February 11, 2005, E.C.B. No. 35/97/253

1.  INTRODUCTION

(1)  This is an application under section 45 of the Expropriation Act, R.S.B.C. 1996, c. 125 (the "Act") and the Tariff of Costs Regulation, B.C. Reg. 189/99 (the "Tariff") for review of three accounts, in the total amount of $285,865.67.

(2)  The claimant, Campbell River Woodworkers' and Builders' Supply (1966) Ltd. ("Campbell River Woodworkers'"), owned property at 2000 Island Highway in Campbell River which the Minister of Transportation and Highways ("MoTH") expropriated on January 8, 1997 for the new Vancouver Island Highway. The expropriated property consisted of seven lots in three distinct parcels for a total area of approximately 6,875 square metres (74,000 square feet). The largest parcel contained a building supply store and two storage sheds. The total area of the three buildings was approximately 2,850 square metres (30,670 square feet). The other two parcels were located across the street from the store and were used for storage yards and parking.

(3)  At the time of the expropriation, the claimant had a 20-year commercial lease (the "lease") with Beaver Lumber, a retail building supply company (the "lessee") that had 14 years to run. The lease had an escalation clause whereby the claimant received a proportionately higher rent if the lessee's sales exceeded a certain amount.

(4)  John and Phyllis McDougall, the shareholders of the corporate claimant, received income from the corporate claimant but otherwise were retired as of the date of expropriation. Mr. McDougall testified in this costs hearing.

(5)  In consideration of the expropriation, MoTH made an advance payment of $1,800,000 on January 3, 1997 with a further payment of $80,000 plus $13,344.63 in interest on October 5, 1999. The claimant did not accept the advance payment as adequate compensation. The Expropriation Compensation Board (the "board") conducted a compensation hearing in 1999 in Campbell River on October 14 and 15, 18 -21, in Victoria on October 26, and on December 20, 1999 for final submissions. The board issued a decision on February 12, 2001.

(6)  The three main claims advanced by the claimant in the compensation hearing were for the market value of the taking, special economic advantage pursuant to s. 31(2)(a) of the Act based on the lease income, and disturbance damages for capital gains tax paid as a result of the expropriation. The board awarded $2.1 million for the market value claim and denied the other two claims.

(7)  The board issued a separate decision on cost entitlement on October 21, 2001.

(8)  The claimant appealed both of the board's decisions to the Court of Appeal which issued decisions dated April 23, 2001 (the leave application), February 19, 2003 (2003 B.C.C.A. 121), and January 21, 2004 (2004 B.C.C.A. 27). These decisions are referred to below.

2.  ISSUES IN THE COSTS PROCEEDINGS

(9)  The broad issues are whether all or some of the claimed costs were reasonable and necessarily incurred, and how the factors set out in section 45(10) affect the claimant's entitlement to costs.

(10)  Under these broad issues, a number of subsidiary issues arise:

1. Is the claimant entitled to costs for pursuing claims for special economic advantage and disturbance damages which were denied by the board and by the Court of Appeal? Were the costs associated with those claims "necessarily incurred?"
2. Is the claimant entitled to an award of costs for the consulting services provided by the accountant?
3. Should the claimant's rejection of the respondent's "Calderbank offer" (a without prejudice settlement offer made by the respondent prior to the hearing which reserves the right to bring the offer to the attention of the board on a costs review) result in a reduction of the costs awarded?
4. And numerous other issues including:

• the reasonableness of the experts' hourly rates,
• whether there is duplication of services for which the respondent should not be held responsible,
• whether the costs were presented with sufficient particularity,
• whether the disbursements charged by legal counsel were reasonable,
• whether t he board directed the parties to prepare written final submissions,
• whether there is duplication between the pre- and post- Tariff Bills of Costs.

3.  OVERVIEW OF THE COMPENSATION CLAIM

3.1  Market Value

(11)  Doug Mendel of Grover Elliot & Co. Ltd. ("Mendel") provided an appraisal report for the claimant. Mr. Mendel based his appraisal on the Discounted Cash Flow method and estimated a value of $2,500,000.

(12)  Paul Peppiatt of D. R. Coell & Associates Inc. provided an appraisal report for the respondent. Mr. Peppiatt provided four estimates of value ranging from $1,600,000 to $1,880,000, based on a variety of appraisal approaches.

(13)  The board placed greatest weight on the Overall Capitalization method. Peppiatt had estimated the value by that method at $1,710,000. The board's analysis produced an estimate of $2,100,000. The board found support for its conclusion in an analysis by the Discounted Cash Flow method which resulted in an estimated value of $2,600,000. The board's final conclusion on market value was $2,100,000.

3.2  Special Economic Advantage

(14)  The claim for special economic advantage was based on a 20-year lease that had 14 years to run as of the date of expropriation. The witnesses who testified to this aspect of the claim were, for the claimant: John McDougall, Bruce Baikie (realtor), Robert Low (business valuer), Douglas Hildebrand (economist); and Richard Crosson (business valuer), for the respondent.

(15)  The board explained that portion of the claim at paragraph [3] of the February 12, 2001 decision:

[3] The primary issue in this case is that the claimant says that its lease with Beaver Lumber was a very advantageous one. The lease provided for an increase in base rent every five years with provision for percentage rent to be paid if sales reached certain levels. The expropriation has led to the frustration of this lease and the loss of the rental income to the claimant. The claimant is seeking compensation for the market value of its interest in the amount of $2,500,000. It is also claiming loss of a special economic advantage that is not included in the market value to the owner pursuant to section 31(2)(a) of the Expropriation Act, R.S.B.C. 1996, c. 125 ("the Act") as a result of the loss of the lease with Beaver Lumber. This claim is between $800,000 and $1,200,000.

(16)  The board disallowed this claim noting that case law established a number of requirements for this type of claim which were not met in this case. Specifically, the board noted that for a claim to be successful, the advantage must be special, economic and arise of out of the owner's use or occupation. The board observed that the economic advantage of this lease would pass to a purchaser.

(17)  The board also rejected the evidentiary basis of this claim noting that the claim was based on the advantage to the shareholders, not the corporate claimant. Further, the board noted that the value of the lease was the basis of the market value appraisal evidence for both the claimant and respondent.

[72] More fundamentally, the very characteristic urged on us by the claimant as the heart of its claim for special economic advantage, the lease to Beaver Lumber, was the central component of what was being valued by both appraisers in their determinations of the market value of the property. The value of the lease was included within the "market value" presented by these witnesses for both sides. Hildebrand stated in testimony that the only difference between his calculations of the overall cash flow and Mendel's calculations of market value was in the discount rate used. The difference in the two totals characterized by the claimant as special economic advantage was not an extra item of value. In this respect the present case is to be distinguished from the two cases mentioned above, Esposito and Woolger, in which the owners were successful in their claims for special economic advantage. In Esposito and Woolger the awards for special economic advantage were for features such as the expropriated property's location or the nursery stock on the expropriated property, which were not included in the market value. In the board's view, it is not open to a claimant to present evidence of a market value which necessarily includes the value of the lease, and then counteract that evidence with an opinion of a different kind of expert who applies a different type of discount rate to the value of the very same income stream.

[73] We deny the claim for special economic advantage.

(18)  The Court of Appeal granted the claimant leave to appeal the board's decision on special economic advantage, noting that s. 31(2)(a) had not been judicially interpreted since the Act came into force. Having heard submissions on the appeal, the Court of Appeal denied the claim, stating:

[16]    Special economic advantage, as that phrase is used in the current statute, must, as the statute says, be something that is not incorporated in market value.  In my view, it must be something that accrues peculiarly to the owner or to a limited number of purchasers.  This provision allows the owner to be compensated for advantages that have no or only a limited market such that their value to the owner cannot be obtained in part or in whole in a sale on the open market.

[17]    I am not persuaded that there was any loss of special economic advantage in this case.  The property was a commercial property encumbered by a long-term lease.  The evidence before the Board was that such properties have a market and, accordingly, a market value.  No element of this property was unique or peculiar to the owner or to only a limited number of purchasers.

[18]    Counsel argued, in effect, that the true value to the appellant was greater than the market value because to the appellant it represented an investment in a stable income stream, whereas to the market it was simply a commercial property like any other.  The difference, in his submission, is that the value to the appellant should be assessed with specific reference to the value and stability of this particular tenant, while the value in the market ignored these intangible advantages.

[19]    I am unable to accept that submission.  The Act is clear.  The formula adopted by the legislature to provide full compensation, or economic reinstatement, as the appellant puts it, is market value plus disturbance damages and, where the market does not capture this value, the value of any special economic advantage to the owner.  Disturbance damages are not before us since leave was denied and, as I have noted, I see no element of special economic advantage.  I would reject the submission that the Board erred in its approach.

3.3  Disturbance Damages

(19)  The disturbance damages claim was based on the payment of capital gains tax by the company as a result of the expropriation. The claimant did not attempt to quantify this aspect of the claim but asked that, after the board determined the award for market value, the board use schedules attached to the accountant's report to calculate the capital gains tax owing on that amount. The witnesses for this aspect of the claim were the accountants, William Huxham for the claimant and Ronald Voyer for the respondent.

(20)  In the February 12, 2001 decision, the board characterized this as a claim for the acceleration of the tax, since it would have to be paid if the property had sold. The board also noted that the obligation to pay tax would not arise until the date of the board's decision or the date that any appeal had been determined, and that there was uncertainty what the capital gains tax would be at some point in the future.

(21)  The board found this claim to be speculative because the board could not know when the property would have sold and could not accept the intentions of an individual shareholder as determinative; the board could not know the market value of the property at some time in future, the capital gains tax rate at some point in the future or whether the capital gains tax regime would be the same at some point in the future. Further, the board found that even if the claimant had succeeded in proving disturbance damages, the claimant had not mitigated the damages. Finally, the board gave its opinion that the claim is not a "reasonable cost, expense or financial loss that is directly attributable to the disturbance" under s. 34 of the Act.

(22)  In summary, the board stated at paragraph [91]:

Although the claimant refers us to the guidelines in Dell Holdings to treat the Act in a broad and remedial manner in order to fully compensate an owner whose property has been taken by the state, we do not find this principle of assistance in this case. The claim for capital gains tax or the acceleration of capital gains tax is uncertain and speculative; the claimant has not mitigated its loss; it is not a reasonable cost that is directly attributable to the disturbance; and there are a number of Court and board decisions that hold that this claim is not sustainable. While none of these authorities are binding we find a number of them persuasive.

(23)  The Court of Appeal denied leave to appeal on disturbance damages.

4.  OVERVIEW OF THE COSTS CLAIM

4.1  The Legislative Framework

(24)  Section 45 of the Act is reproduced in Appendix A.

(25)  Section 45 of the Act governs entitlement to costs. Effective June 28, 1999, the Tariff of Costs Regulation B.C. Reg. 189/99 was enacted. As this claim pre-dates the Tariff, costs are to be determined both pre- and post- Tariff.

(26)  In the October 1, 2001 cost entitlement decision, the board examined the second advance payment of $80,000 and whether it was made in accordance with section 20(12) of the Act. The board found that the payment had been 'tendered' 10 days before the hearing and, therefore, included the payment in the calculation under section 45(5). The Court of Appeal overturned this finding (2003 B.C.C.A. 121) with the result that the amount of the compensation awarded is greater than 115% of the advance payment. Accordingly, section 45(4) is the applicable section and the claimant is entitled to costs.

(27)  Subsequent to this costs hearing, on January 21, 2004, the Court of Appeal delivered another decision touching on the costs issue (2004 B.C.C.A. 27). The issue before the Court was the scale of costs for the appeal hearing. In providing reasons, the Court considered the test to be applied for costs under the Tariff and concluded:

[18] The promulgation of the Tariff under the Act has not changed the underlying approach explicated in s. 45(3) of the Act: the successful owner remains entitled to "costs necessarily incurred ... for the purpose of asserting his or her claim for compensation."  These costs are not to provide a full indemnity, but are to be such costs as are reasonable in the circumstances: s-s. 45(7)(a).

(28)  Section 45(7) provides that costs are the "actual reasonable legal, appraisal and other costs, or … the amounts prescribed in the Tariff…" S ections 3(2) and 5(1) of the Tariff provide for recovery of costs for expenses and disbursements that are proper or reasonably necessary to conduct the proceeding. Applying the Court of Appeal decision, it follows that the test of allowable costs for both pre- and post- Tariff is that set out in section 45 – reasonable costs necessarily incurred.

4.2  Overview of the Claim

(29)  The claimant presented 3 Bills of Costs which were amended and re-submitted after this costs hearing on November 17, 2003, as follows. The amendment addressed some costs that had been agreed to during the hearing, and removed GST to reflect the fact that the claimant is a GST registrant. Throughout this decision, I refer to the amended, non GST, Bills of Costs.

(30)  Bill of Costs #1 is for costs incurred prior to June 28, 1999, the date the Tariff was enacted; the others are post-Tariff.

1.	Actual Bill of Costs, to June 28, 1999
	a)	Legal Expenses	$45,389.76
	b)	Appraisal Expenses	$14,540.55
	c)	Other Expenses	$82,911.17	$142,841.48
2.	Tariffed Legal Bill of Costs
	a)	Tariff	$27,720.00
	b)	PST	$ 2,079.00
	c)	disbursements	$89,709.61	$119,508.61
3.	Tariffed Real Estate Appraisal Costs
	a)	Tariff	$21,400.00
	b)	disbursements	$ 2,115.58	$ 23,515.58
		Total		$285,865.67

4.3  Overview of the Respondent's Position

(31)  The respondent noted that the costs claimed, before the amended Bills of Cost, including costs already paid, totaled approximately $325,000. The respondent submitted that costs of this magnitude were grossly excessive for this case which involved a relatively straightforward appraisal of commercial property. Further, the respondent submitted that the costs were indicative that the claim was conducted in an extravagant and excessive manner.

(32)  The respondent submitted that the special economic advantage and disturbance damages claims were destined to fail from the outset and that no costs should be awarded for those claims. Noting that the costs are difficult to separate, the respondent submitted that approximately 50% of the costs related to the speculative claims and should be disallowed.

(33)  The respondent submitted that the total costs recoverable were $103,392.72, less payments of $18,361.87, for a net reimbursement of $85,030.88.

5.  EVIDENCE

(34)  It was common ground that there had been a number of appraisal reports prepared or amended between July 1996 and the compensation hearing in October – December 1999, including:

• D. R. Coell & Associates Inc., for the respondent, July 29, 1996, market value estimated at $1,800,000 ("Peppiatt report");
• D. R. Coell & Associates Inc., amended to $1,880,000, served on September 10, 1999 and further amended in October 1999("Peppiatt report");
• Thibault & Company Appraisals Inc., for the claimant, October 2, 1996, market value estimated at $1,975,000 ("Thibault report"); and
• Grover Elliot & Co. Ltd., for the claimant, November 6, 1998, market value estimated at $2,500,000 ("Mendel report").

(35)  The witnesses for the claimant at the costs hearing were John McDougall, shareholder of the corporate claimant; W.B. Huxham, Chartered Accountant; and John Coates, legal counsel. The respondent submitted an affidavit from Fran Crowhurst who was legal counsel for the respondent on this case from May 4, 1999 to March 15, 2003.

5.1  Claimant's Witnesses

(i)  John McDougall

(36)  Mr. McDougall testified that he first heard of the expropriation possibility in 1996. His lawyers were McVea, Shook, Wickham & Bishop who subsequently referred him to counsel with expertise in expropriation law. In November 1996, he retained Cosburn and Associates in Victoria. Mr. Cosburn recommended settling for $1.8 million. Mr. McDougall did not recall whether he discussed the special economic loss with Mr. Cosburn. He was certain that Mr. Cosburn did not discuss the capital gains disturbance damages issue with him.

(37)  Huxham and Co. were Mr. McDougall's personal accountants since the 1950's and he testified that he relied on Mr. Huxham for all his accounting needs although Mr. Huxham was not the company's accountant. Mr. Huxham accompanied Mr. McDougall to meet with Mr. Cosburn. Mr. Huxham had reviewed the long term lease and advised Mr. McDougall that $1.8 million was insufficient compensation. As they did not agree with Mr. Cosburn's advice, Mr. Huxham introduced John Coates who Mr. McDougall retained as of July 3, 1997.

(38)  Mr. McDougall testified that he and his wife had invested the money from the expropriation but were receiving only about one-half of the income the lease had provided. They decided to look for other comparable leases for investment purposes and retained Century 21 who was unable to find anything comparable. The invoice dated February 9, 1998, for $1,391, was for those services.

(39)  Beaver Lumber found and leased another property in Campbell River which was owned by a group of investors, including Mr. Huxham. Mr. McDougall was offered an opportunity to join the investors' group, but he did not want to be in a partnership.

(ii)  W. B. Huxham

(40)  Mr. Huxham testified that he acted as counsel for the claimant, not as an advocate but to provide advice. He had an idea of the value of the claimant's property and wanted to ensure that the proper people were on the claimant's team of experts and advisors. He described himself as having coordinated the team and having met with the experts and counsel to discuss strategy and prepare for hearing. He provided a report dated September 15, 1999 and testified at the compensation hearing.

(41)  Concerning his company's invoices, he testified that he billed at $200 per hour and support staff hourly rates differed. An invoice dated May 28, 1997 from Leong & Associates, Actuaries and Consultants, $1,016.50, was for actuarial advice on the worth of the income stream from the lease. An invoice dated March 12, 1997 from Richard Ellis Cumberland, $936.25, was for advice on why the appraiser's values differed from the claimant's view of value.

(42)  In reference to an invoice for $9,000 dated May 14, 1998 from Arthur Anderson & Co., Chartered Accountants, Mr. Huxham testified that the claimant was concerned that the appraisal reports were showing superficial assumptions about the Campbell River market in the future and retained this firm to conduct extensive market research and give an opinion on what could be expected. Additionally, the claimant retained Arthur Anderson & Co. and other experts in an attempt to estimate what the lessee's future sales would have been for the purposes of valuing the escalation clause in the lease.

(43)  Mr. Huxham testified that his attendance and evidence at the compensation hearing was at the insistence of the respondent. At that hearing and in his report, he addressed the general condition of the Campbell River economy, the income tax effect of expropriation and his opinion of the value of the claimant's lease.

(44)  In this costs hearing, Mr. Huxham testified that throughout the proceedings he was concerned that the appraisals did not reflect fair compensation and did not reflect the value of the property from the lease. In his view, that was not a real estate issue rather it was an actuarial issue involving the income stream from the lease. In testimony he reviewed a number of his invoices, noting that he had meetings with counsel, experts and others to discuss strategy and hearing preparation.

(iii)  John Coates, Q.C.

(45)  Mr. Coates has practised law since 1955 and since 1964 his practice has been almost exclusively in expropriation law. He authored the Ontario Expropriation Handbook, 1974, and the New Law of Expropriation, 1984.

(46)  Mr. Coates testified and produced a written statement of evidence. He testified that he was retained on this case and filed a change of solicitor notice on July 3, 1997. He continued as counsel of record until July 7, 2003 when Mr. McDaniel filed a Notice of Change of Solicitor. Mr. Coates' billings throughout were at $250 per hour.

(47)  Mr. Coates testified that the issue under section 31(2), special economic advantage, was whether the section changed the Common Law or whether it would be interpreted to ensure that compensation would make the claimant economically whole. He stated that the claim, if successful, would have opened a new head of claim and would have resulted in an award of $4.0 to $5.0 million. The lease produced income of approximately $200,000 per year. In order to match that income by investment at 5%, which was established at hearing as the corporate/government bond rate, he submitted that the market value award would have to be $4.0 million. He further testified that in 1998 the claimant's income was $129,459 from interest, dividends, and gain on disposal of investments, which at 5% would produce only $105,000 per year. He concluded, therefore, it was clear that market value alone would not make the claimant economically whole. The expropriation resulted in a disastrous loss of income for the claimant.

(48)  Mr. Coates acknowledged that recent Supreme Court of Canada cases require that the special economic advantage be 'special to the owner.' However, he noted that this requirement was not found in earlier decisions of that court. Further, there had been no test of s. 31(2) since the enactment of the present Act in 1987 and, if successful, the award for this claimant would have been much larger than the board's $2.1 million award. Therefore, Mr. Coates submitted that the risk of legal fees was appropriate.

(49)  Concerning the expert witnesses, Mr. Coates testified that he had retained Low Rosen Taylor Soriano, Business Valuation and Litigation Support Services, for some cases in Ontario. He retained them in this case to estimate what revenue was needed to make the claimant whole. Columbia Pacific Consulting, Management and Economic Consultants, had been recommended by a financial advisor and he retained them to advise what securities were available and how to interpret them. Mr. Coates submitted that the evidence of those experts was essential to laying the foundation for the claim in the Court of Appeal.

(50)  Mr. Coates stated that Mr. Huxham was mainly concerned with what the claimant had to receive to be properly compensated. He obtained actuarial and other advice that showed that market value was not the appropriate measure. Mr. Coates testified that Mr. Huxham assisted him and that, in his experience, it is common for lawyers to rely on accountants.

(51)  Concerning the tax issue, Mr. Coates stated that the expropriation caused capital gains tax to be paid earlier than the owner would have sold the property and, therefore, the owner is out of pocket. He testified that he knew that some tax consequences had been denied by the courts but he thought this was a good case to test the law. He characterized it as disturbance damages.

(52)  Concerning the final submissions at the hearing, Mr. Coates recalled that the board ordered written submissions and, therefore, there is a line item of 10 units for that in the Bill of Costs #2.

5.2  Respondent's Witness

(53)  The respondent submitted an affidavit from Fran Crowhurst who was legal counsel for the respondent on this case from May 4, 1999 to March 15, 2003. Ms. Crowhurst provided a summary of administrative details, such as the dates of pleadings, particulars and lists of documents, the length of time required for the Examinations for Discovery (total time required for both parties was 3 hours), the dates of the compensation hearing, the witnesses at the compensation hearing and the nature of their evidence, and the approximate time required for the appraisal evidence. She also deposed that for the final submissions on December 20, 1999, the claimant provided written submissions dated December 8 and 20, and the respondent provided written submissions dated December 16; the claimant provided supplementary written submissions dated February 25, 2000.

(54)  Ms. Crowhurst noted that there was one interlocutory motion heard during the proceedings which concerned the s upplementary advance payment and the effect on costs (which resulted in the board's decision dated Oct 21, 2001).

(55)  Ms. Crowhurst also provided testimony concerning a "Calderbank offer" made by the respondent on October 13, 1999, open for acceptance to October 18, 1999. She deposed that the timing of the offer — the day before the commencement of the hearing - was dictated by the timing of the respondent's amended appraisal evidence, rebuttal reports prepared on the claims of special economic advantage and tax liability and the claimant's reports on appraisal evidence, special economic advantage and tax liability.

(56)  The respondent's offer was for full and final settlement for $2,250,000, which included the advance payments of $1,880,000 but not the interest paid on the second advance. The offer provided for $370,000 above the advance payments. In the offer, the respondent specified that it was made on a "Calderbank basis" and reserved the right to bring the letter to the attention of the board in any claim for costs pursuant to section 45. On or about October 17, the third day of hearing, she received an oral rejection of the offer.

6.  SUBMISSIONS

6.1  Claimant

(57)  The claimant maintained that the issues were complex and that both the special economic advantage and disturbance damage claims had to be raised. However, in assessing the scale of costs, pursuant to section 4 of the Regulation, the claimant 'reluctantly' presented the Bills of Cost at Scale 2, "matters of ordinary difficulty or importance."

(58)  The claimant submitted that there were four significant and complex issues involved in the compensation hearing. First, the valuation of the property was complex because of the number of parcels and lots. The board's determination of value was $2,100,000, which was $220,000 more than the advance payment.

(59)  Second, the claim under section 31 had not been tested before, presented a complex issue and was worthy of being pursued. The claimant's counsel during the proceedings was one of the most experienced expropriation lawyers in British Columbia, also a former member of this board, who was of the view that this was an important and appropriate issue to go to hearing, and to appeal. The lease provided a significant income of $15,000 to $20,000 per month for the McDougalls, the expropriation brought disastrous financial consequence to the claimant which was not reflected in the calculation of market value, and the claimant had the right to be made 'economically whole.' The lease was a special economic advantage to the claimant, it was necessary and proper to pursue that claim on their behalf and it was reasonable to have retained experts, including an economic consultant, to provide evidence.

(60)  Third, the claim for disturbance damages from the acceleration of income tax was a novel and complex issue.

(61)  Finally, the determination of costs involved written and oral submission and a separate ruling by the board. The board's decision was overturned by the Court of Appeal.

(62)  The claimant submitted that the case was prepared and presented in exemplary fashion by both sides and there should be no deduction in costs based on conduct. Concerning the degree of success, the claimant pointed to the difference between the award and the advance payment, $220,000 and argued that evidence of the "Calderbank offer" is not admissible in board proceedings. This is discussed below.

6.2  Respondent

(63)  The respondent submitted that the section 31(2)(a) issue was destined to fail from the outset, based on the statute and case law. The respondent noted that the claim was for the benefit of the shareholders instead of the corporate claimant. There is no provision in the Act to make claimants 'economically whole,' rather the Act says how compensation is to be determined and, as the Court of Appeal confirmed, there was nothing flowing from the lease that was special or unique to this claimant that another owner would not have enjoyed. Further, the disturbance damages claim was also destined to fail from the outset. The respondent submitted that approximately 50% of the costs incurred related to these speculative claims and should not be imposed upon the respondent.

(64)  Concerning the complexity of the issues, the respondent submitted that the main complexity arose from the fact that the claimant could not succeed on two of the issues. The respondent submitted that the claimant's preparation of the case was lavish, extravagant and unnecessary, not exemplary. As an example, the respondent referred to the accountant's billings which exceeded $100,000, as well as high legal costs.

(65)  The respondent took issue with many of the accounts and disbursements on the grounds they lacked particulars, were duplicitous, were not reasonable and were not necessarily incurred.

(66)  The respondent referred to a number of cases discussing these issues.

(67)  The respondent referred to the 'Calderbank' offer, which was $150,000 more than the board awarded, and submitted that in Baines v. British Columbia (Ministry of Transportation and Highways) (1997), 62 L.C.R. 210 the board stated that evidence of the offers is acceptable as a factor in assessing the reasonableness of the owner in pursuing his claim for compensation.

7.  ANALYSIS AND DECISION

7.1  Factors Under Section 45(1) of the Act

(68)  Section 45(10) directs the board to specific considerations in determining the amount of costs:

(a)  the number and complexity of the issues;

(b)  the degree of success, taking into account

(i)  the determination of the issues, and

(ii)  the difference between the amount awarded and the advance payment under section 20 (1) and (12) or otherwise;

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

7.1.1  Complexity of Issues

(69)  For the reasons that follow, I find that this case presented market value issues of average complexity and that the issues involved in the claims for special economic advantage or disturbance damages do not take this case into the realm of 'complex.'

(70)  Claimant's counsel presented the Tariff Bills of Costs at Scale 2 'reluctantly' while noting the issues were complex and involved a new claim under section 31. I agree that Scale 2 of the Tariff is appropriate.

(71)  The scale to be applied is one consideration flowing from the complexity of the issues. The other is the effect of the complexity on the overall determination of the claimant's costs. The respondent took the position that the main complexity in the case resulted from the claimant advancing claims that had no chance of success.

(i)  Market Value

(72)  The market value aspect of the case is relatively straightforward. This involved the taking of the whole of a commercial property. I find that this aspect involved average complexity.

(ii)  Special Economic Advantage

(73)  Both the board and the Court of Appeal found that there was no element of special economic advantage. The advantage claimed was not unique to this owner, the claim was pursued on behalf of shareholders rather than the corporate claimant, the subject matter of the claim was the same as the market value claim – that is, the lease - and the claimant's appraisal experts were consistent in advising that the market value appraisals represented the value of the lease. I find that the claim was problematic from the outset and had little chance of success. The main complexity appears to arise from the claimant's persistence in pursuing the claim and retaining an array of financial experts.

(iii)  Disturbance Damages

(74)  Neither the board nor the Court of Appeal found merit to the claimant's submission on disturbance damages. The claimant did not provide me with compelling arguments that this aspect of the case presented issues of great complexity.

7.1.2 Degree of Success

(i)  Calderbank Offer

(75)  The "Calderbank offer" refers to a without prejudice settlement offer that reserves the right to bring the offer to the attention of the court in a costs review. The respondent made the following offer on October 13, 1999:

… $2,250,000 as full and final settlement of all claims set out in the amended Form A, filed October 13, 1998, except for the claims for interest and costs.

… This offer is made on a Calderbank basis and the Respondent expressly reserves the right to bring this letter to the attention of the Board with respect to any claims for costs pursuant to section 45 of the Expropriation Act.

This offer is open for acceptance until 4:00 p.m. Monday, October 18, 1999, and is not intended as a basis for negotiation.

(76)  The claimant submitted that this offer is not admissible in the costs proceedings. The respondent submitted that the offer is acceptable as a factor in assessing the reasonableness of the claimant pursuing the claim.

(77)  In a recent decision of the board, Sangha and Can-Am Building Supply Ltd. v. City Of Surrey, October 6, 2004 , E.C.B. No. 42/97/252, the chair addressed Calderbank offers. The Sangha case bears some similarity to this case in that the compensation award exceeded 115% of the advance payment and, accordingly, the claimants were entitled to costs. In Sangha, the Calderbank offer was four times the amount awarded and the offer of settlement had been made three months prior to the hearing. The respondent had argued that the board should disallow costs incurred by the claimants after the offer.

(78)  The chair reviewed a number of B.C. Court of Appeal cases addressing Calderbank offers, including Brown v. Lowe (2002), 14 C.P.C. (5 th) 13, [2002] B.C.J. No. 76; Kussmann v. AT&T Capital Canada Inc. (2002), 25 C.P.C. (5 th) 246, [2002] B.C.J. No. 2030; and Sequoia Springs West Development Corp. v. British Columbia (Minister of Transportation and Highways) (2003), 78 L.C.R. 1.

(79)  The chair referred to the Court of Appeal decision on costs in Campbell River Woodworkers' & Builders' Supply (1966) Ltd. v. British Columbia (Minister of Transportation and Highways) (2004), 81 L.C.R. 275, and quoted from that judgment:

[10] The policy underlying s. 45 of the Act is reflected in s. 45(3), which provides:

45 (3)  Subject to subsections (4) to (6), a person whose interest in land is expropriated is entitled to be paid costs necessarily incurred by the person for the purpose of asserting his or her claim for compensation or damages.

[11] This provision expresses the legislative recognition that an owner in expropriation proceedings is not an ordinary litigant. An owner whose land has been taken involuntarily is entitled to indemnification for the necessary expenses of pursuing his or her statutory rights to compensation under the Act. As I will explain, the only limitation on the indemnification is that these expenses be reasonable.

(80)  Applying the reasoning in the Court of Appeal cases to proceedings before this board, the chair in the Sangha case determined that the since the advance payment procedures do not constitute a complete code, it is proper for the board to consider a Calderbank offer as one factor in an award of costs. Further, there are policy considerations which "militate against a wholesale disallowance of costs in expropriation compensation proceedings."

(81)  As noted above, in this case and in the Sangha case, the claimants achieved more than 115% of the advance payments. I agree with the chair's reasoning in the Sangha case that, regardless of whether section 45(4) or (5) applies, on a final cost review, I must be satisfied that the costs were necessary and reasonable in the circumstances.

(82)  Some of the factors the board has considered in determining the weight to be attached to a rejected Calderbank offer are: the timing of the offer vis a vis the commencement of the hearing; whether there was a reasonable basis for the claimant to expect to be more successful at hearing; whether there were justiciable issues for the board to determine.

(83)  In this case, the offer was made the day before the hearing started and was left open for three business days. The offer, exclusive of interest and costs, was to settle all claims for $2,250,000, which was $370,000 more than had been advanced. The board ordered compensation for the market value claim only, in the total amount of $2,100,000, which was $220,000 more than the advance payments, and $150,000 less than the Calderbank offer.

(84)  Obviously, if the claimant had decided to withdraw the impugned claims on the eve of the hearing, the claimant would have benefited from accepting the respondent's offer. I have found that the claimant had very little chance of success on either of those claims. However, the claimant had some expert advice that market value alone exceeded the amount of the offer. That, combined with the offer having been made on the eve of the hearing, leads me to conclude that little weight should be given to the Calderbank offer in the overall consideration of the section 45(10) factors.

(ii)  Market Value

(85)  As noted in the preceding section, the board awarded compensation for the market value which was $220,000 (11.7%) more than the advance payment. The claimant enjoyed a relatively high measure of success on this aspect of the claim.

(iii)  Disturbance Damages and Special Economic Advantage

(86)  As discussed above, the claimant did not enjoy any degree of success from the board or the Court of Appeal for these two claims. I have indicated my view that the claimant had very little chance of success on either of them. There was considerable case law against the claim for disturbance damages and the claim was not properly framed under the statute. It is apparent that the claimant and his advisor Mr. Huxham were not prepared to accept the expert advice that the value of the lease was reflected in the market valuations. Mr. Coates testified at this costs hearing that he was aware of Supreme Court of Canada decisions requiring that special economic advance be 'special to the owner' but because s. 31(2) had not been tested before the courts, he believed that the risk of legal fees was appropriate.

(87)  Despite the lack of success on these two issues, for the reasons that follow I decline to accede to the respondent's argument to disallow all costs associated with the impugned claims.

(88)  In Apland v. British Columbia (Ministry of Transportation and Highways) (1996), 60 L.C.R. 107 (BCECB), the board had found it was necessary and reasonable for the claimants to pursue their claim up to the time they were able to agree on the market value of their property, two weeks prior to hearing. Subsequent to that agreement, the claimants had pursued reimbursement of the $8,000 difference between the agreed market value of the expropriated property and the price they paid for the replacement property. The board observed that the claim was novel but "it must have been evident from any informed review of the language of the Act and the decided cases interpreting it that the argument was fraught with difficulty and highly unlikely to succeed." The board concluded that it was appropriate to deny part of the costs. The board allowed the actual reasonable, legal, appraisal and other costs up to one week prior to the hearing, and only 25% of their costs after that.

(89)  In their submissions on this cost hearing, counsel agreed that the Apland case was probably the case that most closely resembles the Campbell River Woodworkers' case.

(90)  In Smegal et al. v. City of Oshawa (1972), 3 L.C.R. 18 ( Ont. S.C.), the taxing officer declined the suggestion that the claimants be denied costs for services and expenses incurred in advancing a contention that was unsuccessful before the board. The taxing officer noted that to deny costs: "I would require that it be made quite clear to me that it should have been quite clear to the claimants and their advisors at or before the time the costs were incurred that the services giving rise to those costs would quite clearly be of little or no use in the proceedings."

(91)  I agree with the analyses in both Apland and Smegal and I agree that the facts and analysis in Apland most closely resembles this case.

(92)  In reviewing the accounts, it is clear that the claimant had professional advice from the initial stages of this expropriation. It is apparent that the claimant changed counsel a couple of times before settling on Mr. Coates as the legal representative. The claimant obtained a variety of opinions on the appraisal evidence. In my view, there came a time when the claimant had sufficient legal and appraisal advice to come to the conclusion that these two claims were, to use the board's phraseology in Aplands, "fraught with difficulty and highly unlikely to succeed."

7.1.3  Manner in which Case Prepared and Conducted

(93)  As stated in the preceding paragraph, in my view there came a time when the claimant had sufficient legal and appraisal advice to come to the conclusion that the claims were, "fraught with difficulty and highly unlikely to succeed." Nonetheless, the claimant decided to pursue the claims and continued to incur costly expenses.

(94)  In reviewing the accounts, I am concerned by the amount of duplication between counsel billings and the 'coordination' work by Mr. Huxham. It is apparent that Mr. Huxham was performing some of the functions that one normally expects of legal counsel. Mr. Huxham billed at $200 per hour throughout, although he indicated that he did not necessarily bill for all of his time. His billings approach $100,000. There is other duplication, such as the expert appraisal opinions and the number of experts retained to provide advice pertaining to the impugned claims.

(95)  The respondent called into question a number of the issues to which I just alluded, plus the hourly billings of Mr. Coates and Mr. Huxham. I address the individual invoices in the sections that follow.

(96)  The total costs claimed exceed $285,000. Overall, I find that the case was prepared and conducted in an extravagant manner, from the view point of whether the respondent should be required to bear the costs. To a large extent, this is reflected in my analysis and determinations of the individual invoices.

7.1.4  Conclusion

(97)  In my view, consideration of the three statutory factors discussed above should lead to a considerable reduction in the amount of costs claimed. I do not agree with the respondent's contention that there should be a 50% reduction across the board for these factors. I find that the appropriate reduction is 20% of the costs awarded.

8.  BILLS OF COST

(98)  I will now give consideration to specific items claimed to determine whether they were 'reasonable costs necessarily incurred' and after that review, I will apply the 20% reduction which reflects the section 45(10) considerations.

(99)  The board has consistently directed that Bills of Costs should adequately describe the work done, itemize correspondence, telephone calls, meetings, etc., set out the number of hours for the specific work, state the hourly rate(s), detail the costs incurred by experts or others and itemize and verify disbursements. The board has refused or reduced costs for law firms researching expropriation law, duplication or overlap of legal work, high hourly rates for articled students, changes of legal counsel without adequate explanation of why it was required, and excessive amount of counsel time than necessary for the proceeding. See, for example, Nygard v. Surrey (District) (No. 2), (1989) 42 LCR 279; 363146 B.C. Ltd (above).

(100)  When disbursements are disputed, the onus is on the claimant to demonstrate that they are reasonable. See Holzapfel v. Matheusik (1987), 14 B.C.L.R. (2d) 135 ( C.A.); Ingham v Creston (Town) (2001), 73 L.C.R.129 (B.C.E.C.B.). The proper test for a disbursement is whether it was necessary and proper at the time it was incurred: Van Deale v. Van Deale (1983), 56 B.C.L.R. 178 ( C.A.)

(101)  Generally, the claimant did not offer explanations for many receipts, indicating instead that the "receipts speak for themselves." In fairness to the claimant I have endeavoured to construe the disbursements in the most favourable light. To the limited extent possible, I have compared the costs claimed in this hearing with awards in other final cost reviews to assist me in assessing whether the costs claimed appear to be reasonable. However, as discussed later in more detail, in the absence of adequate explanation, I have had to conclude that many of the claimed disbursements were either not "necessarily incurred … for the purpose of asserting the claim" [s. 45(3)] or that the total amount claimed as costs is unreasonable and subject to reduction.

8.1  Legal Costs

8.1.1  Legal Costs — Pre-Tariff

(102)  In the list of invoices in the amended Bill of Costs #1, there are invoices from three law firms and uncontested invoices for the Thibault appraisal report and for some of Mr. McDougall's expenses. In one of the legal firm disbursements, there is an invoice from Symes Valuation Services ("Symes") in April 1998, for $567.03, which I have moved to the section dealing with Business Valuers and Other Financial Accounts. Removing the Thibault, McDougall and Symes invoices, the legal costs total $56,521.06, of which $11,698.33 had already been paid and was uncontested.

(i)  McVea, Shook, Wickham & Bishop ("McVea") and Cosburn & Associates ("Cosburn")

(103)  The respondent did not take issue with the Cosburn accounts but proposed that the McVea accounts should be reduced by 50%.

(104)  McVea was the first law firm the claimant retained on the expropriation issue, in February 1996; the invoices are dated April 10, 1996 and May 27, 1997 and total $4,152.14, of which $3,212.50 was fees. The respondent objected to paying the full amount of the McVea invoices on the grounds that no hourly rates were quoted, there were substantial charges for researching the law on expropriation, the invoices lacked particulars, and there was an unexplained disbursement for "Assoc Economic Cons."

(105)  According to Mr. McDougall's testimony, McVea referred him to Cosburn in Victoria, in November 1996, because of their expertise in expropriation matters. The Cosburn accounts dated November 12, 1996, January 3, 1997 and July 24, 1997 total $16,276.35 (after GST removed from the latter account). The respondent accepted these accounts. I cannot precisely identify the fee portion because I was not provided with one of the invoices, however, it appears that the fees were approximately $14,500, which would be approximately 72.5 hours of billable time.

(106)  Although not stated in evidence, it appears to me that the May 27, 1997 invoice from McVea is for providing a second opinion on advice received from Cosburn or, at least, for providing advice at the same time as Cosburn. From March 21, 1997 until April 22, 1997, someone in the McVea office researched expropriation law and cases, reviewed a letter from Cosburn on April 17, 1997, and provided a memorandum to Mr. McVea. The billing for those fees was $990. At the same, Mr. McVea was reviewing correspondence and memoranda, meeting with the client, talking with the accountant, etc. Mr. McVea's fees billing from February 17 to April 28, 1997 was $1,522.50.

(107)  The Cosburn invoice for this same period, invoiced July 24, 1997, shows that Cosburn was also working for the client, speaking with Mr. McDougall and Mr. Huxham, reviewing documents, gathering background materials, and providing advice. From the testimony I heard, it is clear that Mr. McDougall was being assisted by Mr. Huxham, that they did not agree with the advice given by Mr. Cosburn, and that Mr. Huxham then introduced him to Mr. Coates who was retained on July 3, 1997.

(108)  I find the respondent's submissions on the McVea accounts to be compelling. Those accounts do lack particulars, do not specify hourly rates, and charge for researching the law. There appears to be duplication with legal services provided by Cosburn. I agree that some of the McVea costs are not recoverable, and I find 50% reduction to be reasonable.

(109)  Before applying the adjustment for the section 45(10) factors, I award recovery of the McVea accounts in the total amount of $2,076 and the total amount of the Cosburn accounts, $16,276.35.

(ii)  John Coates

(110)  The claimant submitted six accounts for Mr. Coates from August 31, 1997 to June 29, 1999, for 122.2 hours. His total billing, including disbursements, is $36,659.60; the fees billing is $30,500, at $250 per hour throughout.

(111)  The respondent objected to the full amount of the Coates accounts for a variety of reasons including that the claim was conducted in an extravagant and excessive manner, as reflected in the fees and disbursements billings, and reiterated the concerns about excessive meetings and duplication of work. The respondent submitted that the Coates fees should be limited to 50% recovery and that the disbursements should be reduced from $3,971.10 to $3,000.

(112)  One of the respondent's objections is that Coates' hourly rate is excessive, noting that Cosburn, an equally experienced expropriation lawyer, billed at $200. Clearly, Mr. Coates is one of the most experienced lawyers practicing in the field of expropriation. However, a review of the board's decisions indicates that the usual hourly rate allowed by the board for someone of Mr. Coates' expertise, during this time period, is $200 per hour. The claimant did not present compelling reason for me to allow more than the board has in other decisions. Accordingly, I find that $200 per hour is a reasonable recovery for Mr. Coates' legal services to the claimant.

(113)  The total award for legal fees and disbursements will be reduced as a result of the consideration of the section 45(10) factors. However, there is still a question raised by the respondent whether the legal bills were reasonable and necessarily incurred. The combined legal bills for Cosburn and Coates total 195 hours of billable time, up to the introduction of the Tariff, June 28, 1999.

(114)  As Vice Chair St. Clair observed in Ferancik v. Corporation of the Township of Langley, (1996), 60 L.C.R. 144, although each case must be decided on its own facts and merits, it is often of assistance to the reviewer to consider past decisions. She reviewed a number of board decisions relating to the number of hours of counsel time permitted, according to factors such as the number of years from expropriation to hearing and the length of the hearing.

(115)  I have considered her review and other cases generally, and am of the view that the total number of counsel hours claimed is not so excessive as to offend the statutory requirements of being reasonable and necessarily incurred. In saying this, I bear in mind that the reduction for the section 45(10) factors captures the element of how the case was prepared and conducted.

(116)  As noted, I have removed the Symes' invoice from the legal disbursements. The other disbursements in the Coates' accounts are for long distance, postal, courier, facsimile and photocopying charges, and travel expenses. The respondent submitted that costs should not be allowed for Mr. Coates' travel from Mayne Island to conduct meetings. I have reviewed the accounts and am of the view that the travel is not out of the ordinary for cases involving claimants, witnesses, experts and counsel who do not live in the same city. From my review of Mr. Coates' accounts, it is apparent that he charged travel at a reduced rate, or reduced time.

(117)  Before applying the adjustment for the section 45(10) factors, I award recovery of the pre-Tariff Coates' accounts in the total amount of $24,440 for fees, $1,710.80 P.S.T., and $7,776.18 for disbursements. With the McVea and Cosburn accounts, this results in recovery of pre-Tariff legal accounts in the total amount of $52,279.33.

8.1.2  Legal Costs – Tariff (Bill of Cost #2)

(i)  The Claim

(118)  The claimant has presented this Bill of Costs at Scale 2, $140 per unit, "for matters of ordinary difficulty or importance", which I accept to be the appropriate scale for this case.

(119)  In total, the claim is 198 units, $27,720, plus PST of $2,079, for a total of $29,799. The claimant calculated the PST at 7.5%.

(120)  At the hearing the respondent submitted recovery should be 147 units, for a total $20,580; this appears to be a slight mathematical error as, in fact, the respondent's submission totals 146 units, for a total of $20,440, plus PST, which the respondent calculated at 7%.

(ii)  Respondent's Submission

(121)  Regarding Item 4, the respondent submitted that all the experts were retained prior to the Tariff and the legal costs relating to their retainer is covered in the pre-Tariff costs.

(122)  Regarding Items 6 and 7, the respondent submitted that on August 11, 1999 the claimant provided a Supplementary List of 27 Part 1 documents. The other Lists of Documents are covered in the pre-Tariff costs.

(123)  Regarding Item 20 the respondent's position was that the board did not direct written submissions.

(124)  Regarding the Item 18 claim for December 21, 1999, the respondent submitted that it was already covered in the general Item 18 claim.

(iii)  Analysis and Conclusions

(125)  Item 4 specifically relates to instructing experts and, as the respondent says, that was done prior to June 28, 1999, and has been accounted for in the pre-Tariff Bill of Costs. I find that no units are allowable under this Item.

(126)  Concerning Items 6 and 7, I have reviewed the documents of both parties entered as Exhibits 1, 2 and 4 in the compensation hearing. Exhibit 1 contains correspondence between counsel relating to Demands for Documents and provision of Lists of Documents. In my view, the evidence indicates that document discovery did not take more than an average amount of time. The respondent has suggested that it took minimal time. Given the number of documents and the correspondence concerning document discovery, I find that both Items 6 and 7 should be allowed at the mid-point of 5 units each.

(127)  Concerning the Item 18 claim for December 21, 1999, the claimant did not argue that December 21 should be seen as a separate hearing, although that is the import of claiming Item 18 twice. I agree with the respondent that this has already been accounted for in the general Item 18 award. (I note there is evidence that the correct date of the oral submissions was December 20, 1999. This discrepancy does not affect the decision.)

(128)  Concerning Item 20, the parties were unable to say whether the board had ordered written submissions and noted that the transcript was inconclusive on this. The board's registrar has researched the file and materials and cannot answer the question. Based on past practice, I find it is more likely than not that the board did not order written submissions. It is common practice for counsel to provide written submissions, but rare that the board would order them.

(129)  In the result, before applying the adjustment for the section 45(10) factors, I allow $21,420 based on 153 units at $140 per unit. I find that the appropriate award for PST is the amount that was payable at the time the costs were incurred, which was 7%. Accordingly, I award PST of $1,499.40, for a total of $22,919.40.

8.1.3  Legal Account Disbursements, Post-Tariff (Bill of Costs #2)

(130)  In addition to invoices from John Coates, there was one invoice from McVea, Shook, Wickham & Bishop, and accounts from financial advisors and other experts including, Columbia Pacific Consulting, Huxham & Co., Low Rosen Taylor Soriano and Check Realty. I have included the Symes' invoice with the financial accounts and I have included Mr. McDougall's invoice of $887.95 in 'other.'

(i)  Law Firm Accounts

(131)  Concerning the Coates' accounts, the respondent submitted there were large travel and accommodation disbursements and that the accounts should be reduced to reflect the time spent on the two 'doomed' issues. The respondent submitted that an appropriate recovery would be $8,000 of the $10,792.61 claimed.

(132)  As with the earlier disbursements, I find the travel charged by Coates is not out of the ordinary for cases involving claimants, witnesses, experts and counsel who do not live in the same city.

(133)  Included in the disbursements is an account from McVea, Shook, Wickham & Bishop, dated December 7, 1999, for $447.81. I was not provided with any evidence of why this is considered to have been necessarily incurred for the claim. It appears that the law firm was providing additional legal advice. In the absence of other evidence, I find that it is not a cost necessarily incurred for the purpose of asserting the claim and I disallow recovery.

(134)  Before applying the adjustment for the section 45(10) factors, I find that the law firm disbursement accounts are recoverable in the total amount of $10,344.80.

(ii)  Accountant's Accounts

(135)  There are accounts from Mr. Huxham in both Bills of Costs #1 and #2, pre- and post-Tariff. Since the issues around his accounts are common to both, for convenience I am including them here. My award spans the total of his accounts.

(136)  In the Bill of Costs #1, Mr. Huxham's invoices total approximately $54,190, as follows, with GST removed:

• first invoice, $19,685, dated February 11, 1997, covers October 24, 1995 to January 9, 1997;
• second invoice, $11,200, May 20, 1997, covers January 20, 1997 to May 1, 1997;
• third invoice, $6,750, December 29, 1997, covers June 18, 1997 to October 21, 1997, during which time Mr. Coates was retained;
• fourth invoice, $6,000, June 2, 1998, covers March 27, 1997 to April 17, 1998, contains some time overlap with the third invoice;
• fifth invoice, $8,500, December 30, 1998, covers April 30, 1998 to October 16, 1998; in this accounting billing time is attached to each entry;
• sixth invoice, $1,925, April 6, 1999, covers December 1, 1998 to February 11, 1999;

(137)  In the Bill of Costs #2, Mr. Huxham's invoices total approximately $43,250, as follows:

• July 27, 1999 , $2,850, for hearing preparation, meetings and developing strategy;
• November 23, 1999, $31,925, covers July 15 to November 30, 1999, meetings, travel, report writing, and hearing attendance [this account shows that it was paid on November 28, 1999];
• March 3, 2000 , $7,480.62, covers October 26, 1999 to January 2, 2000, most of which was for assisting counsel prepare for final submissions;
• July 4, 2001 , $200, accounting advice to counsel; and
• May 17, 2002 , $800, accounting advice to counsel.

(138)  The respondent submitted that I should not award recovery for any of the Huxham accounts, on the grounds that his services as an advisor or claim coordinator were redundant and his evidence as an accountant related to the two issues which were doomed to fail. I have considered his accounts from the standpoint of his advisory position, which I have termed for convenience "consulting", and from the standpoint of his position as an expert accountant.

(a)  Consulting Fees

(139)  In 343146 B.C. Ltd. (Inc. No 343146) et al. v. Minister of Transportation and Highways (1993), 50 L.C.R. 221 (B.C.E.C.B.), one of the witnesses described his role as consulting and appraisal. As a consultant he described his role as coordinating and guiding, doing whatever was necessary to conclude and resolve the impact of the expropriation. He billed his consulting and appraisal work at the same rate. The respondent argued that the consulting work was unnecessary and redundant and should reasonably have been provided by the various experts or by claimants' counsel.

(140)  The board noted in 343146 that throughout the time the consultant was acting, the claimants had the benefit of experienced counsel, plus numerous experts including accountants, architects and engineers. The board posed the questions whether the consultant's coordination and guidance were necessary and whether such services were redundant to services provided by others. The board observed, at page 233:

As Mr. Coates asserted his own expertise in the area, I would have thought it incumbent upon him to be very specific in outlining his need for Mr. Pavlakovic's services and the specifics of such services.

(141)  The board noted in 343146 that numerous entries in the consultant's invoices were for attending meetings with the experts and his testimony was that he might augment the expert reports if they were not fully addressing certain elements relating to the taking. The board found that was counsel's role and not justifiable as consulting fees. The board concluded that the services of the consultant were not necessary or warranted, were redundant to the services of counsel or the many other experts, and disallowed the claim for consulting fees.

(142)  In this costs hearing, Mr. Coates stated that Mr. Huxham was mainly concerned with what the claimant had to do to receive proper compensation. The accountant obtained actuarial and other advice that indicated to him that the market value was not appropriate compensation. Mr. Coates stated that, generally, it is essential for counsel for retain and rely on accountants.

(143)  I agree with the board's reasoning in the 343146 case. I also find parallels between the consultant's role in that case and in this one. I find that most of the costs associated with Mr. Huxham's consulting role were redundant to services provided by counsel and other experts, were not necessary to the conduct the proceedings and are not costs that should borne by the respondent.

(b)  Accounting Fees

(144)  The respondent took issue with the claim for costs for accountant services, at $200 per hour, noting that the accountant's advice was for the impugned claims. The respondent also submitted that the accountant gave erroneous advice to the claimant to pay capital gains tax on the advance payment.

(145)  Although Mr. Coates testified that it is usual for counsel to rely on accountants I was not referred to any cases in which the board awarded costs for that service. There have been instances of the board awarding expert fees for specific aspects of a case, other than appraisal or legal fees, but not generally for assistance throughout a case, either as a consultant or an accountant.

(146)  Mr. Huxham's professional advice was primarily directed to the disturbance damages claim but he also provided professional advice on the special economic advantage claim. Concerning the latter claim, it is my view of the accounts that there is overlap and duplication amongst Huxham and the other experts; in some instances he was offering second opinions or analyses. Mr. Huxham provided a report, testified at the hearing, assisted counsel to prepare for final submissions and provided some accounting advice in 2001 and 2002.

(147)  It is not possible to separate precisely the billings for the two aspects of Mr. Huxham's assistance. I find that some costs for the professional accounting services were reasonable and necessary, even though the claims were unsuccessful. I am also of the view that a portion of the consulting fees were reasonable and necessary, although I consider it should be a minimal amount given that counsel was retained throughout. I find that the charge of $200 per hour is excessive when compared to rates the board has awarded for other professionals during this same time frame.

(148)  Allowing some recovery for the consulting advice and some recovery for costs associated with providing the expert report and testifying at the hearing, before applying the adjustment for the section 45(10) factors, I allow the claim for Mr. Huxham's accounts in the total amount of $25,000.

(iii)  Business Valuers and Other Financial Accounts

(a)  Low Rosen Taylor Soriano, Business Valuation & Litigation Support Services

(149)  Mr. Coates testified that he had retained this firm for some cases in Ontario. He retained them in this case to estimate what revenue was needed to make the claimant whole.

(150)  Robert Low produced a report and testified at the hearing. His accounts under consideration here are:

(151)  The August invoice does not provide any detail, just "for professional services rendered." The billing is for R. Low, fees, 4 hours at $300 per hour; F. Nazzani, 35.57 hours at $150 per hour; plus disbursements of $99.51.

(152)  The November invoice provides additional detail: "For professional services rendered for the period ended October 31, 1999, including various discussions with John Coates, final reports sent as requested, review of MacLeod rates of rate, review of Grover and Columbia reports, review of files, preparation for trial, attendance in Campbell River on October 13, 14, and 15, 1999 for hearing." The billing is for R. Low, fees, 36 hours at $300 per hour; F. Nazzani, 3.25 hours at $160 per hour; plus disbursements of $3,871.87.

(153)  In the February 12, 2001 decision, the board noted that Low provided an estimate of rental income from the lease based on two projections for gross sales over the remainder of the lease and that Mendel, at counsel's request, used Low's projections in his DCF analysis. The results were estimates of value of $2,600,000 and $2,700,000 which Mendel included in the Addendum to his report although he did not characterize them as market value. Mendel's estimate of market value was $2,500,000. From my review of the decision and the evidence, the import of Low's work was directed to special economic advantage.

(154)  The respondent took issue with the use of an out of province expert and objected to Low's hourly rate. As with its general dispute of the cost accounts, the respondent submitted that there should be no recovery for charges related to special economic advantage. The respondent acknowledged that approximately 50% of Low's invoices would be appropriate recovery.

(155)  The claimant did not provide evidence of usual hourly rates to support the rates charged, did not provide particulars of the work completed, and did not present additional justification for use of out of town expertise, over and above Mr. Coates' testimony that he had used this firm in some cases in Ontario. It appears to me that there is an element of duplication of work between Mr. Low's services and those of other experts, as indicated in the narrative of his invoice.

(156)  I find that the $300 hourly rate is excessive compared to rates the board has awarded for other experts. I also find that it is appropriate to reduce these accounts to reflect some duplication of services and above average costs for travel.

(157)  Before applying the adjustment for the section 45(10) factors, I award recovery of the Low Rosen Taylor Soriano accounts in the total amount of $13,000.

(b)  Columbia Pacific Consulting

(158)  Doug Hildebrand and two other employees of Columbia Pacific Consulting, provided services related to the claim for special economic advantage. Mr. Coates testified that this company had been recommended to him by a financial advisor and he retained them to advise on available securities and how to interpret them. Mr. Hildebrand produced a report and testified at the hearing in October 1999.

(159)  There are 11 accounts from this company from October 31, 1998 to January 3, 2003, in the total amount of $29,986.37. There are no particulars accompanying the invoices, which are headed "Professional fees and expenses incurred" and then the time frame, but not the specific dates or hours per day. The report is dated July 30, 1999. Other than the report and the fact that Mr. Hildebrand attended the hearing, I am left to surmise the purpose of the other billings.

(160)  The respondent submitted that the services were largely arithmetic using data and discount rates provided by other witnesses and counsel, and were directed to one of the impugned claims. Accordingly, the respondent submitted that none of the accounts should be reimbursed.

(161)  The claimant did not provide me with any case precedents relating to cost recovery for similar companies or witnesses. I reviewed some of the board's cases to find support for the claimant's position but was not successful. It appears this is the only case in which costs associated with Mr. Hildebrand have been claimed.

(162)  In my view, the respondent has correctly characterized Mr. Hildebrand's evidence as largely arithmetic. It appears that the same calculations could have been produced by the appraisers. In the absence of compelling submissions from the claimant, I find that the Columbia Pacific Consulting accounts are not costs necessarily incurred for the purpose of asserting the claim and I disallow them in their entirety.

(c)  Symes Valuation Services ("Symes")

(163)  An invoice from Symes dated April 1998, for $567.03, is contained in the Coates' disbursement accounts. The respondent took issue with this as being an unexplained disbursement, which the respondent presumed was for further business valuation advice.

(164)  I have reviewed Mr. Coates' accounts for an explanation of the Symes account and find references on July 25, July 30, August 5, August 13 and October 28, 1997. The entries indicate telephone conversations, letters to Mr. Symes and a letter from Mr. Symes on August 5, 1997. The claimant did not provide an explanation of why this disbursement was incurred and in the absence of some justification as to its relevance and necessity to the proceedings, I find it is not a cost necessarily incurred for the purpose of asserting the claim and I disallow recovery.

(d)  Leong & Associates, Actuaries and Consultants

(165)  Mr. Huxham testified that the invoice from this company dated May 28, 1997, for $1,016.50, was for actuarial advice on the worth of the income stream from the lease.

(166)  For reasons similar to those outlined in the preceding sections, I find that this is not a cost necessarily incurred for the purpose of asserting the claim and I disallow recovery.

(e)  Arthur Anderson & Co., Chartered Accountants

(167)  In reference to the invoice for $9,000 dated May 14, 1998 from this company, Mr. Huxham testified that the claimant was concerned that the appraisal reports were showing superficial assumptions about the Campbell River market in the future and retained this firm to conduct extensive market research and give an opinion on what could be expected. Additionally, the claimant retained Arthur Anderson & Co. and other experts in an attempt to estimate what the lessee's future sales would have been for the purposes of valuing the escalation clause in the lease.

(168)  For reasons similar to those outlined in the preceding sections, I find that this is not a cost necessarily incurred for the purpose of asserting the claim and I disallow recovery.

(iv)  Other Disbursements

(169)  Mr. McDougall testified that he hired Century 21 [Check Realty Ltd.] to search for investment property with a lease similar to the Beaver Lumber lease. There is an invoice for $1,391 (inclusive of GST), dated February 9, 1998. I find this was more in the nature of a personal expenditure and was not a cost necessarily incurred for the purpose of asserting the claim and I disallow recovery.

(170)  There is another account from the same realtor, now called RE/MAX Check Realty, dated November 2, 1999, for fees of $350.00. This account is detailed as meeting with John Coates, reviewing material and attending the hearing for an hour. In the absence of specific submissions from the claimant, I find this was not a cost necessarily incurred for the purpose of asserting the claim and I disallow recovery.

(171)  I noted earlier that there was an account for expenses for Mr. McDougall in with the Legal Expenses account, Bill of Costs #1. This had been paid by the respondent and I include it in the global award, in the amount of $887.95.

8.2  Appraisal Costs

8.2.1  Pre-Tariff Appraisal Accounts (Bill of Costs #1)

(172)  The pre-Tariff claim for appraisal expenses comprises three invoices from Grover, Elliot & Co. Ltd. ("Mendel") and one from Nilsen Realty Research Ltd. However, I note that there is also an invoice from Thibault & Co. for the claimant's ini tial appraisal report included in the legal expenses. In the "other expenses" there are appraisal accounts from Richard Ellis ( Canada) Inc. ("Ellis"), dated March 12, 1997, which I understand was for providing an opinion on the Thibault appraisal report, and from Cunningham & Rivard ("Cunningham"), dated September 1998. I have included both of those under this heading.

(173)  The Mendel invoices of June 30 and November 5, 1998 included billings for providing an appraisal report and an amendment report which included a business valuation which provided the basis for the market value claim at the hearing.

(174)  The claim for the appraisal costs is $14,540.55, plus the Thibault account of $7,637.36, and $875 for Ellis and $225 for Cunningham, for a total of $23,277.91. The respondent had already paid for the Thibault account and accepted two of the Mendel accounts. The respondent noted that the earliest Mendel invoice and the Nilsen invoice were for review of the Thibault appraisal report and objected to both being claimed. The respondent also objected to paying for the Ellis and Cunningham accounts.

(175)  In the decision on 415528 B.C. Ltd v. Greater Vancouver Sewerage and Drainage District (2001), 75 L.C.R. 217 (B.C.E.C.B.), the board's vice chair considered a claim for two separate Tariff accounts for appraisal costs. She reviewed the board's pre-Tariff practice in dealing with multiple accounts:

[17] I have also been provided with two separate Tariff accounts for appraisal costs by two different appraisers. Prior to the Tariff being introduced, this board has sometimes allowed as reasonable costs more than one appraisal account billed to the claimant where the claimant has established that at the time that each expert was retained it was a necessary and reasonable expense. When more than one appraisal account has been allowed, there has sometimes been a reduction of one or all of the accounts. See for example Bill's Frontier Restaurant Ltd v. British Columbia (Minister of Transportation and Highways) (1996), 58 L.C.R. 204. The board has also sometimes refused the costs of more than one report where the claimant obtained successive and duplicative appraisals. See Hampton Investments Ltd. v. British Columbia (Minister of Transportation and Highways) (1998), 64 L.C.R. 284 (B.C.E.C.B.). In the present case while the claimant tried to emphasize that Royal Lepage's report included extra analysis with respect to disturbance damages, at the heart of both appraisals was a determination of the reduction in market value of the remainder using the subdivision development approach. I have not been persuaded at this stage that retaining the two appraisers was necessary to the claimant to assert its claim.

(176)  The claimant did not specifically address the respondent's objection to claiming costs for multiple opinions on the Thibault appraisal. The Ellis account clearly indicates it was for reviewing the Thibault and Coell reports in 1997 and it was submitted for payment to Huxham & Co. The Mendel account for the opinion on the Thibault report is dated January 26, 1998; the Nilsen account is dated February 10, 1998. In the absence of specific submissions on why three opinions were necessary and reasonable, I find that only one should be allowed. Since the primary appraiser was Mendel, I allow that account of $3,075.00. As I have no evidence on the purpose of the Cunningham account, I disallow recovery of that account.

(177)  Before applying the adjustment for the section 45(10) factors, I allow pre-Tariff appraisal expenses, in the total amount of $19,667.91, including the Thibault account, for fees and disbursements.

8.2.2  Post-Tariff Appraisal Accounts (Bill of Costs #3)

(178)  The claimant has presented this Bill of Costs at Scale 2, $100 per unit. I accept Scale 2, "for matters of ordinary difficulty or importance", to be the appropriate scale for this case.

(179)  The claim, for Items 1, 3, 4, 5, 6, 7, and 8, totals 214 units at $100 per unit, $21,400, plus disbursements of $2,115.58. The respondent objected to any allowance under Items 1, 3, 4, and 5 on the grounds that these have already been claimed in the pre-Tariff claim. I agree. The Mendel appraisal report was completed in November 1998 and invoiced at that time and I do not find any additional instruction, inspection and research, or analysis and report preparation that would justify additional claims.

(180)  The respondent submitted that the claims under Items 6 and 7 should be limited to 4 days of "necessary attendance of appraiser" at the hearing instead of the 10 days claimed. I note that the hearing concluded in 8 days so the claim was slightly erroneous. I do not agree with the respondent that the claim for the appraiser's attendance throughout is not reasonable. It is reasonable for the claimant and legal counsel to seek expert advice throughout the hearing even when the evidence is not directly appraisal evidence. Lay evidence has an impact on appraisal issues. Expert advice is not usually required during the course of final submissions. I find that the claim for 7 days of hearing is reasonable, resulting in 35 units and 70 units, respectively.

(181)  Unit 8 was not contested and I find that 2 days of travel for the appraiser to attend the hearing is reasonable.

(182)  In the result, before applying the adjustment for the section 45(10) factors, I allow a total of $10,900 based on 109 units at $100 per unit, plus $2,225.58 for the uncontested disbursements.

9.  Summary of Cost Award

(183)  I have determined the claimant's costs, with GST removed, as follows:

(184)  From these costs, I apply the reduction for the section 45(10) factors, at 20%, to ar rive at a final costs award of $125,771.98. I have not accounted for any costs that the respondent paid in advance and leave those calculations to the parties.

EXPROPRIATION COMPENSATION BOARD

______________________________________

M. Gwendolynne Taylor, Presiding Member

on behalf of and with the approval

of the Chair