File No.: M/M/206/96

IN THE COURT OF QUEEN'S BENCH OF NEW BRUNSWICK

TRIAL DIVISION

JUDICIAL DISTRICT OF MONCTON

B E T W E E N:

RICHARD WINSLOW MCLEOD and

SHIRLEY LYNN MCLEOD,

Applicants

- and –

THE PROVINCE OF NEW BRUNSWICK,

Respondent

BEFORE: The Honourable Mr. Justice George S. Rideout

HEARD: JUNE 16, 2000

DECISION: JUNE 22, 2000

APPEARANCES: Rick F.T. Nesbitt , on behalf of the Applicants

Marie T. Berube, on behalf of the Respondent

RIDEOUT J.

Richard and Shirley McLeod were owners of property in Penobsquis, New Brunswick. A portion of their property was expropriated for the new four lane highway between Moncton and Saint John. There was a dispute between the parties as to the appropriate compensation for the expropriated property. I gave my reasons for judgment on February 25, 2000 and those reasons can be found at [2000] N.B.J. No. 86.

At the conclusion of the trial of this matter the Province of New Brunswick requested that they be given an opportunity to speak to costs and interest once reasons for judgment were given. Apparently, attempts to settle these issues failed and the parties are back before me for a determination of costs and interests.

FACTS

The Province of New Brunswick expropriated approximately 24 acres of Richard and Shirley McLeod’s property. At the time of expropriation the property was used as a woodlot and for eco-tourism uses. As is required, the Province tendered $5,393.00 as compensation for the expropriation. The McLeods launched these proceedings in order to receive a greater sum for the 24 acres. The McLeods hired a real estate appraiser who valued the property including injurious affection at $103,500.00. It was valued as blueberry land.

After hearing all of the evidence I was of the view that the 24 acres was worth $35,540.00 including an allowance for injurious affection.

In the hearing on costs and interest, the court learned that there were a number of attempts by both sides to settle the value of the property taken. However, there was only one formal offer pursuant to the Rules of Court and 52.1 of the Expropriation Act, R.S.N.B. 1973 Ch E-14. This offer of settlement was made by the Province approximately a month before the trial and was in the amount of $28,059.00 plus interest.

Solicitors for the McLeods have provided the court with their detailed legal account plus the accounts of the real estate appraiser. However they have not supplied any affidavit evidence verifying the costs only their expenses. In their correspondence to the court the solicitors outline their request as follows:

We submit the total amount payable to Patterson, Palmer, Hunt, Murphy in trust is broken down as follows:

The amount of the court order	$35,540.00
Appraisal finance charges	$5,749.92
SNB Wood Cooperative	$362.25
Interest at 30% [6% for five years]	$12,495.65
Patterson, Palmer, Hunt, Murphy	$201,228.01
W.H. Goodwin account	$83,350.24
TOTAL	$338,726.07
Less amount paid per statutory offer	$5,393.00
	$333,333.01

There were a few aspects of this matter which were resolved prior to the actual hearing on costs and interest. The McLeods hired the SNB Wood Cooperative to evaluate the wood on the 24 acres expropriated. Their cost was $362.25. The Province has agreed to pay this sum.

In my award of $35,540.00 was included the sum of $3,000.00 as reimbursement of Mr. McLeod’s time as he is self-employed on his woodlot. I said in my reason as follows:

Therefore, admittedly on a somewhat arbitrary basis I would allow 200 hours at $15.00. the rate has been accepted in other cases and 200 hours seems reasonable. This would result in compensation of $3,000.00. . .

The McLeods argue that Mr. McLeod would be entitled to interest on this amount.

At the hearing of this matter the parties agreed to all other aspects of interest except for the interest on the $3,000.00. It was agreed that the outstanding interest (save the interest on the $3,000.00) as well as the $3,000.00 would total $15,228.89. However, the McLeods are asking for a ruling on the interest on $3,000.00.

It was agreed and I ordered at the hearing that the province pay to the Applicants $362.25 and $15,228.89 on or before June 30, 2000. The interest was calculated up to that date.

Another issue raised at the hearing was the inclusion of travel and accommodation expenses for Douglas Caldwell, Q.C., one of the counsel for the McLeods. It was agreed that included in the fee account of $201,228.01 was an amount of $12,339.50 for time, travel and accommodation. This figure was subsequently amended. Mr. Caldwell is a lawyer with the firm Patterson, Palmer, Hunt, Murphy who maintains his office in Truro, Nova Scotia. The Province of New Brunswick has asked for a ruling as to whether the Province must compensate the travel time and expenses.

There was also included in the request an amount of $5,749.92 which would reimburse the McLeods for interest cost on a loan used to pay a portion of the appraiser’s fee account. The parties agreed that the sum of $5,749.92 was the amount of interest owing up to the last day of trial namely January 20, 2000. It was further agreed that the per diem rate is $7.00.

ISSUE

The court is asked to determine reasonable legal, appraisal and other costs incurred by the McLeods.

ANALYSIS

The right to be compensated for legal and appraisal costs is derived from the Expropriation Act. It is based on the proposition that the taking of property is the ultimate exercise of government authority and constitutes a significant interference with a citizen’s property rights – Dell Holdings Limited v. Toronto Area Transit Operating Authority 1997 CanLII 400 (S.C.C.), [1997] 1 S.C.R. 32. Consequently, the person whose property has been taken should be compensated both for the loss of property and the costs to establish this loss.

This right to costs is contained in Section 52 of the Expropriation Act:

52(1) The Court shall award costs on the basis of the following rules, namely:

(a) where the compensation awarded by the Court exceeds the amount offered by the statutory authority, the statutory authority shall pay the legal, appraisal and other costs reasonably incurred by the owner in asserting his claim to compensation, and

(b) where the compensation awarded by the Court does not exceed the amount offered by the statutory authority, the costs shall be in the discretion of the Court on such basis as the Court considers just,

and the Court shall determine what are reasonable costs and shall fix the amount of costs to be paid by or to the statutory authority.

52(2) For the purposes of subsection (1), the Court shall have regard to the most recent offer of settlement of the compensation payable, if any, made by an expropriating authority or a statutory authority not less than ten days before the commencement of the hearing in respect of the notice of arbitration or, where the hearing is adjourned, not less than ten days before the hearing reconvenes.

52(3) Subsection (2) applies

(a) to proceedings in respect of any notice of arbitration outstanding on the commencement of this subsection, where the proceedings have not been settled or there has been no final judgment on the commencement of this subsection, and

(b) to proceedings in respect of any notice of arbitration filed or served after the commencement of this subsection.

Section 52.1 of the Act deals with other offers of settlement.

52.1(1) An expropriating authority or a statutory authority may at any time make an offer of settlement of the compensation payable in response to a notice of arbitration.

At the hearing of this matter counsel for the McLeods argued that I should disregard the formal offer made by the Province prior to the trial . It was submitted that there is no provision for a formal offer pursuant to the Rules of Court and in any event the offer was not accompanied with the cash so it was invalid under the Expropriation Act.

Sections 52.1 and 52(2) of the Act clearly contemplate the making of offers. In fact the parties should be encouraged to resolve these matters prior to trial. I was not pointed to any prohibition which would preclude the filing of a formal offer under Rule 49 of the Rules of Court. I am therefore of the view that the court can consider such an offer.

That being said the offer was approximately $7,000.00 less than the decision of the court. Consequently, the effects of Rule 49.09 would not be applicable on the calculation of cost. However, Rule 49.11 would and it provides:

Notwithstanding the provisions of this rule, the court, in exercising its discretion as to costs, may take into account any offer to settle made in writing, the date the offer to settle was served and the terms thereof.

The Court of Appeal also gives guidance in McAllister v. Cleary 1999 CanLII 13121 (NB C.A.), (1999) 213 N.B.R. (2d) 156. The facts of this case are somewhat different. The Applicant was requesting a taxation of a lawyer’s account. The taxation was carried out under the Law Society Act, S.N.B. 1996, ch. 89 and the Rules for the Review of Lawyers Bills. However the central issue is the same namely the determination if the fees claimed were just and reasonable in light of all the circumstances. The matter went first to a reviewing officer, then to a judge of the Court of Queen’s Bench and finally to the Court of Appeal. Drapeau, J.A. says in paragraphs 44, 45 and 46:

[44] In taking a global view of the account and in approving and allowing fees of $3,900, Ms. Finn exercised her discretion in a manner that was both consistent with a long standing tradition and faithful to the Act. See McKinley v. Atkinson (1980), 27 N.B.R. (2d) 178; 60 A.P.R. 178 ((Q.B.), per Dickson, J.) and Noel v. Bell (1997), 188 N.B.R. 109; 480 A.P.R. 109 (Q.B.), at p. 118, para.27 (per Larlee, J., as she then was). In my view, she made no error in principle in arriving at her conclusion.

[45] Moreover, I am satisfied that Ms. Finn’s written order sets out her decision with reasons as required by rule 8(1). In her reasons, Ms. Finn recites the relevant facts and reviews the account including the nature of the services and the time and fees claimed. She then sets out her findings of fact with respect to the global fairness and reasonableness of the fees claimed, and she applies her experience and judgment in approving and allowing just and reasonable fees. She was not, contrary to the view expressed below, required to specify which “ items and [. . .] the exact times that gave her difficulty.” Nor was she required “to specify which items were not reasonably necessary and proper . . . ”. As noted earlier, a global assessment was proper. There is nothing in the Act or the Rules that required her, In the circumstances, to be more verbose than she was.

[46] In my view, a reviewing officer fully complies with his or her duty under the Act and the Rules if, as was done here, he or she hears the parties, reviews the lawyer’s file, applies the pertinent factors to a consideration of the account and provides reasons that articulate, at least in general terms, a rational connection between those salient factors and his or her exercise of discretion. (Underlining added)

In the case before this court we have a situation where the McLeods have submitted that they are entitled to legal costs, appraisal costs and other costs which are almost nine times greater than the value of the land as awarded by the court. Even if the court were to have accepted the McLeod valuation, costs would still would have been three times that valuation.

That being said, I have no doubt that the lawyers and appraisers spent the hours they indicate in their accounts. I am sure that from their perspective they feel their accounts are justified and reasonable. But that is not the issue. The issue is what is reasonable in the circumstances of this case. With all due respect, I do not believe that this case was that difficult. There were complexities but not to the extent suggested by the size of the accounts.

Rule 59.02 of the Rules of Court gives factors which the Court may consider. The Rule provides:

59.02 Costs of a Proceeding

In fixing costs, the court may consider

(a) the amount claimed and the amount recovered,

(b) the apportionment of liability,

(c) the complexity of the proceeding,

(d) the importance of the issues,

(e) the conduct of any party which tended to shorten or unnecessarily lengthen the duration of the proceeding,

(f) the manner in which the proceeding was conducted,

(g) any step in the proceeding which was improper, vexatious, prolix or unnecessary,

(h) any step in the proceeding which was taken through over-caution, negligence or mistake,

(i) the neglect or refusal of any party to make an admission which should have been made,

(j) whether or not two or more defendants or respondents should be allowed more than one set of costs, where they have defended the proceeding by different solicitors, or where, although they defended by the same solicitor, they separated unnecessarily in their defence,

(k) whether two or more plaintiffs, represented by the same solicitor, initiate separate actions unnecessarily, and

(l) any other matter relevant to the question of costs.

In Mikalda Farms Ltd v. Regional Municipality of Halton (1998) 67 L.C.R. 138 the assessing officer of the Ontario Court (General Division) considered an assessment of legal and appraisal costs. In this case the property’s full compensation for market value, disturbance damages and injurious affections was $310,000.00. Counsel submitted a bill of costs for $556,693.00 which the reviewing officer reduced to $233,824.11. The reviewing officer said at pages 142 and 143:

In fact, it should be said here that in assessing the accounts before me which were quite a few, especially the experts, that I have considered some of the factors enunciated in rule 58.06(1) of the Rules of Civil Procedure.

(a) the amount involved in the proceeding;

(b) the complexity of the proceeding;

(c) the importance of the issues;

(d) the duration of the hearing and

(e) whether any step in the proceeding was,

(i) unnecessary, or

(ii) taken through excessive caution

I have also considered eight of the nine factors approved by the Court of Appeal in Cohen v. Kealey & Blaney (1985), 26 C.P.C. (2d) 211 (Ont. C.A.), being:

1. The time expended by the solicitors;

2. The legal complexity of the matters dealt with;

3. The degree of responsibility assumed by the solicitor;

4. The monetary value of the matters in issue;

5. The importance of the matters to the client;

6. The degree of skill and competence demonstrated by the solicitor;

7. The results achieved;

8. The reasonable expectation of the client as to the amount of the fee.

In the case before the court we are dealing with a straight forward expropriation of 24 acres of land for a highway. The only complicating aspect was the determination of the highest and best use of the property. Originally the Province determined its highest and best use to be a woodlot but subsequently the applicants successfully argued that it should be used for the cultivation of blueberries.

I am of the view that the matter was not so complex that it required the time expended by the lawyers. This is particularly so when one considers the monetary value of the matter, accepting either the judgment or the value as determined by Mr. Goodwin. Coupled with these factors is the fact that Mr. Caldwell is senior counsel with years of experience in expropriation and compensation cases. In fact he has written articles in the area. His curriculum vitae says:

Douglas A. Caldwell, Q.C., is a partner with the Atlantic Canada law firm of Patterson Palmer Hunt Murphy. Mr. Caldwell has been in practice for 24 years and has made a specialty of commercial litigation, including valuation of businesses and commercial properties in connection with expropriations, property tax assessments and income tax prosecutions. He is a co-author of a paper presented to the Regional Conference of the Canadian Institute of Chartered Business Valuators held in Ottawa, Ontario, in October 1991, entitled “Valuation of Special Purpose Industrial Property: Quantifying Economic Obsolescence Using Business Valuation Techniques”, co-authored with Brian Keough, CBV.”

It is my view that Mr. Caldwell should have been able to handle this matter more expeditiously and perhaps should not have needed the assistance of co-counsel or to a far lesser degree. The information submitted by the Province indicates that Mr. Nesbitt did not examine many of the witnesses at discovery and that was certainly the case at trail.

The solicitor for the Province carried out an extensive review of the legal account and appraisal fee. She points out that in addition to the two lawyers involved in the matter the law firm used ten support staff made up of paralegals and secretaries. Mr. Caldwell billed 459.6 hours while Mr. Nesbitt billed 345.7 hours. While all of these hours were being billed, and ten support staff were beavering away on the file, the lawyers knew that their appraisers report indicated a value of the property of a little over $100,000.00.

After a review of all the material supplied and considering the complexity of the matter, I feel that the account of Patterson Palmer Hunt Murphy to be excessive and unreasonable.

In addition, Mr. Caldwell was aware that Mr. Goodwin was not experienced in business valuation. However, a large portion of his report consisted of two business proforma scenarios for blueberry production. Mr. Goodwin at trial was not qualified to give expert opinion in the field of business valuation. Again, counsel for the Province analysed the account of Mr. Goodwin and concluded that 55% of his report related to the preparation of his business proforma calculation. As was pointed out in my reasons for judgement, there were numerous errors in these calculations which required recalculation. As well we do not have justification for the time spent at discovery and at trial by Mr. Goodwin.

In the circumstances of this case I find that Mr. Goodwin’s account is excessive and unreasonable.

The court is left with the difficult task of balancing what is reasonable without creating a situation which makes it impossible for citizens to counter a valuation prepared by an expropriating authority. If the latter were to occur then only the rich could fight the government. The intention of section 52 of the Expropriation Act is to fully compensate a citizen for reasonable costs and the court should err on the side of the person whose land was expropriated.

Considering the formal offer of settlement which was made, the complexity of the matter, the competence of counsel and the appraiser, the possible monetary value for the land taken as well as the results actually achieved, I am of the view that the accounts of the lawyer and appraiser must be reduced substantially. I am further of the view that the only way to adequately finalize these costs is on a global basis – McAllister v. Cleary supra.

Prior to making the global assessment, I am required to deal with Mr. Caldwell’s travel and accommodation expense. While I acknowledge Mr. Caldwell’s expertise and experience in this area of the law, I find it difficult to believe that competent New Brunswick counsel was not available. It is sometimes the case that counsel in New Brunswick must travel to other judicial districts. I am unaware of such travel and accommodation expenses being appropriate expenses to be born by an unsuccessful litigant. I have previously ruled in Ross v. New Brunswick Teachers Association [2000] N.B.J. No. 34 that such expenses are not appropriate and I, therefore, disallow Mr. Caldwell’s travel and accommodation expenses.

In the Bill of Costs of the Applicant certain expenses are set out. I proposed to deal with each one of those.

1. Summons to witness fees	$143.60	Allowed
2. Process Service fees	$127.40	Allowed
3. Travel, Meals, Parking & Accommodation	$6,716.24	Disallowed
4. Other Expenses	$6,7116.24	Allowed
5. Discovery Transcripts	$3,247.03	Allowed

This resulted in the total allowable expenses of $9,575.06. Following the hearing the Applicants advised that the travel, meals, parking and accommodation figure had been reduced. Because I have not allowed any amount under this heading nothing changes.

Another issue to be resolved relates to interest to be paid for Mr. McLeod’s time. In my reasons for judgment I allocated $3,000.00 for this times. This was an arbitrary amount. I believe $3,000.00 was fair compensation to McLeod. It would also be difficult to determine the interest because the time was accumulated over the life of the matter. I therefore, disallow interest on the $3,000.00.

Finally there is the matter of the interest cost incurred by Mr. McLeod to pay a portion of the appraisers fees. I am of the view that this is not an appropriate expense. The Province will be paying interest on the amount awarded which is sufficient and the appraiser and the lawyers should wait for their fees because they are almost guaranteed their reasonable fees under the legislation.

As I indicated earlier, I intend to give a global figure for legal and appraisal cost which I believe to be reasonable in this case. I find that $55,000.00 is an appropriate amount for legal fees. Added to that amount would be H.S.T. and the allowable expenses outlined above makes the total $72,825.06. I have considered the appraisal costs and conclude that the sum of $25,000.00 inclusive of expenses plus H.S.T. is reasonable and appropriate which makes a total appraisal account of $28,750.00.

Mr. Caldwell in his article “Forensic Expropriations “ says:

Notwithstanding that the client hopes to pass on all of the expert’s account to the expropriating authority, the authority is usually only responsible for paying all “reasonable” accounts of experts. There may be excess charges in the expert’s account which are not recoverable from the authority and which may well have to be borne by the client. This, too, needs to be stipulated in the retainer agreement. What is reasonable must be distinguished from what is excessive, i.e. not recoverable even from the client.

I found that the legal and appraisal cost were excessive. Consequently the cost not approved herein should not be recoverable from the McLeods.

DISPOSITION

I order the Province of New Brunswick pay the following to Richard Winslow McLeod and Shirley Lynn McLeod.

a) the sum of $362.25 on or before June 30, 2000.

b) the sum of $15, 228.84 on or before June 30, 2000.

c) the sum of $72,825.06 within a reasonable time.

d) the sum of $28,750.00 within a reasonable time.

________________________

George S. Rideout

Justice of the Court of Queen's Bench of New Brunswick

June 22, 2000