley, who had
been in practice longer than Mr. Hood, was also not inexperienced in litigation
matters generally and expropriation matters in particular. She remained with the
claimants' law firm until August of 1994, several months after the compensation
hearing took place.
In the McKinnon cost decision,
I found that the expenditure of approximately 160 hours of counsel time was not
unreasonable in the circumstances of that case. There, however, lawyers having
conduct of the file visited the site, conferred extensively with appraisers, prepared
for and appeared at an interlocutory application before the board, conducted an
examination for discovery of the respondent's representative, and undertook an
in-depth review of documents in the possession of both the respondent and the
District of Surrey. On the evidence, it appears to me that the claimants' law
firm, except for a last minute document review, did none of these things although
claimants' counsel undoubtedly was able to draw upon what counsel in the McKinnon
case unearthed. Nevertheless, the simplicity of the tasks which faced the claimants'
law firm in the pre-hearing process would not, in my view, justify the expenditure
of anything like the same amount of time spent by the law firm representing the
McKinnons. At least a few of the tasks which were performed also appear to me
to have consumed more time and effort than the resulting product would reasonably
warrant. One example is in the preparation of the claimants' Form A, for which
there are five separate time entries amounting, it would appear, to something
like half a day to produce a rather standard two-page document. Since I intend
to deal separately with the cost of preparation for and attendance at this cost
hearing, I should also adjust here for the time recorded on the last of the legal
accounts which relates to preparing for the hearing.
Nearly a third of the time billed on this file by the claimants' law firm related
to work performed by legal assistants, largely by Ms. Olkovick. The respondent
says that this work mainly involved routine tasks which any competent legal secretary
could have been expected to perform and therefore it ought to form part of office
overhead rather than being billed as legal fees.
the hearing of this cost application, the board has had occasion to consider in
depth the role of qualified legal assistants within law firms with a view to determining
what tasks are properly billable as legal fees in an expropriation case. In Ferancik
v. Langley (Township) (1996), 60 L.C.R. 144, the claimants in that case had
retained the same law firm and vice chair St. Clair had before her for review
the time entries of Ms. Olkovick reflected in the firm's accounts. Those claimants
also tendered expert opinions prepared by a professional law firm administrator
and manager on the topic of services provided by qualified legal assistants in
general and of Ms. Olkovick's services in particular. The vice chair scrutinized
each of the time entries in light of her discussion of the appropriate role for
legal assistants and of past cost decisions of the board, allowing some items
and disallowing others.
Although I do not have here the
same depth of explanatory detail which was available in Ferancik, I agree
with and have endeavoured to follow the vice chair's analysis in reaching my determination
as to which of the tasks performed by the legal assistants in this matter are
properly billable. For example, I have allowed the time reasonably spent in setting
up the file and the retainer agreement, drafting correspondence and documents
of a substantive nature, and making or receiving telephone calls which seem to
go beyond mere procedural routine, but have disallowed the time spent in reviewing
invoices, handling and paying out compensation funds, and preparing detailed cost
claims. I have determined from my review that, of approximately 46 hours billed
for legal assistants, 21 hours should reasonably be allowed.
With respect to the hourly rates charged by particular lawyers on this file, I
conclude that, as in the McKinnon case, some adjustment is called for.
In so deciding, I have taken into account the claimants' further submissions on
hourly rates flowing from the vice chair's cost decision in Summit Enterprises
Ltd. v. Kamloops (City) (1995), 57 L.C.R. 24, as well as my own oral cost
decision in Rastad Construction Ltd. v. Her Majesty the Queen in Right of the
Province of British Columbia as represented by the Minister of Transportation
and Highways, unreported, E.C.B. No. 56/95, July 2, 1996. In both of those
cases, 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 marketplace for legal services at the relevant
time. Accompanying the claimants' further submissions in this matter were relevant
extracts from the CBA/VALA survey summarizing hourly rates charged by lawyers
practising litigation in Vancouver and grouped by year of call and size of firm.
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 including my own in McKinnon
where the Summit Enterprises Ltd. decision was also before me, I conclude
that an appropriate hourly rate for Mr. Melville's reasonable time was $150 per
hour in 1991 when his involvement with this matter began, rising to $180 per hour
by 1994 when it concluded. I would allow Mr. Hood's reasonable time at $130 per
hour throughout the period of his involvement. I accept the hourly rates billed
by Ms. Bentley ($125), Mr. Yeung ($125) and Mr. Harris ($150) for their reasonable
time on the file.
The determination of reasonable legal
fees for the prosecution of an expropriation case is rarely, if ever, simply a
matter of multiplying reasonable total hours by a reasonable effective hourly
rate. The statutory considerations to which I have referred as well as the common
law factors frequently cited from leading cases such as Yule v. Saskatoon
(1955), 16 W.W.R. 305 (Sask. Q.B.), affd 1 D.L.R. (2d) 540, 17 W.W.R. 296 (Sask.
C.A.) also come into play. Nevertheless, to perform that arithmetic calculation
assists in arriving at the global number. Taking into account what I consider
to be appropriate reductions in some of the hourly rates as well as adjustments
for duplication, excessive time spent, and inappropriate or disallowed items,
I have determined that it was reasonable for the claimants' law firm to have spent
approximately 95 hours of counsel time at an effective average rate of around
$132 per hour and 21 hours of legal assistant time at the billed rate of $60 per
hour on this file. These calculate in total to some $13,800 in legal fees. As
I found to be the case in the McKinnon cost decision, a further downward
adjustment is, in my opinion, appropriate here in light of evidentiary deficiencies
in the manner in which the case was prepared and conducted and the lack of success
on determination of the issues including the claimants' failure to obtain an award
of compensation above what they had already been paid. Accordingly, I allow the
legal fee costs in this matter at $11,000.
The only items
of legal disbursement in contention on this cost review were photocopying and
facsimile charges. However, they comprise a significant proportion of total disbursement
costs. The claimants' law firm charged $433.65 for photocopies, mostly, it appears,
at the rate of $0.25 per page, and $192 for faxes at the rate of $1.50 per page.
On previous cost reviews before the board, photocopies have generally been allowed
at the rate of $0.15 per page and faxes at $0.35 per page. I see no reason to
depart from those determinations in this matter and, indeed, the claimants in
their further submissions have accepted the appropriateness of those rates. Accordingly,
I would reduce the amount recoverable in respect of photocopies to $260.25 and
in respect of faxes to $44.80. Otherwise, the disbursements are allowed as presented.
It follows that goods and services tax and provincial sales tax, where applicable,
will need to be adjusted on the legal costs which I have allowed, comprising $11,000
in fees and $1,110.59 in disbursements. Provincial sales tax applied on only half
of the legal accounts presented for review and I propose to use the same formula
here for recalculating that tax as I did in the McKinnon cost decision.
Therefore, goods and services tax is allowed in the sum of $847.74 and provincial
sales tax in the sum of $525.92, for a total of $1,373.66 on account of taxes.
5. APPRAISAL COSTS
appraisal firm of Interwest rendered three invoices in respect of its services
to the claimants. The account summary is as follows:
|Oct. 25, 1991||$2,457.50||$128.45||$181.02||$2,766.97|
|Apr. 23, 1992||1,295.00||--||90.65||1,385.65|
|Apr. 28, 1995||2,925.00||101.85||211.88||3,238.73|
The third invoice dated April 28, 1995 replaced an
earlier one of March 8, 1994 which had been rendered in the amount of $3,566.78.
This replacement invoice added time spent by the appraiser in attending the compensation
hearing and deleted time spent by one employee of Interwest which had already
been billed to the McKinnons, resulting in a small net reduction of fees.
Unlike the accounts presented for review in the McKinnon cost matter, the
Interwest accounts presented here did not include a record of the detailed time
entries to assist me in determining precisely what work was performed. However,
it appears from other evidence received during the cost hearing that, as in the
McKinnon case, Interwest prepared an initial appraisal report around the
date of the respondent's acquisition of the claimants' lot, which was followed
by additional research ultimately resulting in the production of a second appraisal
report shortly before the date of the compensation hearing. The first invoice
pertained to the preparation of the first appraisal report which was dated October
15, 1991, the second invoice to additional work on the section 33 issue reflected
in a nine-page supplementary letter dated April 20, 1992, and the third invoice
to further analysis consolidated within the second appraisal report dated February
18, 1994, and to the cost of preparation for and attendance at the compensation
5.1 Appraisal Fees
A succession of appraisers from Interwest were engaged in this matter. Initially,
Mr. Mario Pavlakovic, AACI, a partner in Interwest at the time, oversaw the appraisal
exercise and signed the first report and supplementary letter. He billed 11.75
hours of his time at the rate of $130 per hour. However, it appears that Mr. C.C.
Chan, who at the time was working toward his AACI designation, did much of the
legwork. He logged 22.5 hours at $50 per hour. By early 1992, two others became
involved: Mr. Brian Davies, AACI, an experienced appraiser who recorded 5.5 hours
at $120 per hour, and Mr. David Hall, AACI, a junior appraiser who also worked
on the McKinnon report. He also billed 5.5 hours but at the rate of $80 per hour.
Mr. Danny R. Grant, a principal of Interwest, signed the second appraisal report
and testified with respect to it on behalf of the claimants at the compensation
hearing. He billed 17 hours at the rate of $165 per hour. As in the McKinnons'
cost case, Mr. Grant also testified at this cost hearing. His appraisal qualifications
are discussed in the McKinnon cost decision. Additionally, Mr. Grant's
son assisted with appraisal research, charging 3 hours of his time at $40 per
In summary, the Interwest accounts presented for
review reveal that the appraisal firm billed a total of 65.25 hours for its services
in this matter at an average effective rate of slightly over $102 per hour. It
is clear from all of the evidence before me that Interwest was able to reduce
its costs to the claimants by utilizing work performed for the McKinnons. As the
respondent observed, the appraisal reports prepared for each of the claims were
nearly identical. The claimants say that the resulting appraisal fees in this
matter were modest and reasonable.
Although in total the
appraisal fee costs are much less, the respondent advances many of the same objections
to the size of the Interwest account here as it did in the McKinnons' cost claim.
First, it refers to the board's expressed opinion (at p. 53 of the reported compensation
decision) that one appraisal report, carefully researched and drafted, rather
than the two reports actually prepared, would likely have been sufficient. On
that basis the respondent suggests that, at most, only the third and final Interwest
account should be allowed. Second, the respondent characterizes the use of highly
experienced appraisers, particularly of Mr. Grant at the rate of $165 per hour,
on so simple an appraisal exercise as a case of "overkill". Third, it
submits there should be a reduction of fees in light of the board's rejection
of the appraiser's assumption of "project influence" and its criticism
of the unexplained inconsistencies in Mr. Grant's evidence.
Because I have already dealt at great length in my reasons in the McKinnon
cost decision with similar objections made to the Interwest accounts, I will be
briefer here. First, I accept that the necessary and reasonable costs of additional
appraisal research and analysis beyond that reflected in the first appraisal report
are recoverable, and that most of the additional cost associated with writing
and assembling a second complete appraisal report was deleted when the revised
third invoice was rendered on April 28, 1995. I therefore do not share the respondent's
view that the claimants should be entitled to recover only the cost of the final
invoice. A small deduction only from total appraisal fee costs appears to be warranted
on this ground.
Second, although it seems to me not inappropriate
in the circumstances for the claimants to have used Mr. Grant's highly paid services
to the extent they did, I am troubled by the use on one small file of so many
qualified appraisers. Absent detailed time entries or other adequate explanation
for the practice, I am led to the conclusion that there was probably some avoidable
duplication of effort. However, in light of the overall amount of time billed,
the element of duplication appears to have been small.
In my view the third objection is the most cogent. It goes both to the degree
of success achieved on determination of the issues at the hearing and to the manner
in which, from an appraisal perspective, the claimants' case was prepared and
conducted. The board was equally critical in this case as in its compensation
decision in McKinnon of the appraiser's treatment of the section 33 issue
(see pp. 46-48) and of inconsistencies and confusion in Mr. Grant's evidence on
the key issues of highest and best use (see p. 45) and market value (see pp. 49,
52). For the same reasons set out in my cost decision in McKinnon, I conclude
that cost consequences should reasonably follow.
into account all of the above considerations, I conclude that a significant reduction
is warranted in the amount which I should allow on account of the appraisal fees
rendered. I fix the reasonable fees recoverable from the respondent with respect
to the Interwest accounts at $5,000, which is roughly 75% of the fee cost claimed.
5.2 Appraisal Disbursements
The facsimile charges were the only items of disbursement within the appraisal
accounts which drew an objection from the respondent. Interwest appears to have
charged faxes at $1 per page. The amount at issue is $55. I fix the amount allowed
for faxes at $0.35 per page, which has the effect of reducing the disbursement
account by $35.75. Accordingly, total disbursements recoverable amount to $194.55.
It follows that goods and services tax will need to be adjusted on the appraisal
costs which I have allowed, comprising $5,000 in fees and $194.55 in disbursements.
I calculate the adjusted amount to be $363.62.
6. COSTS SUMMARY
I was provided with copies of
correspondence between counsel for the parties evidencing the various claims for
advance payment of costs and the amounts actually advanced from time to time.
Included as an advance against legal costs is the sum of $700 representing the
amount by which advance payments made under section 20 exceeded the amount of
the board's compensation award. Taking that additional information into account,
my review of the claimants' costs in this matter is summarized below:
From this review I have determined that there remains
owing to the claimants on account of their reasonable legal and appraisal costs
pursuant to section 45 the sum of $6,023.14.
7. INTEREST ON OUTSTANDING ACCOUNTS
The next question
is whether the claimants should be awarded interest on the unpaid balance of the
accounts which I have allowed and, if so, from what date and at what rate. In
that respect, I adopt for the purposes of this decision what I said in McKinnon,
namely that reasonable interest expenses incurred on professional accounts are
recoverable under the Act, that an award of interest on costs is discretionary
depending upon the particular circumstances of each case, and that the board in
previous cost decisions has set out certain principles and guidelines for determining
the appropriateness of an interest award.
exhibited a copy of an undated retainer agreement they signed with the claimants'
law firm. According to the evidence of Mr. Hood, it was concluded in late August
or early September of 1991. Para. 4 of the agreement states as follows:
Client's account with the Law Firm for professional fees, disbursements and applicable
taxes may be billed periodically as the Law Firm determines. The Client shall
pay the account in full within thirty (30) days of any statement date and shall
pay interest at the rate of 1.5% per month (19.56% per year) on any balance unpaid
over thirty days.|
also provided tables showing the balance outstanding from time to time on accounts
rendered to them up to March 2, 1995 as well as the amount of interest accrued
as of that date on the outstanding balance. After adjustment, the interest was
said to total $3,126.41. The amount includes interest calculated on both the legal
and the appraisal accounts since the appraisal invoices were included as disbursements
within the accounts rendered by the claimants' law firm. The result is consistent
in that each of the Interwest invoices contains a statement providing for interest
charges on overdue accounts at the same rate of 1 1/2% per month or 19.56% per
Although the claimants acknowledge that they have
not been required to pay any interest on oustanding accounts to date, they say
this is a reasonable cost they have nevertheless incurred as a result of the respondent's
failure or refusal to pay the accounts in full when rendered. The respondent,
on the other hand, points to its own record of advance payments in respect of
costs totalling more than $13,000 on a claim that was small, simple, and largely
unsuccessful. In its submission, the particular circumstances of this case weigh
against any award of interest, and more especially at a rate in excess of 19%
per annum which respondent's counsel labelled as "usurious". The respondent
in further written submissions says that, if any interest is to be allowed, it
ought to be charged at the rate prescribed in what is now section 46 (2) of the
Act, that is, "at an annual rate that is equal to the prime lending rate
of the banker to the government".
the chronology of advance payments of costs and the correspondence between counsel
in respect of them prior to the compensation hearing, I am satisfied that the
respondent acted reasonably in reimbursing those costs. The respondent withheld
payment of certain specified items which it considered unreasonable, mainly the
legal assistant's charge for preparation of detailed cost claims which I have
now disallowed, and delayed payment of some others while seeking clarification
from the claimants. A prime example was the second Interwest invoice dated April
23, 1992 which, as the respondent noted, contained no detailed entries to substantiate
the reasonableness of the charge. Ultimately, the respondent did reimburse the
claimants for the full amount of that invoice. Apart from the few items of costs
to which it voiced objection, the respondent fully paid all accounts rendered
to it prior to the compensation hearing except those two, dated February 28 and
March 17, 1994, which were forwarded immediately preceding the hearing. In these
circumstances, I consider that there is no reasonable basis for assessing interest
in the pre-hearing period.
Once the compensation hearing
had been held, the respondent resisted payment of any further accounts. Mr. Woodward,
counsel for the respondent, wrote to Mr. Hood, claimants' counsel, on May 10,
1994 as follows:
In view of the fact that
the E.C.B.'s decision remains pending at the current time, with the Respondent
having applied under Section 44 to have the claimants deprived of their costs
in the event that the [School] Board's evaluation ultimately prevails, we do not
propose to settle this account at the current time.
As was the case in McKinnon, in my view it was reasonable in the circumstances
of this matter for the respondent to await the board's compensation decision before
deciding whether to make any further payment on account of costs. However, as
in McKinnon, the board in this case awarded the claimants their actual
reasonable costs. The compensation decision was released on October 7, 1994, after
which time it was incumbent upon the respondent, if it wished to avoid incurring
interest charges, to reassess its position and make further payment in light of
the board's determination on costs. The respondent has made no further payment
on account of costs. An award of interest is intended to compensate claimants
reasonably for the period of time during which they have been kept out of their
rightful funds and the respondent has had the use of those funds. Accordingly,
I conclude that the claimants are entitled to be indemnified at least for the
reasonable interest costs they have incurred on the amount of the outstanding
legal accounts which I have allowed. Interest will therefore run on the amount
of $4,536.04 from October 7, 1994 until paid.
the outstanding appraisal costs in a different light. The respondent paid the
first two Interwest invoices in full and received the third and final invoice
only a few days, at most, before this cost hearing convened. Because the board
in its compensation decision suggested that reasonable appraisal costs should
be limited to the preparation of one report, in my view it was reasonable for
the respondent to leave in abeyance any further payment until the matter was addressed
in this cost decision. In these circumstances, no interest will be assessed on
the outstanding appraisal costs in the amount of $1,487.10 provided that amount
is paid promptly, that is to say, within 30 days of the date of this decision.
As to the rate of interest charged, I am unable to accept the respondent's submission
that section 46 (2) of the Act governs. That argument has already been rejected
in the board's cost decision in El & El Investments Ltd. v. School District
No. 36 (Surrey) (1996), 59 L.C.R. 200, at p. 210. Neither do I accept the
claimants' original submission that the contract rate should be applied. The claimants
offered no evidence to substantiate that the rate specified in the retainer agreement,
which is in excess of 19% per annum, was reasonable. Prior cost decisions of the
board have considered what constitutes a reasonable rate of interest and I am
satisfied that the conclusions reached in those cases are applicable to this matter.
The claimants in their further written submissions accepted as appropriate here
the same rate of interest applied in the McKinnon cost decision. Accordingly,
I allow as reasonable a simple rate of interest of 12% per annum.
8. SECTION 45 COSTS
final cost review in this matter occupied the better part of one hearing day.
Mr. Grant, the claimants' appraiser, testified for about one hour. Mr. Hood, who
wore the hats of both witness and claimants' counsel, said that he was performing
the dual role as a cost-saving measure. He made no specific submission as to the
costs of this hearing. Mr. Woodward for the respondent, whose primary position
was that no costs should be awarded in respect of the section 45 review if the
claimants failed to obtain an award of costs above what they had already been
advanced, went on to suggest in the alternative that a flat sum of $500 would
Given the apparent disinclination of the
parties to compromise and settle the issues which were outstanding, I accept that
it was necessary and reasonable for the claimants to proceed with a section 45
review. Apart from the lack of documentary back-up for the appraisal invoices,
the evidence was well-organized and presented. However, the issues were neither
novel nor complex and the preparation for the review by claimants' counsel accordingly
should have been quite straightforward and not time-consuming. The degree of success
which the claimants have achieved on my determination of their reasonable costs
is modest. They have been allowed slightly more than $19,000, which is around
$6,000 more than what the respondent paid them in advance but over $10,000 less
than what they claimed. These figures are exclusive of interest and, on that issue,
the claimants' success was also divided.
As I said in
the McKinnon cost decision, it is desirable where possible to fix a global
award of costs for a section 45 review. In my opinion, it is appropriate to do
so here. Taking into account all of the foregoing considerations, I accordingly
allow the reasonable costs incurred by the claimants on this section 45 hearing
in the amount of $1,200 inclusive of fees, disbursements and tax.