October 6, 2004, E.C.B. No. 42/97/252

 
REASONS FOR DECISION

1.  INTRODUCTION

[1]  The claimants have applied to the board for a review of some of their bills of costs and a final award with respect to those costs pursuant to 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"). The costs claimed total over $62,000. The claimants incurred those costs to pursue a claim for business loss against the respondent through to a compensation hearing before the board. Although the claim was for between $52,000 and $104,000, the board awarded the claimants only nominal damages of $5,000. At this final cost review the respondent has sought to have most of the costs disallowed on the basis that they were unnecessarily and unreasonably incurred following the claimants' rejection of a so-called "Calderbank offer" by the respondent to settle the business loss claim for $20,000. The respondent has also argued that the cost claims are simply excessive in all of the circumstances and has raised other objections to specific items.

[2]  This cost review has proceeded under section 45(9) of the Act which provides that, if the board determines the amount of compensation or damages to which a person is entitled, the amount of costs must be determined by the chair. I conducted the review in Victoria on February 18, 2004. It occupied a full hearing day during which both sides presented affidavit and documentary evidence. Oral testimony was given by the claimant Sam Sangha, the claimants' business valuation expert, Toby McL. Symes, and claimants' counsel, John A. Coates, Q.C. The parties made reference to several case authorities in support of their final submissions.

2.  BACKGROUND

[3]  The claimants together own and operate a lumber and building supply business at 11016 Bridge Road in the City of Surrey. The claimant, Sam Sangha, is the owner of the subject property and the claimant, Can-Am Building Supply Ltd. ("Can-Am"), operates the business. Mr. Sangha is the sole shareholder and operating mind of the claimant company.

[4]  In 1996 the respondent embarked on a plan to widen Bridge Road as part of a larger project creating a new highway called the South Fraser Way adjacent to the former end of Bridge Road. A portion of the subject property was required for road widening purposes. In late October 1996 the respondent served an expropriation notice and, in late December 1996, made an advance payment of $83,956. Although the claimants in October 1997 filed with the board an application for determination of compensation (the "Form A") claiming in total the sum of $200,000, they eventually accepted the advance payment in satisfaction of every claim except one for business loss plus interest and costs. In late April 1997 the parties entered into a section 3 agreement under which it was agreed that any reasonable disturbance damages including business loss suffered by Can-Am were deemed to be suffered by the owner of the subject property, Mr. Sangha.

[5]  In or about June 1997 the respondent began road construction in the vicinity of the subject property. The construction continued intermittently until early April 1999. The essence of the claimants' unresolved claim was that the construction, which included the deposit of preloads of sand on the new section of the road, interfered with Can-Am's business and caused the claimants to suffer a business loss. The claim was not, however, actively advanced until several years after construction ceased.

[6]  In May, 2002, the claimants retained Toby Symes, a chartered accountant and business valuator operating Symes Valuation Services Ltd., to estimate the business loss. He reviewed the claimant company's books and compared actual sales during the periods that he assumed were affected by the construction activity with sales during the same periods in prior years. On the assumption that there were no other factors which could have caused the observed decline in sales during the affected period, he estimated the business loss resulting from the respondent's project to be in the range of between $52,000 and $104,000. The quantum of the estimated loss varied depending on the length of time during which the project could be said to have affected the business. Claimants' counsel, Mr. Coates, provided a copy of Mr. Symes' report dated June 21, 2002 to respondent's legal counsel, Anthony Capuccinello, shortly thereafter. Mr. Coates in his accompanying letter made a "without prejudice" proposal that the parties settle the business loss claim for the mid-point figure of $77,500. The proposal was not favourably received.

[7]  Over the summer of 2002 the respondent retained Richard F. Crosson, a chartered accountant and business valuator with Blair Crosson Voyer. Mr. Crosson reviewed the Symes report, analyzed the claimant company's financial statements, monthly sales summaries and, to a limited degree, its sales invoices, and provided preliminary comments on the Symes analysis. He segmented Can-Am's sales data into two categories – cash sales and credit sales. He estimated that credit sales accounted for between 75% and 86% of Can-Am's annual sales for the period 1994 through 2001. He expected that the most significant impact from the roadwork would be to cash sales. However, the sales data during the period of construction did not bear out this expectation. In his preliminary report dated November 19, 2002, Mr. Crosson wrote:

"Our preliminary conclusion, which is based on the limited scope of our work to date and certain factual assumptions, is that the expropriation and roadwork had little or no adverse impact on Can Am's cash sales…. Our analysis of credit sales does not indicate any sales reduction in the months in which we would have expected declines to be most evident.

In the absence of an adverse sales affection, our preliminary view is that Can Am's consequential financial loss, if any, is nominal."

[8]  On November 19, 2002, Mr. Capuccinello wrote to Mr. Coates making a "without prejudice" offer to settle the business loss claim for $20,000 plus costs. The offer was open for acceptance until noon on November 25, 2002. Although the offer was said to be without prejudice, the respondent expressly reserved the right to bring the offer to the attention of the board at a section 45 cost hearing. There is no reference in the letter to Mr. Crosson's preliminary report having been enclosed but the evidence at the cost hearing clearly indicates that the claimants and their advisors received and reviewed it at that time. Mr. Symes testified at the cost hearing that he recommended against acceptance. The offer was not accepted.

[9]  Thereafter the parties continued their preparation for a compensation hearing on the business loss claim. Examinations for discovery were conducted and document discovery completed. Mr. Coates prepared a detailed chronology of the roadwork in the vicinity of the subject property based on daily report logs and daily or weekly inspection reports. He also prepared a detailed agreed statement of facts which, however, respondent's counsel ultimately declined to accept. At the beginning of January 2003, Mr. Crosson completed his final report on business loss and it was delivered to the claimants and their professional advisors. The report now purported to show that the decline in Can-Am's sales, where it occurred, coincided with a significant decline in building activity within the region. It concluded that the decline in building activity was a more likely cause of the decline in sales than the respondent's road widening project. Ultimately, the claimants' response to Mr. Crosson's opinion was to engage a qualified mathematician, Dr. Edward Mansfield of Grant Thornton LLP, to provide rebuttal evidence in the form of regression analyses of the correlation between Can-Am sales and regional building permit statistics.

[10]  The compensation hearing was originally scheduled to begin on January 13, 2003 but, as a result of Mr. Coates' serious ill health, was adjourned until February 17, 2003 in Surrey. The witnesses who testified at this time were Mr. Sangha and Mr. Symes for the claimants and Brian Snow, a civil engineer with Web Engineering Ltd. who acted as the construction project manager, and Mr. Crosson for the respondent. After four days or partial days of hearing, the matter was again adjourned for a final day of evidence on June 9, 2003 in Victoria. It was then that the claimants introduced Dr. Mansfield's rebuttal evidence. At the request of the board, final written submissions followed in July 2003.

[11]  The board released its compensation decision dealing with the business loss claim on November 25, 2003. The decision is reported as Sangha v. Surrey (City) (2003), 81 L.C.R. 93. The board accepted Mr. Sangha's evidence that the respondent's project in the vicinity of the subject lands had caused some inconvenience. There was also no dispute that Can-Am's sales had declined during certain periods between June 1997 and April 1999 when construction was underway. The main issue for the board to decide was whether the decline in sales experienced by the claimants was due in whole or in part to the project or whether it was due to some other explanation such as a general drop in building activity. The board found Mr. Crosson's overall analysis to be more cogent than that undertaken by Mr. Symes. It accorded little weight to Dr. Mansfield's rebuttal opinion. The board concluded at p. 119:

After reviewing all the evidence we have concluded that during the relevant time frame there was a significant decline in construction of single family residences throughout greater Vancouver that was sufficient to account for most, if not all, of the decline in Can-Am's sales and alleged business loss. We have rejected the claimants' contention that the only reason for lost sales was the project. Nonetheless we have accepted that some potential customers were deterred by the preload of sand and Can-Am is entitled to nominal damages for the loss of these prospective customers. The claimants were not able to point to any particular customer that was lost. The fact that cash sales during this period were increasing undermines the general deterrent effect of the project. In all the circumstances and doing the best we can to attribute decline in total sales between the project and the decline in construction of single family residences, we conclude the nominal damages for business loss as a result of the project to be $5,000.

[12]  Notwithstanding the nominal award made, the board sought to ensure that the claimants would not be penalized in costs for having earlier reached a settlement of all of the substantive issues except business loss. Under section 45(4) of the Act, if the compensation awarded to an owner, other than for excluded business losses, is greater than 115% of the amount paid by way of an advance payment by the expropriating authority under section 20(1) or (12) or otherwise, the authority must pay the owner his or her costs. Under section 45(5), if the compensation awarded to an owner is 115% or less of the amount of the advance payment, the owner's entitlement to costs is not automatic. The board has discretion in the matter. It may award the owner all or a part of his or her costs. In the present instance the board noted that it had awarded the claimants $5,000 for business losses. The advance payment was $83,956 and 115% of that amount would be $96,549. However, the board decided that the amount of the advance payment, all of which related to those items which had settled, should be excluded from the calculation. This construction meant that no advance payment had been made with respect to business loss, section 45(4) applied, and the claimants were entitled to their costs.

3.  ISSUES

[13]  Although there are several subsidiary issues to be addressed, the main issues which have arisen on this cost review are as follows:

4.  THE CALDERBANK ISSUE

[14]  The reference in the respondent's submissions to having made a "Calderbank offer" is a reference to the judgment of the English Court of Appeal in Calderbank v. Calderbank, [1975]  3 All E.R. 333. That was a matrimonial case in which the plaintiff wife offered to settle the disputed division of property on a basis that, if it had been accepted, would have provided the husband with more than the award ultimately made in his favour by the trial judge. The offer had been made in a letter written "without prejudice" in consequence of which the Court held that the letter could not be relied upon at trial or upon appeal. Counsel for the wife then sought to rely upon another settlement offer made in substantially similar terms but in which she had expressly reserved the right to refer to the offer, if rejected by her husband, on the issue of costs. The Court held that the making of the offer in that way could be considered in deciding the issue of costs. The Court went on to hold that the husband was entitled to his costs up to the time the offer was made but that the wife was entitled to her costs thereafter.

[15]  The making of a without prejudice offer of settlement, reserving the right to bring the offer to the attention of the court on the issue of costs, has since been referred to as a "Calderbank letter" or a "Calderbank offer". The practice gained acceptance in the superior courts of this Province.

[16]  In the present instance a Calderbank offer was contained in Mr. Capuccinello's letter of November 19, 2002 to Mr. Coates, sent both by fax and by mail and marked "without prejudice". The letter bears repeating in full. It states:

"Re: Sam Sangha and Can-Am Building Supply Ltd. v. Surrey
E.C.B. Control No. 42/97

In the interests of reducing the costs, time and inconvenience of this claim, the Respondent is willing to settle the above claim for $20,000.00 (the "Payment Amount") on the conditions set out in this letter. If this letter is accepted, the only outstanding claim remaining to the Claimants will be a claim pursuant to section 45 of the Expropriation Act, R.S.B.C. 1996, c. 125, as amended (the "Expropriation Act") for legal, appraisal and other costs involved in pursuing this claim for compensation.

The terms of the proposed settlement are as follows:

1. The Claimants will instruct its solicitors to consent to a dismissal of its claim other than the claim for costs pursuant to section 45 of the Expropriation Act; and

2. The Payment Amount will be forwarded to the order of the Claimants forthwith upon receipt of a signed Consent Dismissal Order.

This offer is made for the reasons set out above and is primarily aimed at reducing costs. This offer is not intended to form the basis for any counter offer or negotiation on the part of the Claimants, as in the view of the City the Claimants are not entitled to additional compensation. Although this offer is without prejudice, the City reserves the right to bring this offer to the attention of the Board at a section 45 hearing. [Emphasis added.]

This offer is open for acceptance until noon on November 25, 2002 at which time it will be revoked without any further action on the part of the City. Please communicate your acceptance of this offer in writing."

[17]  The respondent submits that the board has the authority to give effect to Calderbank offers. It relies on the board's cost entitlement decision in Baines v. British Columbia (Minister of Transportation and Highways) (1997), 62 L.C.R. 210, and especially the recent judgment of the British Columbia Court of Appeal in Sequoia Springs West Development Corp. v. British Columbia (Minister of Transportation and Highways) (2003), 78 L.C.R. 1, as authority for that proposition.

[18]  The respondent also says that the board should give effect to the Calderbank offer in the present case. It argues that the claimants acted unreasonably in rejecting its generous $20,000 offer to settle a business loss claim that was without merit. In so doing the claimants caused the respondent to have to incur additional professional costs of its own approaching $30,000 to continue to defend against the claim. In these circumstances the respondent submits that any fees and disbursements incurred by the claimants to continue to prosecute their claim after they were presented with the Calderbank offer on November 19, 2002, or within a few days of that date, were neither necessarily incurred nor reasonable and should not be recoverable from the respondent.

[19]  The claimants question the status of Calderbank offers in this jurisdiction. They cite the judgments of the British Columbia Court of Appeal in Brown v. Lowe (2002), 14 C.P.C. (5 th) 13, [2002] B.C.J. No. 76, and Kussmann v. AT&T Capital Canada Inc. (2002), 25 C.P.C. (5 th) 246, [2002] B.C.J. No. 2030 for the proposition that such offers now have little or no application in Supreme Court proceedings in British Columbia because the Supreme Court Rules provide an exhaustive code on the subject. The claimants argue that in expropriation compensation matters there is similarly a comprehensive mechanism available in the form of statutory advance payments under section 20(1) and (12) of the Act through which to attempt to effect settlement of claims. That being the case, resort to Calderbank offers is unnecessary and inappropriate.

[20]  In the present case the claimants say the respondent chose not to follow the procedure laid down in the Act and to make a further advance payment in respect of business loss. Instead, the respondent chose to use a "back door" method. Even assuming that the board at a cost review can give effect to a Calderbank offer, the claimants argue it should not do so here. Although the board in its compensation decision accepted the analysis of Mr. Crosson over that of Mr. Symes and awarded only nominal damages, the claimants say the question before the board on a cost review is whether it was unreasonable for them to have refused the Calderbank offer at the time it was presented. The claimants submit that, on the contrary, it was reasonable for them to have relied on the advice of their highly regarded business valuation expert, Mr. Symes, who in the face of Mr. Crosson's preliminary report assessing the loss as nominal, continued to assert that his own calculations of loss ranging between $52,000 and $104,000 were fair and reasonable.

[21]  I am satisfied from my review of the recent cases cited that Calderbank offers now play a greatly diminished role in litigation in British Columbia but have not entirely disappeared. For a number of years after the Calderbank decision of the English Court of Appeal such an offer was treated by the courts in this jurisdiction as a relevant consideration in deciding on questions of costs. However, the 1993 revision of the Supreme Court Rules concerning costs — in particular Rule 37 governing offers to settle — has left little if any scope for the application of Calderbank offers in proceedings before the Supreme Court.

[22]  A forceful rejection of their use can be found in the January 2002 majority judgment of the Court of Appeal in Brown v. Lowe where Southin J.A. spoke of the error of founding orders as to costs on Calderbank. At para. 154 she wrote:

The 1993 revision to our Rule 37 is of such an order that we have no gap since then. It is a complete code and there is no room for any judicial discretion save that given by it. Calderbank v. Calderbank should not be considered law in this Province today.

[23]  However, in the Kussman decision, released approximately eight months after Brown v. Lowe, a three member panel of the Court of Appeal found that Calderbank offers might still be applicable when considering costs incurred in proceedings before that Court. At para. 3 the Court stated:

In the light of the judgments of the majority of the members of this Court who addressed the issue in the recent case of Brown v. Lowe, [2002] B.C.J. No. 76, it now seems doubtful that the Calderbank procedure would be thought usually permissible in Supreme Court proceedings. I gather from the majority judgment on the issue that this is so because now the Supreme Court Rules provide an exhaustive code on the subject. As I read the judgment, however, it does not necessarily follow that such procedure might not be considered appropriate in this Court. I say that because we do not have such a detailed set of rules on the subject in this Court. [Emphasis added.]

[24]  It seems to me that what was said in Kussman about proceedings in the Court of Appeal has applicability as well to proceedings before the board. There is nothing truly akin to Rule 37 in the Act or the regulations under the Act concerning offers to settle. Although the advance payment provisions under section 20 of the Act provide one way through which settlements might be effected, they do not constitute a complete or exhaustive code on the subject. Certain business losses, for example, are excluded from the requirement for advance payments. Moreover, different considerations enter into an offer to settle a claim as opposed to the making of an advance payment. An expropriating authority may be prepared to offer to pay more to settle a claim in order to avoid the costs of a hearing than the authority would be willing to risk in the form of an advance payment. An advance payment is an acknowledgment of the amount the authority estimates is or will be payable to that owner as compensation.

[25]  In Sequoia Springs, decided after Brown v. Lowe and Kussman, the Court of Appeal, in disposing of a cross-appeal by the respondent from an order of this board awarding costs, upheld the board's recognition that Calderbank offers have a place in proceedings before it.

[26]  The board in its supplementary decision in Sequoia Springs (reported at 71 L.C.R. 315), from which the cross-appeal was taken, found that it had discretion to take into account a Calderbank letter but declined to do so for several reasons. First, the board concluded that there was some reasonable basis for the claimant to expect to obtain more than the offer to settle in the Calderbank letter so that rejection of the letter was not unreasonable. Second, the letter itself had been delivered to the claimant only two working days before the compensation hearing was scheduled to begin and the late timing made the offer less worthy of weight. Third, the board was of the opinion that there were justiciable issues in the case which reasonably warranted their being brought to the board for determination. The respondent contended that the board had erred in law in giving effect to those considerations.

[27]  At paras. 72 to 74 of the reasons for judgment, Saunders J.A. stated:

[72]  … I would not disagree that an offer of settlement contained in a Calderbank style letter may be given weight by the Expropriation Compensation Board. However, to the extent MoTH urges application of the reasoning in that case to the Act at hand and these circumstances, I would not agree that the existence of the Calderbank letter is, by itself, determinative of the costs issue.

[73]  The Board, in this case, referred to its prior decision in Baines v. British Columbia (Minister of Transportation and Highways) (1997), 62 L.C.R. 210 (B.C.E.C.B.):

… a Calderbank letter may be one factor in assessing the reasonableness of the owner in pursuing his claim for compensation …

[74]  In my view, this approach is one within the Board's discretion to take. The Expropriation Act is a compensatory scheme. Its first premise for compensation is that a claimant will be made whole. It includes a provision for advance payments, and for reimbursement of actual reasonable legal, appraisal and other costs where the award is 115% or more of the advance payments. In this context, the Board concluded that a letter offering settlement is not determinative. It is obviously, however, a factor to be considered in determining whether all or a portion of costs will be awarded to a person achieving less than 115% of the advance payments.

[28]  The present case is distinguishable from both Baines and Sequoia Springs inasmuch as in both those cases the claimants had been awarded compensation which was somewhat less than 115% of the advance payments so that the board had discretion in the award of costs under section 45(5) of the Act. It was clearly able to give effect, if it chose, to Calderbank offers. Here the claimants by virtue of having been awarded a nominal amount for business loss were found by the board to have surpassed the 115% threshold entitling them to their costs under section 45(4).

[29]  However, in my view, that is not the end of the matter. Even where the claimant is found to be entitled to his or her costs, the reviewer of costs at a final cost review must nevertheless be satisfied that those costs were necessary and reasonable in the circumstances. Where the costs were not "necessarily incurred" or "reasonable" within the meaning of sections 45(3) and (7) of the Act, or "proper or reasonably necessary" within the meaning of section 3(2) of the Tariff where it applies, they cannot be allowed.

[30]  The respondent's argument in favour of application of the Calderbank principle in the present instance has some attraction. The offer was made in a timely way, its underlying premise was made clear, and it was bolstered by at least a preliminary assessment from the respondent's business valuator which ought to have alerted the claimants and their professional advisors to some serious evidentiary problems with their case. The respondent's offer was, as it turned out, for four times the amount the board ultimately awarded.

[31]  I am, however, unable to accede to the respondent's request and deny all of the claimants' costs incurred after the time the Calderbank offer was presented. In part I am guided in this respect by the policy considerations to which the Court of Appeal referred in Sequoia Springs as well as in another even more recent decision of the Court cited by the claimants, Campbell River Woodworkers' & Builders' Supply (1966) Ltd. v. British Columbia (Minister of Transportation and Highways) (2004), 81 L.C.R. 275, wherein Smith J.A. wrote at p. 281:

[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.

[32]  Apart from the policy considerations which, in my view, militate against a wholesale disallowance of costs in expropriation compensation proceedings, I am also not satisfied that Mr. Crosson's report of November 19, 2002 was a sufficient basis for my concluding that the claimants should reasonably have abandoned their claim for up to $104,000 in business losses and have accepted a settlement offer of $20,000 instead. The report was described as "preliminary", it performed only "a limited review of the Symes report", and it offered no "alternate opinion" as to the cause of any observed downward trend in sales over the relevant period. Mr. Crosson's theory which linked the decline in sales to a downturn in residential construction activity was only advanced later as the compensation hearing date approached. The matter might have been different if the claimants had proceeded with their claim against the advice of their own expert in light of the preliminary Crosson report but, as Mr. Sangha and Mr. Symes both testified, that was not the case here.

[33]  I conclude that the respondent's offer can and should be given some weight as a factor in assessing the reasonableness of the claimants' costs but not through a draconian application of the Calderbank principle. Rather, I view it as appropriate to include the rejected offer as a factor in some of the considerations which I am required to take into account under section 45(10) of the Act and when reviewing the reasonableness of the professional accounts themselves.

5.  SECTION 45(10) ISSUES

[34]  Section 45(10) of the Act provides:

[35]  It is clear from the language of the section that these are mandatory considerations on a final cost review, whether or not the claimant has met the 115% threshold. My assessment of each of these considerations in the present case follows.

5.1  Number and Complexity of Issues

[36]  As the board at the outset of its compensation decision noted, the claim before it was solely one for business loss arising from a partial expropriation. All other claims had settled. The business loss claim itself was also limited to one main issue: that of causation. There appears to have been no real dispute over the fact that the claimants' business experienced periods of reduced sales and profits within the relevant time frame. As the board put it, the dispute was over whether the decline experienced was due in whole or in part to the respondent's road widening project or whether it had some other explanation. Although there was evidently a considerable body of documentation to review related both to the construction project and the sales activity of the business, the issue itself was not complex. This was especially so for the claimants who proceeded throughout on the premise that there was no explanation other than the project for the decline.

[37]  Other issues arose in the course of the compensation hearing around the admissibility of the evidence of Mr. Crosson and Dr. Mansfield and as to the level of costs to which the claimants were entitled in consequence of a provision in the parties' section 3 agreement. However, it does not appear that any of these subsidiary matters greatly lengthened or complicated the proceedings.

[38]  At the conclusion of the compensation hearing the claimants submitted that they should be awarded costs under the Tariff at Scale 3, the highest scale which is for matters of more than ordinary difficulty or importance, as a result of what they characterized as the difficult and complex issues raised in the case. The board disagreed. It stated at p. 122 (81 L.C.R.):

[72]  With respect to the relevant Scale we find this matter of ordinary difficulty and complexity. The main question was a narrow one and although there were various secondary issues, they were insufficient to displace the default position for Scale 2 found in section 4(3) of the Tariff.

5.2  Degree of Success

[39]  In assessing this factor I do not wish to lose sight of the fact that the claimants were able to settle most of their claims, including those for the market value of the land taken, for diminution in value to the remaining land, and for certain items of disturbance damage. In an overall sense, it seems to me, partial settlement should be viewed as a positive indicator of success. However, the costs claimed at this section 45 review all relate only to the one substantive issue that was not settled but that proceeded instead to a compensation hearing. The reasonableness of the costs incurred by the claimants in asserting claims which settled at an early stage are not directly before me for review.

[40]  The claimants realized success on the business loss issue insofar as the board did not dismiss their claim but determined instead that there had been a nominal loss. Because the board also ruled, in effect, that no advance payment had been made in relation to this claim, the difference between the amount awarded and the advance payment was the full measure of the award and the claimants were therefore successful in asserting entitlement to costs.

[41]  Beyond winning these threshold battles, however, the claimants' success in their business loss claim must be viewed as something of a pyrrhic victory. They incurred costs of more than $62,000 to obtain an award of only $5,000. The amount awarded was only a small fraction of the amount claimed. I recognize that, in light of the judgment in Ingham v. Creston (Town) (2001), 73 L.C.R. 122 (B.C.S.C.), to reduce costs to a claimant who has been found to have exceeded the 115% threshold principally on the basis of a comparison between the costs incurred in pursuing a claim and the eventual award received from the board would constitute an error in law. That approach applied indiscriminately would discourage claimants with only small claims against the taking authority from pursuing their claims and, in so doing, would undermine the underlying purpose behind the compensation scheme envisaged in the Act.

[42]  The fact here is that the amount eventually awarded by the board was also only a quarter of the amount plus reasonable costs for which the claimants might have settled their business loss claim some three months before the compensation hearing took place and before much costly preparatory work on both sides occurred. To my mind this is not an irrelevant consideration in assessing the real degree of success achieved in the determination of the issue which was before the board.

5.3  Manner in which Case Prepared and Conducted

[43]  In addressing this consideration, the respondent submitted that the claimants acted unreasonably in advancing a claim that was without merit in the first place, refusing to accept less than $77,500 (the mid-point figure of their estimated loss), rejecting the Calderbank offer of $20,000, forcing the respondent to incur costs of over $40,000 to defend itself against a meritless claim, and incurring the substantial fees and disbursements they now seek to have reimbursed.

[44]  There is force to the respondent's argument but I think it goes too far. To my mind the claimants as expropriated owners were entitled to advance a claim for business loss which they honestly and reasonably believed had been caused by the respondent's road widening project in respect of which the partial taking occurred. There was, after all, some obvious disturbance to the access and exposure the business normally enjoyed which went on for a rather prolonged period and which it was not unreasonable to suppose was connected to a decline in sales.

[45]  The real difficulty as I see it with the way in which the claimants' case was prepared and conducted has to do largely with assumptions and methodology. This is particularly so in light of the fact that the claimants bear the onus of proving that their costs were necessary and reasonable.

[46]  Mr. Sangha testified that he could think of no other reason than the project for the decline in sales the business experienced. Yet Mr. Sangha had been conducting his lumber and building supply business at its present location since 1972 and must have experienced business fluctuations for perhaps a variety of reasons in the past. In fact the records showed there was a sales decline in the period preceding the start of construction on the respondent's project. Mr. Sangha nevertheless conveyed his single-minded view of causation in the present instance to his business valuation expert.

[47]  Mr. Symes then adopted his client's view as a key assumption in preparing his valuation report. There is no indication in the evidence that he explored other possible causes. Mr. Symes' analysis of sales data, as I will discuss in greater detail later when dealing with the business valuation costs, was also somewhat superficial.

[48]  Once Mr. Crosson had prepared his preliminary critique of Mr. Symes' report, exposing some methodological shortcomings and arriving at a very different conclusion as to business loss, I believe it was incumbent upon the claimants and their professional advisors to take reasonable steps to shore up their case if they intended to pursue it. It was especially incumbent upon them to do so in the face of a concurrent offer to settle the matter for a substantial sum of money -- $20,000 plus reasonable costs -- even though Mr. Crosson's report suggested that consequential financial losses, if any, were nominal. Other than trying unsuccessfully to get Mr. Crosson to share his own working data prior to hearing and, much later on, trying to discredit his conclusions by means of regression analysis, the claimants and their advisors did not adopt any such approach.

5.4  Conclusion

[49]  In the present matter, where the costs claimed in pursuing only the business loss claim exceed $62,000, I conclude that the foregoing three considerations, viewed collectively, should lead to a reduction in the overall costs allowed. However, before addressing the appropriate reduction, I first wish to review in detail the bills of costs themselves.

6.  LEGAL COSTS

[50]  The claimants first retained legal counsel in connection with the pending expropriation of part of their property in early 1996. Jeffrey L. Hayes of the law firm of Worthington, Simm & David acted for them initially. He conducted negotiations and arranged for the receipt of the advance payment at the end of 1996. He also prepared and filed with the board the claimants' Form A in October 1997. For several months in early 1997 Mr. Coates acted as Mr. Hayes' agent on the file and it appears that he negotiated the section 3 agreement as well as perhaps an easement or statutory right of way agreement. Mr. Coates explained during his testimony at the cost hearing that he found himself at some point around this time in a potential conflict and withdrew from involvement with the claimants' case. The claimants in turn, Mr. Coates said, were prepared to wait until he was in a position to assume full conduct of their case before pursuing any unresolved claims. This only occurred in the spring of 2002. It is unclear from the evidence before me when the parties reached a partial settlement of the claimants' claims but it seems to have been in place by the time Mr. Coates resumed his involvement.

[51]  The claimants have not included in their bills of costs the legal accounts rendered to them in 1996 and 1997 which I am told were fully reimbursed by the respondent. The respondent has put three accounts from this period into evidence, not to request that I assess whether they were necessarily and reasonably incurred, but rather to invite me to take them into account when assessing unit allocations under the Tariff and perhaps the global reasonableness of the claimants' costs in this matter. I note that Mr. Hayes rendered an account in January, 1997 for $3,911.47, including fees of $3,451.00. Although he was involved in preparation and filing of the Form A in October, 1997, I have no record of his having rendered a further account for services performed. Mr. Coates rendered two accounts in early 1997 which total $13,553.90, including fees of $7,480.00. One of his two accounts included a disbursement item of some $4,560.87 for engineering services. Therefore, prior to 2002, the claimants had already incurred and been reimbursed in respect of costs arising from the partial taking of $17,465.34.

[52]  The legal costs for which reimbursement is sought at this cost review relate entirely to conduct of the business loss claim in 2002 and 2003 and this section 45 hearing in early 2004. As such they fall completely under the Tariff which came into force on June 28, 1999. The claimants' legal bill of costs was presented in the amount of $37,278, including $27,160 in costs for items of work described in Schedule 1 of the Tariff, $8,081 in disbursements, and $2,037 in provincial sales tax ("PST"). No amount has been claimed in respect of goods and services tax ("GST") because the claimants are GST registrants able to apply for reimbursement of any GST paid.

[53]  Schedule 1 of the Tariff lists 23 items of description of legal costs which may be recoverable. For some items of description the Tariff prescribes a fixed number of units and for others it provides for minimum and maximum numbers of units. Where a range of units is indicated, the reviewer has the discretion under section 4(6) to allow a number within that range, having regard to how much time "should ordinarily have been spent" on the particular matter. Also, if an item in the Tariff provides for a fixed number of units for each day but the time spent during the day is less than 2 ½ hours, only half the number of units is allowed for that day. Similarly, if fixed units for preparation for an attendance are provided but the time spent on the attendance is less than 2 ½ hours, only half the number of units for preparation is allowed. There is also provision for increasing the number of units allowed by half where the time spent during the day exceeds 5 hours.

[54]  The claimants' legal bill of costs includes entries for 16 items of description of legal work performed in relation to the business loss claim including two entries for this section 45 cost review. The items of description, together with the minimum and maximum or fixed numbers of units permitted and the units actually claimed in the legal bill of costs, are as follows:

[55]  The number of units claimed totals 194. As previously noted, the board in its compensation decision held that the appropriate scale at which legal costs under the Tariff should be assessed was Scale 2. Under section 4(1), Scale 2 is "for matters of ordinary difficulty or importance" and, under section 4(4), the value allowed on an assessment of legal costs under Scale 2 is $140 for each unit. Therefore, the claimants' legal bill of costs in respect of the units claimed is for the sum of $27,160. PST is chargeable on legal fees and, calculated at the rate of 7.5%, adds a further $2,037 to the bill.

[56]  The respondent takes issue with many of the units claimed under particular items of description. In the first place, it argues, there is a need to take into account work performed under the same item of description in the pre-Tariff period when fixing the appropriate number of units where a range is indicated. In the second place, the respondent contends that excessive units have been claimed for the modest amount of time which should reasonably have been spent on certain tasks. Finally, the respondent says that some items have simply been incorrectly calculated, for example, the number of hearing days involved. The respondent submits that the "starting point" for an award of legal costs in this matter, before applying global reductions on account of the Calderbank offer and section 45(10) issues, is a total of 113 units which equates to $15,820 plus PST.

[57]  Determination of the number of units which should properly be allowed under each item of description in the claimants' legal bill of costs, before final adjustment in light of my considerations under section 45(10), is best approached on an item by item basis.

[58]  Item 1 is something of a catch-all for correspondence, conferences, instructions, investigations or negotiations relating to a claim for which provision is not made elsewhere in the Tariff. In this instance Item 1, which provides for between 1 unit and 20 units, also raises the issue of allocation of units under the Tariff in light of pre-Tariff work performed under the same general description. I believe it is the only item in the Tariff which raises this issue in the present case. The claimants have claimed the maximum of 20 units on the basis of allocating 10 units to preparation by Mr. Coates of a detailed chronology of the respondent's construction project in the vicinity of the subject property and a further 10 units to his preparation of a detailed agreed statement of facts. Mr. Coates testified during the cost hearing that it was a significant project to assemble the detailed chronology which involved, as he put it, "lengthy, time-consuming effort." On the basis that any earlier work resulted in a settlement of the issues involved, the claimants made no allowance for any pre-Tariff work.

[59]  Respondent's counsel, Mr. Capuccinello, in a letter to Mr. Coates just before this cost hearing took place, wrote with respect to Item 1 as follows:

"As you are aware this file initially involved more than a business loss claim. In fact Mr. Jeff Hayes and yourself were fully compensated for your efforts in resolving all other issues. Where work that can be described under this Item was compensated for under the pre-tariff period, there must be a reduction in the units claimed. In this regard I draw your attention to Gerald Budd v. Her Majesty the Queen."

[60]  The foregoing reference is to my cost decision in Budd v. British Columbia (Minister of Transportation and Highways) (2001), 72 L.C.R. 114. That was the first section 45 review to consider the application of the Tariff to an award of final costs. On the issue of allocation of units I made reference in that decision to a slightly earlier cost review in Chu v. School District No. 36 ( Surrey) (2001), 72 L.C.R. 89. I noted at p. 127 of my decision in Budd:

[31]  The Chu decision resulted from an application for advance payment of tariffed costs under s. 48 of the Act. There, evidence of time spent on both pre-tariff and post-tariff legal work of the same or similar description was taken into account in fixing the appropriate number of units allowable under the tariff so as to avoid duplication of costs on an advance cost review.

[32]  A similar exercise will assist in arriving at the appropriate allocation on a final cost review.

[61]  It is apparent upon review of the accounts rendered by Mr. Hayes and Mr. Coates during 1997 that some of the legal work performed in that period would have fallen under Item 1 if the Tariff had been in effect at that date. However, an even greater proportion of the pre-Tariff work likely would have fallen instead under Items 2 and 3 which are concerned with reviewing and advising in relation to a section 3 agreement and to advance payments, and under Item 23 which is concerned with negotiations, mediation and the process for settlement of a claim.

[62]  While the claimants' claim of 20 units under Item 1 makes no allowance for pre-Tariff work and is for that reason alone excessive, the respondent's suggestion that only 2 units should be allowed for this item is also unrealistic. Taking all of the pertinent circumstances into account, including perusal of the detailed chronology and agreed statement of facts prepared by Mr. Coates, I would allow 10 units for Item 1.

[63]  Item 4, the next item of description claimed, concerns instructing expert witnesses where the witness prepares a report. It allows for between 1 unit and 5 units for up to a maximum of three experts without leave of the board. The claimants claim the full 5 units for instructing Mr. Symes, the business valuation expert, and 2 units for instructing Dr. Mansfield, the mathematical analyst. The respondent says there was nothing particularly unusual or overly complex about Mr. Symes' instructions so that the mid-point of 2.5 units is appropriate, and Dr. Mansfield's instructions were simply to undertake a regression analysis and as such merit only the minimum number of units available. I have reviewed the terms of reference in each of the engagement letters from Mr. Symes and Dr. Mansfield which were included in the claimants' bill of costs binder and I conclude that it would be reasonable to allow 3 units for the instructions to Mr. Symes and 1 unit for instructions to Dr. Mansfield.

[64]  Item 5, which allows for between 1 unit and 10 units for every process for commencing and prosecuting a claim before the board, was one of three items of description I considered on review of a section 48 application for advance payment of costs. In my decision, reported as Sangha v. Surrey (City) (2003), 79 L.C.R. 153, I allowed 3 units under this item of description. The parties have accepted that number on this section 45 review.

[65]  Items 6 and 7 deal in turn with the processes for obtaining and for giving discovery and inspection of documents. Each of the items of description provides for a range between 1 unit and 10 units according to the amount of time that should reasonably have been spent on each matter. The claimants have claimed 10 units under each of these items of description. Mr. Coates testified during the cost hearing that it took almost six months of effort to obtain a list of documents from the respondent and that, shortly before the compensation hearing was initially scheduled to begin, a supplemental list arrived. Mr. Coates also testified, from his vantage of some 40 or more years' experience in the expropriation field, that in quantity they were "the greatest number of documents that I have encountered in practice". The respondent took issue with these characterizations, saying that there was nothing particularly unusual about the discovery process which related to just a single issue. While there were indeed numerous boxes of invoices, reviewing and copying them as necessary was a task undertaken by the respondent, not the claimants. The respondent therefore suggested as a starting point that 4 units be awarded for each of these items of description. In my view the evidence does not support the notion that, from the claimants' perspective at least, the document discovery process was an unduly onerous one. Even accepting that there were large quantities of documents mainly in the claimants' possession to be obtained and reviewed, it does not appear that the claimants or their professional advisors intensively undertook the task. I recognize, of course that the test is the amount of time that reasonably should have been spent on the task. On the whole I think it would be reasonable to allow 6 units for each of Items 6 and 7.

[66]  Items 10 and 11 concern, in turn, the preparation for and attendance at examinations for discovery which took place on November 26 and 27, 2002. The claimants have claimed the fixed number of units for one day's preparation and one day's attendance for examination by Mr. Coates of the respondent's representative, Mr. Snow, and the fixed number of units allowed for a day's preparation of Mr. Sangha for his examination for discovery and for legal counsel's attendance at the examination. This amounts to a total of 9 units in connection with the examination of Mr. Snow and 7 units in connection with the examination of Mr. Sangha. The respondent submits that a total of 5 units only should be allowed under Items 10 and 11 combined. A review of Mr. Coates' time dockets for the period in question satisfy me that the discoveries of these two individuals each occupied more than 2 ½ hours on the days in question and therefore that 16 units as claimed by the claimants under Items 10 and 11 combined should be allowed.

[67]  Items 14 and 15, which concern in turn the preparation for and attendance at the board either to settle an order or to assess costs, in this case have to do with both the earlier section 48 advance cost review and the present section 45 final cost review. In my advance cost decision, the costs associated with that review (which proceeded by way of written submissions only) were allowed on the basis of a proceeding which had occupied less than 2 ½ hours. Therefore, one half of the 2 units per day for preparation and one half of the 4 units per day for attendance were allowed. The parties have accepted that the 3 units awarded at that time should continue to govern now. The claimants had anticipated that this section 45 review might take two hearing days and therefore claimed units under Items 14 and 15 on that basis in their legal bill of costs. In fact this final cost review was completed in one full hearing day. Accordingly, I would allow the claimants 2 units under Item 14 and 4 units under Item 15 with respect to it.

[68]  Items 16 and 17 concern the preparation for and attendance at what is described in the Tariff as a "pre-trial conference". The parties acknowledge that a brief teleconference with the board took place on December 30, 2002, approximately two weeks before the compensation hearing was originally scheduled to begin. Although the claimants in their bill of costs claimed for a full day's preparation and attendance, Mr. Coates acknowledged during the cost hearing that only half the number of units or 2.5 units in total should be awarded. The respondent agreed. Accordingly, I would allow 2.5 units for these two items combined.

[69]  The largest claim under Schedule 1 of the Tariff is for the legal costs of preparation for and attendance at the compensation hearing. Item 18 allows for 5 units per day for preparation (up to a maximum of 30 units) while Item 19 allows for 10 units per day for hearing attendance. Initially, there was some disparity between the parties' positions with regard to these items. The claimants' bill of legal costs claimed 25 units for preparation and 50 units for attendance on the basis of five hearing days: February 17, 18, 20 and 21, 2003, and June 9, 2003. The respondent, however, put into evidence a letter from PRS Professional Recording Services Ltd., which officially records the board's hearings, indicating that the board sat for less than 2 ½ hours on the opening day, February 17, 2003, and on the fourth day of proceedings, February 21, 2003. The claimants acknowledged that this was undoubtedly the case and amended their claim under Items 18 and 19 on the basis of four full hearing days in total. Accordingly, I would allow the claimants 20 units under Item 18 and 40 units under Item 19.

[70]  The claimants have claimed the full 10 units under Item 20 which provides for a range of between 1 unit and 10 units for written argument if requested or ordered by the board. The claimants made the undisputed assertion at the cost review that the parties had agreed to proceed by written argument and that the board at the conclusion of the compensation hearing had ordered it. Mr. Coates referred me to a copy of the claimants' final written submissions as well as the claimants' written rejoinder, both of which were included in the bill of costs binder. The submissions run to 28 pages and the rejoinder to another 12 pages. The respondent on this cost review argued that there was nothing to suggest that more than an average amount of time should have been spent on this item and that, accordingly, a midpoint allocation of 5 units was appropriate. Having reviewed the claimants' submissions and rejoinder in light of my understanding of the issues at stake and the course of proceedings at the compensation hearing into business loss, I consider that more than an average amount of time should reasonably have been spent on these items in the circumstances. I would allow 8 units under Item 20.

[71]  Item 21 provides for only a single fixed unit for the process involved in setting a claim down for hearing. In this instance the claimants have claimed 3 units on the basis that there were three occasions on which their claim was set down: first, for the hearing initially scheduled to begin on January 13, 2003; second, following the last minute adjournment necessitated by ill health, for the hearing re-set to begin on February 17, 2003 in Surrey; and third, following a further adjournment, for completion of the hearing on June 9, 2003 in Victoria. The respondent argues that, since all of the adjournments were made at the request of the claimants, it is inappropriate for them to seek more than 1 unit. In any case, the respondent says, the Tariff permits only one unit for this item of description. While there are situations which would warrant claiming Item 21 more than once, I do agree with the respondent in the circumstances of the present case that only 1 unit is justified.

[72]  The final item of description utilized in the claimants' bill of legal costs is Item 23 which provides for 2 units per day for travel by a solicitor "to attend any hearing, application, examination or other analogous proceeding" more than 40 km from the solicitor's place of business. On December 10, 2003 Mr. Coates provided a copy of the claimants' draft bill of legal costs to Mr. Capuccinello which included a total of 14 units under Item 23. These were for travel by Mr. Coates between his home on Mayne Island and Surrey to examine and obtain copies of the respondent's documents, to New Westminster for the examinations for discovery of Mr. Snow and Mr. Sangha, to Surrey and Victoria for the compensation hearing, and finally, to Victoria for this section 45 cost review. In his letter reply to Mr. Coates on February 16, 2004, Mr. Capuccinello said he had no objection to the unit allocations selected. However, when the bill of legal costs was finally presented at the section 45 hearing, 6 more units had been added under Item 23. They now included travel by Mr. Coates for the purpose of meeting with his clients, with the claimants' business valuation expert and with representatives of the respondent. In response to my inquiry at the hearing, Mr. Coates stated that these additional activities came within the meaning of "other analogous proceeding". I am unconvinced that travel for the purpose of meeting with a client or the client's expert can properly be described as attending on a "proceeding" which is analogous to a hearing, application or examination. Accordingly, I would allow the 14 units as agreed between the parties under Item 23 but would not allow the 6 units for travel for the other purposes described.

[73]  The result of my review of the claimants' bill of legal costs is that, subject to final adjustment in light of the considerations under section 45(10), I have allowed 139.5 units at $140 per unit for a total value of $19,530. PST calculated at 7.5% on legal fees adds a further $1,464.75.

[74]  On the subject of disbursements, section 5(1) of the Tariff provides:

[75]  The disbursements billed by Mr. Coates in the course of conducting the claimants' case for business loss are substantial. They total $8,081. The largest items are for hotel accommodation ($3,282.96), examination and hearing transcripts ($2,515.79), facsimiles ($703.00), and meals ($694.84). Some disbursement items over which issues arose prior to the cost hearing were resolved by the parties in the course of the hearing. The respondent focused its specific objections at the cost hearing on four items: the rates charged for photocopying and for faxes and the expenses incurred on hotels and meals.

[76]  Mr. Coates charged out his photocopying costs at $0.25 per page for a total of $65.75. At the cost hearing he provided affidavit evidence showing that numerous law firms in British Columbia, many of which are active in expropriation compensation matters, charge either $0.25 or $0.30 per page for photocopies, that the British Columbia Courthouse Library Society charges $0.25 per page, and that the National Archives of Canada charges either $0.40 per page for photocopies or $0.30 per page where the user is a student or senior citizen. Mr. Coates submitted that the board's past practice of allowing only $0.15 per page is not consistent with a costs regime intended to reimburse expropriated owners on a more generous scale than party and party costs. He cited the following passage from the Ontario Court of Appeal, General Division, in 131843 Canada Inc. v. Double "R" (Toronto) Ltd. (1992), 11 C.P.C. (3d) 190 at p. 195:

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

[77]  Mr. Capuccinello for the respondent cited the board's section 48 cost decision in 415528 B.C. Ltd. v. Greater Vancouver Sewerage and Drainage District (2001), 75 L.C.R. 217 at p. 229 as indicating that the board in recent times has continued to allow photocopies at $0.15 per page.

[78]  In my view the rates allowed by the board for such in-house office items should not be treated as immutable over time. Where cogent evidence is provided in support of a higher rate, that rate can and should be allowed. In this instance I am satisfied from the evidence that it would be reasonable to allow photocopying charges at $0.25 per page.

[79]  In the 415528 B.C. Ltd. decision noted above, facsimile charges were allowed at $0.20 per page. That rate is considerably lower than what the board in other cost decisions has allowed in recent years which is $0.35 per page for incoming faxes and $0.50 per page for outgoing faxes. However, in the present instance Mr. Coates testified that he billed for incoming faxes at the rate of $1.00 per page and for outgoing faxes at the rate of $2.00 per page – rates clearly far in excess of what the board has ever considered reasonable. I would allow facsimiles in this matter at the rate of $0.35 and $0.50 per page, so that in the result the amount allowed for incoming items is reduced from $123 to $43 and for outgoing items from $580 to $290.

[80]  The respondent submitted that the amounts spent by Mr. Coates on hotel accommodations and meals were simply excessive. Mr. Coates had several explanations for the amounts incurred on these items. He noted that he used extra hotel room space for the purpose of interviewing his witnesses, that because of his ill health during the compensation hearing in Surrey he had required the assistance of his niece, and that on some other occasions he stayed with relatives rather than in hotels, thus effecting a saving in that regard, but that he in turn felt obligated to take his relatives out to dinner as an appreciative gesture for their hospitality. While I accept Mr. Coates' rationale up to a point, I nevertheless conclude that it is unreasonable to expect the respondent to reimburse the global amount of such charges. I note, for example, that Mr. Coates has billed nearly $2,500.00 net for four nights' accommodation at the hotel in Surrey where the compensation hearing initially took place. By way of comparison, I would observe that out of town members of the board attending the hearing and staying at the same hotel would have been limited to reimbursement of their hotel expenses at the rate of $80.00 plus applicable taxes per night. This, I would further point out, was the provincial government rate at the time. In my view, having regard to the out of town tasks necessarily undertaken by Mr. Coates, it would be reasonable to reimburse hotel accommodation costs in the total sum of $1,500.00 and meal costs in the total sum of $400.00 in total with respect to this matter.

[81]  By the end of the cost hearing, no other disbursement items remained in contention. Subject to final adjustment I would therefore allow the claimants' disbursements in their legal bill of costs in the total amount of $5,633.20.

7.  BUSINESS VALUATION COSTS

[82]  Unlike legal costs which, pursuant to section 45(7)(b), have been made subject to the Tariff, business valuation costs still fall to be determined on the "actual reasonable" standard as set out in section 45(7)(a) of the Act.

[83]  All of the business valuation costs in this matter relate to the services provided by Toby Symes. Mr. Symes is a highly experienced chartered accountant who has practised exclusively as a business valuator since 1977. Prior to establishing his own company, he was for many years a partner with the accountancy firm of Deloitte and Touche. He has frequently testified in hearings before the board.

[84]  Mr. Symes' engagement letter to the claimants, dated May 23, 2002, outlined the approach he intended to follow in estimating the loss suffered by Can-Am as a result of the partial taking from the property owned by Mr. Sangha. These included a detailed review and analysis of the financial position and past and projected operating results of the claimant company, discussions with the company accountant, with Mr. Coates, and possibly with others, calculation of the estimate of loss, preparation of a preliminary draft, and preparation and delivery of a final report shortly thereafter. In addition Mr. Symes stated in his letter that he anticipated assisting counsel as required to obtain a settlement or otherwise to proceed with the prosecution of the claim. He estimated his fees for preparation and delivery of a report to be in the range of $4,500 to $6,000 with fees based on his standard charge-out rate of $275 per hour (i.e., representing approximately 16 to 22 hours of work) and standard disbursements invoiced at a rate of 3% of the charge-out rate.

[85]  In the end the business valuation costs proved to be much higher than this original estimate. Mr. Symes rendered a total of seven accounts to the claimants between early June 2002 and late June 2003. He billed nearly 73 hours of time at the rate of $275 per hour throughout for a total of $20,020 in fees. Disbursements came to a further $1,214.90. The business valuation costs at issue therefore total $21,234.90 excluding GST and not including the costs associated with preparation for and attendance at this final cost review. The breakdown is as follows:

[86]  By the time the first two accounts were rendered, Mr. Symes had completed his draft report and provided it to his client and to Mr. Coates. The fees charged were well within the range of his original estimate. By early December 2002, according to the third account rendered, Mr. Symes had received and reviewed the draft business valuation report of Mr. Crosson, had discussed it with Mr. Coates and Mr. Sangha, and had prepared a letter commenting on it at the request of claimants' counsel. Much of the time spent during the month of January 2003, which was covered off in Mr. Symes' fourth account, had to do with attempting to obtain or verify the sales data and building permit statistics which now appeared in Mr. Crosson's final report. Most of the services provided in the month of February 2003, as detailed in the fifth account, involved Mr. Symes' preparation for and attendance at the first four days of the compensation hearing in Surrey during which time he gave his evidence-in-chief, was cross-examined, and listened to Mr. Crosson's evidence-in-chief. More than 25 hours of billed time were recorded on these tasks. The final two accounts rendered in June 2003 concerned the time spent by Mr. Symes' in discussions with Dr. Mansfield on the latter's regression analysis, preparation for the reconvened hearing, and attendance at the one day hearing in Victoria to assist counsel in the cross-examination of Mr. Crosson and to give further evidence in rebuttal.

[87]  Mr. Capuccinello for the respondent in final submissions challenged the reasonableness of Mr. Symes' costs, not only in general terms in light of the Calderbank offer and the factors under section 45(10), but also in the first instance because he said Mr. Symes had accepted his client's instruction to assume that the project was the sole cause of Can-Am's business loss during the period in question. Mr. Symes, he said, should not have accepted such instructions, his report as a result was founded on an unreasonable assumption, and his costs in turn were not reasonably incurred.

[88]  The evidence does not go so far as to support the respondent's allegation that Mr. Symes was instructed to make the foregoing assumption. He testified that in the course of meeting with Mr. Sangha he asked his client whether he could think of anything else which might have caused the loss and his client told him that he could not. The evidence does, however, clearly show that Mr. Sangha's response became the basis of a major assumption upon which Mr. Symes proceeded in preparing his opinion report. That assumption as to causation was, in my view, a highly questionable basis upon which to proceed without closer examination of the data and, as events proved, the assumption was wrong.

[89]  The respondent also challenged the reasonableness of Mr. Symes' costs in light of the way in which he approached the company's sales data. Mr. Capuccinello referred me to the following exchanges with Mr. Symes during his cross-examination at the compensation hearing:

[90]  It is fair to observe that Mr. Symes' analysis of sales data was somewhat superficial. It did not attempt to distinguish between cash sales and credit sales. It avoided the time-consuming task, which Mr. Crosson undertook in at least a limited way, of plying through boxes of sales invoices. Differences in the depth of analysis may, of course, help to explain why Mr. Crosson's professional fees, at over $30,000, were some 50% higher than those of Mr. Symes at slightly more than $20,000. Nevertheless, the issue before me is whether the expenditure of time resulting in fees of even $20,000 can be justified as wholly reasonable in the circumstances.

[91]  In my view the services provided by Mr. Symes in this matter do not fully justify as reasonable the expenditure of nearly 73 hours of billable time at a fee charge of $275 per hour which I believe is a higher rate for professional services than the board has ever allowed in the past. Taking into consideration what I have observed above, I conclude that it would be reasonable as a starting point to limit the business valuation fees recoverable to the sum of $15,000.

[92]  Mr. Symes' approach to disbursements was somewhat unconventional in my experience. The approach was explained in his engagement letter to his clients as follows:

"In addition to the foregoing billing rate [of $275 per hour], disbursements such as photocopy, facsimile, long distance, mileage, parking and other charges, but excluding travel and accommodation, or any special research reports, if any, will be invoiced at a rate of 3% of the standard charge-out rate."

[93]  At the cost hearing Mr. Symes explained that the 3% formula had been derived from a survey study undertaken by his previous firm, Deloitte and Touche, into standard disbursements as a percentage of professional fees. Using the formula, he said, avoided the labour intensive burden of having to identify each and every disbursement and was an easier way to bill.

[94]  The approach causes me some concern in a general sense since, in reviewing business valuation costs, I have to be satisfied that they are the "actual reasonable" costs incurred and not simply hypothetical costs. However, the respondent did not specifically object to it. I also note in the present instance that application of Mr. Symes' approach has resulted in billed disbursements for photocopying, faxes, long distance telephone charges, mileage, parking and the like of $600.60. Applied as a percentage of the reduced level of business valuation fees which I have allowed at first instance, the applicable disbursements come to $450.00. This does not strike me as an unreasonable amount for professional disbursements and it compares favourably with those incurred by Mr. Coates in this matter. Subject to final adjustment, I am prepared to accept it. Together with the other items which largely relate to hotel accommodation and travel costs, I would allow total disbursements in the sum of $1,064.30.

[95]  Before final adjustment under section 45(10), the total business valuation costs allowed therefore amount to $15,000 in fees and $1,064.30 in disbursements for a total of $16,064.30.

8.  MATHEMATICIAN COSTS

[96]  At the beginning of June, 2003, shortly before the adjourned compensation hearing was scheduled to resume, the claimants retained Dr. Edward J. Mansfield, a partner in the accounting and consulting firm of Grant Thornton LLP. Dr. Mansfield holds a Ph.D. in applied mathematics and, at the date of the compensation hearing, had practised as a consulting statistician and mathematician for over fifteen years. He was provided with spreadsheet data containing annual sales of the claimant company and GVRD statistics showing the value of building permits for the years 1994 through 2001. He was asked to prepare regression analyses on these two sets of data on both a fiscal and calendar year basis. His letter report, dated June 6, 2003, was brief. It concluded that there was little or no relationship between the annual sales of the company and the GVRD statistics for building permits. Because the report was provided to the respondent so close to the date of the resumed hearing on June 9, 2003 in Victoria, its admissibility even as a rebuttal report was challenged. The board, however, decided to hear Dr. Mansfield's evidence, reserving until later on the question of the admissibility of his report. At pp. 110-111 (79 L.C.R.) of its compensation decision the board stated:

However, after considering all the circumstances, we have decided to admit Dr. Mansfield's expert report. The potential prejudice faced by the respondent is accommodated by other evidence that tests the scope of Dr. Mansfield's opinion. If we are wrong in admitting the report the fact remains that given the other evidence we have accorded it little weight.

[97]  For his professional services in this matter, Dr. Mansfield rendered a fee account for $2,475, calculated on the basis of 4.5 hours to undertake the statistical analysis and prepare a report and a further 4.5 hours to attend the compensation hearing in Victoria, all at the rate of $275 per hour. His only disbursement was airfare at $200. Therefore, the account in total was for $2,675 excluding GST.

[98]  At the cost hearing the respondent submitted that the regression analysis undertaken was straightforward and that the testimony in respect of it occupied only a very brief amount of time. Together, the respondent argued, the report preparation and hearing testimony did not justify a fee account of this magnitude.

[99]  From my review of the report and its use at the compensation hearing as commented on by the board, I have to agree with the respondent's assessment. Both the time charged for report preparation and hearing attendance, which includes travel time, and the hourly fee rate should be reduced. In the result, before final adjustment, I would allow Dr. Mansfield's account in the amount of $1,500 for fees and $200 for disbursements or $1,700 in total.

9.  OTHER COSTS

[100]  The claimants presented two other accounts for reimbursement at this cost hearing. The first was an invoice from one Tara Sangha dated June 10, 2003 and marked "paid". Sam Sangha testified at the cost hearing that Tara Sangha was a second cousin whom he hired on a casual basis to work from time to time when he was, as he put it, "in a bind". In this instance Mr. Sangha hired his second cousin to work in the building supply store for the entire week of February 17 to 21, 2003 and on June 8 and 9, 2003 during his absence to attend the compensation hearing. Tara Sangha invoiced the business for 40 hours of work in February and 16 hours in June at the rate of $20 per hour for a total of $1,120. The respondent did not question Mr. Sangha on this or any other aspect of his brief testimony at the cost hearing and raised only a mild objection to this account in final submissions. In my view it was reasonable for Mr. Sangha to attend for the duration of the compensation hearing and, in turn, reasonable to hire his cousin to assist in the store during his absence. The hourly rate charged does not seem to me to be unreasonable and, although the hearing proceeded on only four of the five days billed between February 17 th and 21 st, I accept the claimants' explanation that a commitment had been made to Tara Sangha to provide a full week's employment. Subject to final adjustment, I would allow this cost as invoiced at $1,120.

[101]  The second account was for the costs said to have been incurred by Mr. Sangha to travel from Surrey to Victoria for the continuation of the compensation hearing on June 9, 2003. Mr. Sangha explained that he had lost his ferry receipts and Mr. Coates had reconstructed his costs consisting of a return ferry fare of $70.75, a hotel room charge of $212.60 and mileage calculated as 100 km at $0.43 per km. for a total of $326.35. Subject to its overarching objection as to the claimants' costs generally, the respondent did not challenge these charges. I do not consider them unreasonable and, subject to final adjustment, would allow them as presented.

10.  FINAL COST AWARD

[102]  Before applying a final adjustment in light of the factors which I earlier considered pursuant to section 45(10) of the Act, I have determined the claimants' costs as follows:

[103]  The considerations under section 45(10), viewed in combination, lead me to the conclusion that a global reduction in the order of 25% is warranted to the total amount of costs otherwise determined. Accordingly, the costs as claimed are finally allowed in an amount which I round to $35,000.

11.  COSTS OF THE SECTION 45 REVIEW

[104]  The unit costs of Mr. Coates' preparation for and attendance at this section 45 cost review have already been dealt with under the Tariff. Additionally, Mr. Coates provided an itemized list of disbursements in respect of photocopying (483 pages) and facsimiles (19 pages outgoing and 20 pages incoming) and two invoices for office-related supplies totalling $39.62, all of which he said were for the purpose of this hearing. However, some other costs including travel costs for Mr. Coates, Mr. Sangha and Mr. Symes were not before me for determination. All three were witnesses at the cost hearing and there was some suggestion that Mr. Symes might wish to bill for witness fees. If the parties are unable to agree on the claimants' outstanding costs of this review, they may make further application to the board. For future reference, if necessary, I would observe that in my view the claimants are entitled to the reasonable costs they incurred on this review but I would question the necessity of having either Mr. Sangha or Mr. Symes attend in person for the purpose of giving oral testimony when sworn affidavits as to the matters they briefly addressed would likely have sufficed.