Tariff Costs

February 15, 2001, ECB Control No.: 23/94/201  (72 LCR 150)

REASONS FOR DECISION

1.  INTRODUCTION

[1]   In its decision after the compensation hearing in this matter (reported at 71 L.C.R. 6), the board invited the parties to speak further as to costs. The claimant therefore asked for this continuation of the hearing solely on the question of the appropriate scale of costs to be applied under the Tariff of Costs Regulation, B.C. Reg. 189/99 (the "Tariff"). The application was conducted by telephone conference.

[2]   Section 45 of the Expropriation Act, R.S.B.C. 1996, c. 125 (the "Act") deals with the costs recoverable by a claimant at the conclusion of a compensation proceeding. The basic rule in s. 45(3) is that a claimant, with some exceptions, "is entitled to be paid costs necessarily incurred ... for the purpose of asserting his or her claim for compensation or damages."

[3]   Section 45(7) then defines "costs" in the above rule. Until mid-1999, "costs" meant "the actual reasonable legal, appraisal and other costs". However, on June 28, 1999 the Tariff came into effect which replaced the earlier rule at least with respect to legal and real estate appraisal costs. These costs are now costs under the Tariff.

[4]  Section 2 of the Tariff says that the Tariff is to apply to costs "incurred on or after the date this regulation comes into force" -- in other words, after June 28 1999. It was not the purpose of this application to determine what part of this extended proceeding would come under the Tariff, but the board does note that a considerable amount of the time spent on the compensation claim would have predated the Tariff.

[5]  The Tariff, on its face, speaks only to "legal costs" -- which are to be assessed under Schedule 1 -- and "real estate appraisal costs" -- assessed under Schedule 2. There is as yet no final determination in decided cases before the board as to how such costs will be assessed. However, that also is an issue which the board has not been asked to address in the immediate hearing.

[6]  Section 3(3) of the Tariff permits the board to fix the scale under which costs will be assessed. There are three scales of costs. The board has the power to fix a different scale for legal costs than for real estate appraisal costs, and indeed can fix different scales under either heading for different steps in the proceeding. The only question for this decision is what scale or scales should be applied for those costs which are subject to the Tariff.

2.  THE TARIFF SCALE

[7]  Section 4(1) of the Tariff directs that the choice of scale depends on the "difficulty or importance" of the matter. Scale 2 is to be used for matters of "ordinary" difficulty or importance. Scale 1 is for less difficult or important matters, while scale 3 is for matters of "more than ordinary difficulty or importance". The claimant asked for scale 3 to be applied throughout, whereas the respondent argued for scale 2.

[8]  The Tariff also permits the board, when considering what scale to apply, to consider any of the factors in s. 4(2). These include:

(a) whether a difficult issue of law, fact or construction is involved;

(b) whether a difficult appraisal issue is involved;

(c) whether an issue is of importance to a class or body of persons, or is of general interest.

There is a fourth factor, but neither party felt it was relevant to the present case.

[9]  The effect of using the higher scale 3, as opposed to the ordinary scale 2, is in the higher value prescribed for each "unit" of legal or appraisal work under the Tariff.

[10]  Section 45(9) of the Act provides that the actual assessment of costs (assuming it is not agreed to) is determined by the chair of the board in a separate review. The chair in determining costs is required to take a number of factors into account at that review, and it is worth noting that the factors to be considered overlap to some degree with those that the board is to consider in fixing the scale. Under s. 45(10), the chair as reviewer must take into account:

(a) the number and complexity of the issues;

(b) the degree of success ... [with some subsidiary considerations];

(c) the manner in which the case was prepared and conducted.

[11]  Thus, difficulty or complexity of issues seems to be something to be taken into account both when setting the scale of costs, and later when considering the precise amount of costs to be allowed.

[12]  The Tariff also provides the reviewer of costs with discretion in other respects. Many of the items for which costs are allowed provide for a range of units, for example from 1 to 10, or 1 to 20. When there is a range, the reviewer is required to consider how much time should ordinarily have been spent on this item. Thus, to some extent the difficulty of legal and appraisal issues will be considered by the chair, as reviewer of costs, when deciding how much time needed to be spent on each item, and therefore how many units to allow.

[13]  Although it is not the function of the present application to decide on the number of units, it is nevertheless useful for the board, in deciding how to approach the issue of scale, to bear in mind that some of the arguments around difficulty are likely to be raised again in the final assessment of costs.

3.  THE CLAIMANT'S POSITION

[14]  As mentioned earlier, the claimant asked for an order that all Tariff costs be assessed on scale 3. It submitted that the case was both more difficult and more important than the "ordinary" case, and should qualify for the higher scale on either ground.

[15]  On the question of difficulty, the claimant observed that the board's compensation decision was almost 100 pages in length, a fact which in itself showed the number and complexity of issues which had to be resolved. The claimant argued that there were additional "layers" of issues which distinguished the case from the ordinary.

[16]  The ordinary expropriation case, said the claimant, would involve a parcel of land with a surface use, the value of which would be attested to by one appraiser for each side. In the present case, however, there was a very significant threshold issue of the size of the mineral resource. The interpretation of the available data required geological expertise. The valuation of the property based on a notional mining operation also required mining engineering and business valuation evidence. Since there was also a claim in respect of the surface, standard appraisal evidence was also required. Thus, three kinds of experts were required to fully make the case.

[17]  The claimant also observed that the mineral assessment was a difficult evidentiary issue in its own right, being based on a long history of observations and assessments by others, with conflicting opinions.

[18]  The valuation of mining properties is in its nature difficult, the claimant observed. Although the parties' experts were broadly agreed as to the available methods, their very different opinions, based on the same documentary evidence, showed the degree to which the valuation depends on skilled judgment. The fact that the board, in the end, did not agree with the claimant's opinion should not prevent the board from holding that the valuation question was more than ordinarily difficult.

[19]  The claimant then argued that the case raised important and complex legal questions which would guide all further claims involving mining rights in parks. Although there was now some jurisprudential guidance in the cases, cited by the respondent, of British Columbia v. Tener, [1985] 1 S.C.R. 533, 17 D.L.R. (4th) 1, 28 B.C.L.R. (2d) 241, [1985] 3 W.W.R. 673, 32 L.C.R. 340 (S.C.C.), Casamiro Resource Corp. v. British Columbia (Attorney General) (1991), 45 L.C.R. 161 (B.C.C.A.), Cream Silver Mines v. The Queen (1986), 27 D.L.R. (4th) 305, 46 L.C.R. 184 (B.C.S.C.), and Cyprus Anvil Mining Corp. v. Dickson (1986), 33 D.L.R. (4th) 641 (B.C.C.A.), these cases did not provide what the claimant called a "complete template". The Casamiro litigation, for example, produced rather different decisions at the different levels. The board had suggested a legal burden approach, which would have given the benefit of doubt to a claimant denied the chance to prove its mineral resource: see 50 L.C.R. 99 at p. 143. The Court of Appeal came to a very different view, but only after the compensation hearing in the present matter had already concluded: see 70 L.C.R. 81 at pp. 94-5. Such twists and turns, said the claimant, serve to demonstrate that the legal issues were difficult.

[20]  Similarly, Cyprus Anvil showed how difficult the appraisal issues in these cases can be, when discounted cash flow approaches are suggested. According to the claimant, there was a vast difference between the approach taken by the trial judge and that adopted by the Court of Appeal.

[21]  The present case also raised some novel issues of interpretation, such as the question of how to apply the additional interest provision under s. 46(4) of the Act when there had been no advance payment until late in the proceeding. The claimant observed that the board's answer to this question would be important to other claimants.

[22]  Generally, the claimant argued that because of the slender volume of precedent on several of the issues in the litigation, the case had a wide importance beyond the immediate parties. 

[23]  The claimant argued that scale 3 should not be reserved only for "unique" cases. It should be allowed whenever a matter could be said to be of "more than ordinary" difficulty or importance. On this view, the claimant submitted that if this case was not a candidate for scale 3, then it was hard to imagine what would be. 

4.  RESPONDENT'S POSITION

[24]  To the respondent, this was not an extraordinary case on the issues which actually needed to be decided. Although the compensation hearing had a rather tortuous and extended history, much of this, the respondent said, was due to the claimant's own difficulties with its legal and technical advisors, rather than to any innate difficulty or complexity of the valuation problem.

[25]  The respondent argued that the actual compensation hearing only occupied in fits and starts some two weeks, which is quite common in expropriation matters. There had been two pre-hearing applications, but this was not extraordinary. There were no examinations for discovery. In the end, the case resolved itself around the competing opinions of two experts with similar qualifications in mining valuation, a situation not unlike that involving two competing real estate appraisers. The available evidence used by each valuer involved the same historical data. Both valuers acknowledged the availability, in principle, of the same three methods of valuation; and each of these methods, although adapted for the mining context, bore a resemblance to the traditional three methods of valuation in real estate appraisal.

[26]  Although the case began many years ago, when the Province's position on the extinction of mining claims in parks was less clear, there had since been some significant judicial decisions which, the respondent submitted, largely resolved the contentious and difficult questions before the present case came to full hearing. These cases were available to guide the claimant in the final preparation of its own case. Their existence also meant that the decision in the present case did not significantly add to the body of precedent for mineral expropriation cases, with the result that the present case had no unusual importance beyond the immediate parties.

[27]  The respondent observed that, although there was no helpful precedent under the new expropriation Tariff, there is an obvious similarity between this Tariff and the tariff authorized for civil litigation under the Supreme Court Rules. Thus guidance could be sought from cases on interpretation of the Supreme Court tariff. It relied particularly on the judgment of Catliff J. in Boogaars v. Anderson, [1991] B.C.J. No. 983 (B.C.S.C.)

[28]   Boogaars was a personal injury action which was settled before trial. It was before the Court on appeal from a decision of the master who had fixed the scale of costs at scale 4 (the default or "ordinary" level in the Supreme Court tariff being scale 3). As with the expropriation Tariff, the basic test was difficulty or importance, with "importance" meaning importance to people beyond the immediate parties. The plaintiff had argued for a higher scale based on the complicated and serious nature of the injuries, the number of expert reports which had been obtained, and the difficulty of calculating lost future income.

[29]   On appeal, however, Catliff J. applied scale 3. He held that it was not uncommon to have to collect and prove difficult facts, or to have to call experts in aid. There had not been an unusual number of days of discovery. In the absence of a trial, there was no basis to remove the case from the ordinary scale.

[30]   If one applies this reasoning to the present case, said the respondent, one would conclude likewise that its difficulty was not sufficiently out of the ordinary to justify a higher scale of costs. Given that by the time the matter came to hearing there was substantial precedent in mining cases, this case was not laying new ground. It should not be the rule that all mining cases automatically justify a higher scale.

[31]   The respondent also suggested that higher scale costs are more likely to be awarded when the plaintiff or claimant has achieved significant success, which was not the case here.

[32]   The judgment of Meredith J. in Alastair Scott v. Norris Alan Hutchinson, unreported, July 7, 1992, No. C883112, Vancouver Registry (B.C.S.C.) was cited by the respondent in support of the argument that a plaintiff should not be awarded costs on a higher scale where the unusual difficulties of the case were self-inflicted. In that case the court set costs at the ordinary level, noting that the plaintiff's case had been made difficult mainly because the claims were exaggerated. Had the plaintiff taken a more moderate posture, the process would not have been protracted. (The case is also interesting for a comment that the Court was loath to award costs on a higher scale without knowing what the plaintiff was actually having to pay his lawyer. The object of costs being at best an indemnity against actual expenses, an award of higher scale might require this kind of additional evidence in support.)

5.  ANALYSIS AND CONCLUSION

[33]   The claimant urged the board not to apply reasoning from Supreme Court tariff cases without recognizing the different context in which they take place. The overall intent of the Act, the claimant pointed out, is to make the expropriated owner economically whole. The purpose of costs in private litigation, by contrast, is only to give a partial indemnity in the usual case.

[34]   We agree that there are differences. As this board stated in El & El Investments Ltd. v. School District No. 36 (Surrey) (1996), 60 L.C.R. 41, at p. 52:

The principle that costs follow the event is not dominant in expropriation matters in the same way that it is in civil litigation matters. The objective of the compensation scheme under the Act is to make an expropriated owner economically whole, and indemnification for costs is part of that scheme. Under section [45(3)] of the Act, an owner whose interest or estate in land is expropriated is, with certain exceptions designed to discourage inflated or frivolous claims, entitled to be paid the costs which the owner necessarily incurs for the purpose of asserting a claim for compensation.

Furthermore, it is well understood that costs recoverable on the normal scales under Appendix B of the Supreme Court Rules do not make the successful litigant economically "whole", after paying typical legal bills. As was pointed out in the board's recent final cost decision in Gerald Charles Budd v. Her Majesty the Queen in right of British Columbia as represented by the Minister of Transportation and Highways, unreported, January 31, 2001, E.C.B. No. 49/96/199, at pp. 14-15, the value allowed per unit on an assessment of legal costs under Appendix B ranges between $40 and $120 depending on the scale. When a fuller indemnity is considered appropriate, there are provisions for "increased" or "special" costs, but these are not available in the ordinary case. Under the Tariff, although there is no provision for "increased" or special" costs, the value allowed per unit on such an assessment ranges between $100 and $180.

[35]   We also note that the Supreme Court tariff has five scales. The two above the "ordinary" are for "more than ordinary difficulty or importance" (scale 4) and "unusual difficulty or importance" (scale 5). The expropriation Tariff only has three scales, the highest using the phrase "more than ordinary". If we were to assume a tight analogy, an expropriation scale 3 would be closer to the Supreme Court scale 4. We agree with the claimant, in other words, that scale 3 in the expropriation Tariff should not be reserved for the "unique" or completely unusual case, but should be available whenever the case is noticeably more difficult or more important than the "ordinary" case.

[36]   We do, however, accept the respondent's point that the claimant should not be able to create that additional difficulty unilaterally. If the proceeding is extended or delayed or made more difficult because of the claimant's own indecision, unreasonableness, or poor judgment, or that of its advisors, that state of affairs would not provide a reason to grant a higher scale of costs. In the present case, there were adjournments and delays in the early course of the compensation hearing that were not caused by any innate complexity of the subject matter, but which resulted to a considerable degree from decisions made or approaches taken by the claimant or its advisors which, in our view, might have been avoided through the exercise of reasonable judgment or due diligence. The circumstances are set out at some length in the compensation decision itself.

[37]   We agree with the respondent that, notwithstanding a few novel interpretive points, the case does not have a more than ordinary importance which would justify a higher scale of costs. Its potential importance as precedent has largely been eclipsed by earlier decisions of higher authority which have not only shown when and how the establishment of a park will result in a deemed expropriation of mining interests within the park, but which have also commented on the appropriate valuation methods. As such, the board's compensation decision in this matter is principally important only to the parties involved, which is not a sufficient ground for scale 3 costs: see also Metchosin (District) v. Metchosin Board of Variance (1992), 9 C.P.C. (3d) 241 at p. 247. Our decision as to the appropriate scale of costs, therefore, must depend on the level of difficulty of the matter.

[38]   Although neither party argued for differentiating between the scales of costs for legal work and other work which might fall under the Tariff, or as between different steps in the proceeding, the board has a responsibility to consider whether that is appropriate. In this case we do not find that the legal issues presented were out of the ordinary, and therefore order costs on scale 2 for the legal work. Should the result be different for the valuation issues?

[39]   In considering this point, we do not want to be taken as having decided that the Tariff necessarily applies to the valuation work. There may well be questions posed at the stage of final cost review over whether some or all of this work, although arguably necessary for the conduct of the case, is nevertheless outside the Tariff, either because of its timing or its subject matter We do not wish to foreclose those arguments. However, to the extent that real estate appraisal costs falling under the Tariff apply, what scale should be used?

[40]   The valuation problem was, at first sight, made more than usually difficult by the fact that it was impossible for the claimant or its experts to gain access to the mining property to do testing or exploration work. This meant that they had to rely on historical reports, which varied considerably in age, quality, and result. However, this does not really provide a solid justification to describe the valuation exercise as difficult. The board was persuaded, at the end of the day, that mining properties are routinely bought and sold on slight knowledge. People in the market have ways of deciding how much to pay for such speculative or "exploration" properties. They normally make those decisions without resort to highly complex valuation methods, and they create a market in so doing.

[41]   The additional "difficulty" in the valuation process with respect to the undersurface rights was essentially one which the claimant brought on itself, by choosing to advance a discounted cash flow valuation method which was appropriate only to much more developed mining properties for which the resources could be described with a high level of certainty. As in Scott v. Hutchinson, the result was that the compensation claims presented were highly exaggerated. Had the claimant chosen a valuation method more appropriate to the actual state of knowledge of the property at the time of its expropriation, we seriously doubt that the proceeding would have seemed as difficult. With respect to the separate claim made for compensation for surface rights, we would add that neither a proper legal nor evidentiary foundation was laid to support any such claim.

[42]   Taking all the arguments into account, we agree with the respondent that all costs assessed under the Tariff should be assessed on scale 2.