May 16, 1997, E.C.B. No. 71/92/139 (61 L.C.R. 288)

Between:Macdonald Frederick Buchanan and
Gwendolyn Anne Buchanan,
Claimants
And:The Board of School Trustees of
School District No. 36 (Surrey)
Respondent
Before:Robert W. Shorthouse, Chair
Appearances:D. Roderick Hood, Counsel for the Claimants
J. Bruce Melville
 
Michael C. Woodward, Counsel for the Respondent

 

REASONS FOR DECISION

 

1. APPLICATION

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.

 

2. BACKGROUND

The claim 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.

The compensation 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 my decision.

 

3. STATUTORY 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

The claimants 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:

DateFeesDisbursementsTaxTotal
Sep. 25, 1991$ 1,356.40$ 175.50$ 106.96$ 1,638.86
Nov. 26, 1991339.3014.1524.74378.19
Feb. 5, 1992842.5079.4459.45981.39
Mar. 27, 1992547.4010.7539.07597.22
Apr. 29, 1992600.0028.2543.98672.23
Jun. 10, 1992510.704.5036.07551.27
Jul. 28, 1992600.0057.1379.07736.20
Nov. 4, 19921,138.5079.25153.551,371.30
Feb. 12, 1993885.7081.61120.851,088.16
Jun. 13, 19931,036.0035.1574.981,146.13
Feb. 28, 1994488.00286.8788.40863.27
Mar. 17, 1994797.50119.68120.031,037.21
Apr. 21, 19947,803.00242.871,098.259,144.12
Mar. 2, 19951,247.00116.04182.701,545.74
    Total:$18,192.00$1,331.19$2,228.10$21,751.29

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.

From the 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.

The claimants' 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 charges.

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.

Since 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.

4.2 Legal Disbursements

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

The appraisal firm of Interwest rendered three invoices in respect of its services to the claimants. The account summary is as follows:

DateFeesDisbursementsTaxTotal
Oct. 25, 1991$2,457.50$128.45$181.02$2,766.97
Apr. 23, 19921,295.00--90.651,385.65
Apr. 28, 19952,925.00101.85211.883,238.73
    Total:$6,677.50$230.30$483.55$7,391.35

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 hearing.

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 hour.

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.

Taking 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:

CategoryCosts ClaimedCosts AllowedCosts PaidBalance
Legal$21,751.29$13,484.25$8,948.21$4,536.04
Appraisal7,391.355,588.174,101.071,487.10
  Total:$29,142.64$19,072.42$13,049.28$6,023.14

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.

The claimants 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:

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

The claimants 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 annum.

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".

Having reviewed 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.

I view 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

The 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 be appropriate.

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.

 

 

Government of British Columbia