Judgments

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T-4100-77
Hillsdale Golf & Country Club Inc. (Petitioner)
v.
The Queen (Respondent)
Trial Division, Walsh J.—Montreal, December 18; Ottawa, December 22, 1978.
Practice — Costs — Expropriation proceeding — Pro nouncement awarding costs including fees and disbursements of experts and costs of exhibits — Appraisal report prepared for negotiations for compensation for expropriated golf course — Expropriation abandoned five years later but subject to perpetual servitude prohibiting residential development — Second appraisal report prepared determining adverse finan cial effects of expropriation and calculating diminution of property value because of servitude — Petition for directions or for order prescribing global sum in place of costs — Expropriation Act, R.S.C. 1970 (1st Supp.), c. 16, s. 27 — Federal Court Rule 344(7), Tariff A, s. 4(2), Tariff B, s. 2(2).
This is a petition for directions concerning costs in these expropriation proceedings or for an order prescribing the pay ment of a global sum in the place of costs. The subject property, a luxury golf course, was expropriated for the con struction of Mirabel Airport. Plaintiff, preparing for the negotiations to determine the compensation payable, expended a substantial sum for a thorough and detailed evaluation report. The expropriation, after five years' negotiation, was abandoned, but subject to the imposition of a perpetual servitude prohibit ing any use of the property for residential development. A new and entirely different appraisal report became necessary to determine the adverse financial effects of the expropriation during that five-year period and to calculate the diminution in value of the property because of the imposition of the servitude. The eventual judgment awarded $180,000 less $45,000 credit for taxes during the five-year period the Crown owned the land due to the expropriation, with "costs including fees and dis bursements of experts and costs of exhibits."
Held, the plaintiff's disbursements in respect of its expert witnesses are to be taxed. The pronouncement is quite clear that the question of fees and disbursements of experts and costs of exhibits was intended to be included as an item in the bill of costs. In determining what is a reasonable amount, all the surrounding circumstances should be taken into account by the taxing officer. The appropriate direction to be given is that, while it would be inappropriate to tax the entire amount paid for the two appraisal reports in the costs to be paid by defendant on a party and party basis, especially as half of that amount was of no direct use in the present proceedings, a substantial part of the amount expended could be considered as reasonable, especially that part pertaining to the actual pro ceedings brought. The pronouncement did not provide for a
lump sum and the Court cannot now prescribe one as it would constitute a change in the pronouncement. The Court directs, without attempting to make an order establishing the amount of the costs, that the low and unrealistic sums provided in the tariff be increased so as to provide part, but not full, compensa tion to plaintiff for the disbursements for experts and for counsel's fees in these proceedings.
Smerchanski v. Minister of National Revenue [1979] 1 F.C. 801, applied.
APPLICATION. COUNSEL:
Pierre Pinard for petitioner. Gilles Fafard for respondent.
SOLICITORS:
Viau, Bélanger, Hébert, Mailloux, Pinard, Denault & Legault, Montreal, for petitioner.
de Grandpré, Colas, Amyot, Lesage, Des- chènes & Godin, Montreal, for respondent.
The following are the reasons for judgment rendered in English by
WALSH J.: This is a petition for directions con cerning costs in these proceedings or for an order prescribing the payment of a global sum in place of costs. The problem of what constitutes appropri ate sums to be allowed in lieu of taxed costs and the proper procedure to be followed for allowing them has become a difficult and controversial question which frequently misleads counsel for the parties in view of what was, at least until recently, conflicting jurisprudence. Amounts substantially in excess of the tariff, which in my view is unreal istic and outdated by contemporary standards save for the relatively few cases in this Court where the amounts involved and the time and effort expend ed are small were allowed by Kerr J. in the case of Aladdin Industries Inc. v. Canadian Thermos Products Limited', and in a judgment I rendered in the case of Crelinsten Fruit Company v. Mari time Fruit Carriers Co. Ltd. [1976] 2 F.C. 316, in which although I substantially reduced the amounts claimed calculated on a time basis the amount involved was still greatly in excess of the tariff. I adopted the same policy in the case of The
' [1973] F.C. 942.
Trustee Board of the Presbyterian Church in Canada v. The Queen Court Nos. T-908-74 [[1977] 2 F.C. 107] and A-404-74 a judgment dated December 2, 1976, which unlike the other two cases referred to was an expropriation action although one which proceeded under the new Act. 2 In the Crelinsten case I had referred to a Court of Appeal judgment in the case of Crabbe v. Minister of Transport 3 , as well as to the Thermos case and also to the Court of Appeal judgment in the case of Bourque v. National Capital Commission 4 in which Jackett C.J. at page 530 after referring to paragraph 4(2) of Tariff A and paragraph 2(2) of Tariff B of the Federal Court Rules stated in parenthesis:
(It is true that this provision contemplates a direction from the Court within a time that has expired in this case but we have no doubt that such time would be extended, in the circumstances of this case, under Rule 3(c).)
The question was also raised in the case of Benmar Development Corporation v. The Queen Court No. T-935-71, an expropriation similar to the present case in that it was brought under the former Expropriation Act, R.S.C. 1970, c. E-19 and that instead of dealing with the amount to be allowed in an expropriation was concerned with the amount to be awarded as a result of the subse quent abandonment of same by the Crown. I had rendered the judgment in that case dated Decem- ber 17, 1971, which allowed $265,000 less amounts which had already been paid and interest and merely concluded "the whole with costs". In due course costs were taxed by the taxing officer, including costs of experts (who happened to be the same experts as in the present case) in the amount of $33,641.99 which was treated as a disburse ment, the total taxation coming to $36,066.99. An application for revision of this taxation was made by defendant and an order made by Addy J. requiring that further particulars be furnished and adjourning the revision sine die. After the particu lars were furnished a settlement was made where by the sum of $27,687.19 was paid by agreement between the parties.
2 R.S.C. 1970 (1st Supp.), c. 16.
3 [1973] F.C. 1091.
4 [1972] F.C. 527.
In the recent Court of Appeal case of Smer- chanski v. Minister of National Revenues Jackett C.J. sitting alone on an application for an order concerning costs gave the whole question of proce dure careful consideration and in an Appendix criticized the decisions in the Crelinsten Fruit and Thermos cases (supra). This judgment together with the Crabbe judgment (supra) must be con sidered as a definitive finding on the question of procedure and quantum. I have also had the ben efit of reading the recent judgment of Thurlow A.C.J. in the case of Parsons v. The Queen Court No. T-463-77 in which he concluded that on the material before him it would be difficult to regard the appropriate allowance as capable of estimation save on a rough and ready basis but that he was satisfied that the $35 provided for in paragraph 4(1) of Tariff A was not appropriate for that case and that paragraph 4(2) should apply. He then
directed that pursuant to Rule 344(7) and sub- paragraph 2(2)(a) of Tariff B disbursements to an expert witness should be taxed at a reasonable amount for the services performed in preparing for and giving evidence at trial due regard being had to the amount of damages recovered in the action, to the question of reasonableness in the circum stances of the extent of the time spent by the witness in preparing himself to give evidence and to the reasonableness of the rate to be paid for such time.
Rule 344(7) reads as follows:
Rule 344... .
(7) Any party may
(a) after judgment has been pronounced, within the time allowed by Rule 337(5) to move the Court to reconsider the pronouncement, or
(b) after the Court has reached a conclusion as to the judgment to be pronounced, at the time of the return of the motion for judgment,
whether or not the judgment includes any order concerning costs, move the Court to make any special direction concerning costs contemplated by this Rule, including any direction con templated by Tariff B, and to decide any question as to the application of any of the provisions in Rule 346. An application under this paragraph in the Court of Appeal shall be made before the Chief Justice or a judge nominated by him but either party may apply to a Court composed of at least 3 judges to review a decision so obtained.
5 Supra, page 801.
Paragraph 4(2) of Tariff A reads:
4. ...
(2) In lieu of making a payment under section 3, there may be paid to a witness who appears to give evidence as an expert a reasonable payment for the services performed by the witness in preparing himself to give evidence and giving evidence.
Paragraph 2(2) of Tariff B reads:
2. The following may be allowed unless the Court otherwise directs:
(2) Disbursements:
(a) all disbursements made under Tariff A may be allowed, except that payments to a witness under para graph 4(2) may only be allowed to the extent directed by the Court under Rule 344(7).
(b) such other disbursements may be allowed as were essential for the conduct of the action.
Section 3 reads:
3. No amounts other than those set out above shall be allowed on a party and party taxation, but any of the above amounts may be increased or decreased by direction of the Court in the judgment for costs or under Rule 344(7).
With regard to revision of judgments Rule 337(5) and (6) is to be referred to.
As I understand the present state of the law following the Smerchanski judgment is as follows:
1. If the Court in rendering judgment merely gives judgments for costs to be taxed it cannot subse quently substitute a lump sum unless by way of reconsideration of the judgment for a reason that falls within one of the classes of a case to be found in Rule 337(5) or (6).
2. In dealing with the subsequent taxation of costs pursuant to section 3 of Tariff B and Rules 344(7) and 350(3) Jackett C.J. states at page 803:
In my view this cannot change the nature of the order that may be sought as set out in the notice of motion without the acquiescence of the opposing party and the Court and it cannot be said that there was any acquiescence on the part of the opposing party during the hearing of this application.
While this is the rule it is not applicable in the present case where counsel for defendant at the hearing of the present motion before me
acquiesced to the application of section 3 of Tariff B and Rule 344(7) as well as to the waiver of any delay for presentation of a motion for revision of the judgment pursuant to Rule 337, conceding that the Tariff does not represent reasonable remunera tion either for the experts or for plaintiff's counsel in the particular circumstances of this case.
3. With respect to the application of Rule 350(3) which reads as follows:
Rule 350... .
(3) Where, for any reason, there would otherwise be a delay in the taxation of a bill of costs, if a judge finds that he can do so without interfering with his judicial duties, he may tax the bill of costs as if he were a prothonotary.
this is intended to be used only in the case where a judge is sitting at a place where there is no author ized taxing officer available or if it is some compa rable exceptional case and does not entitle a party as of right to taxation of costs by a judge instead of taxation by a regular taxation officer. This is not an issue in the present case where there is a regular taxation officer available in Montreal.
4. Any special Court directions changing the tariff amount contemplated by section 3 of Tariff B should be obtained before the taxation procedure is proceeded with so that such direction will be available to support the amounts claimed in the bill of costs at the time of the taxation.
5. Reading Rule 344(7) with Rule 337(5) it is contemplated that an application for a direction increasing costs should be made while the matter is sufficiently fresh in the mind of the Court that the Court is in a position to appreciate whether there were present in the particular case circum stances justifying a departure from the normal tariff amount.
In the present case unlike the Smerchanski case there has been no unreasonable delay. The judg ment was pronounced on October 3, 1978, and the matter is still fresh in my mind. Moreover, as already indicated defendant's counsel acquiesces so that no formal motion under Rule 337 is neces sary. The motion for directions before me requests the Court to render whatever order is deemed advisable concerning the adjudication of costs, which would include the revision of the pronounce ment if necessary.
6. In expressing his views as to the reasons for making a direction such as is sought here the learned Chief Justice stated at page 805:
Nothing has been put forward to suggest that there was anything in the conduct of the appeal to warrant any increase in the party and party tariff. While there is no principle with reference to the basis for ordinary party and party costs that is apparent to me from a study of the relevant Rules, it does seem to be clear that party and party costs are not designed to constitute full compensation to the successful party for his solicitor and client costs.
and again at page 806:
If Federal Court party and party costs are not designed to provide full reimbursement, as it seems to me, what is intended is that they be made up of the completely arbitrary amounts fixed by or in accordance with the rules subject to variations (where authorized) based on factors arising out of the conduct of the particular proceeding.
7. As appears by the Appendix of the Smerchan- ski case it is the view of the Chief Justice that Rule 344(7) authorizes applications for special directions to be carried out on the taxation of costs but does not authorize applications to change the pronouncement of a judgment or a judgment after it has been signed.
8. Again from the Appendix on a review of taxa tion under Rule 346(2) the Crabbe case decided that the Court can merely decide whether the taxing officer erred in performing his duties but can neither change the Court's judgment nor make a directional order contemplated by Rule 344 or section 3 of Tariff B.
It is now necessary to review briefly the very unusual situation which arose in the present case. The property in question was a luxury and expen sive golf course in the area expropriated for con struction of the Mirabel Airport north of Mon- treal. Golf courses present exceptionally difficult problems in evaluation and plaintiffs retained the services of Warnock. Hersey who prepared a very thorough and detailed evaluation report. At the time the Crown was offering approximately $2,000,000 for the property in question whereas, as a result of the report plaintiff was seeking approximately $4,000,000. About $25,000 of the Warnock Hersey account rendered in due course to plaintiffs was for this work and certainly the amount in issue would justify the expenditure of this much time in preparation for negotiations as to the amount to be awarded and in anticipation of
the likelihood of eventual court proceedings to establish the amount. Negotiations went on for nearly five years during which the members of the golf club were not certain how long they would be able to operate it as such, with resultant loss of new members' entrance fees, and delay of neces sary capital expenditures which subsequently became more costly. Eventually in September 1974 the Minister of Transport decided to aban don r the expropriation which had taken place in 1969, but subject to the imposition of a perpetual servitude prohibiting any use of the property for residential development. This would enable the golf club to retain ownership of the property and be able to continue to operate until anticipated increases in taxation would make this impossible, but subject to the severe handicap of not being able to sell any of the peripheral property around the golf course for residential development and additional revenue.
The experts then had to prepare an entirely different type of appraisal report which they did again at great length and in great detail, making a study of the demise of golf courses in the Montreal area and the value which the bare land used by them had reached for taxation purposes at the date they could no longer continue, making a study of zoning regulations in the Mirabel area and prop erty values there with the view of attempting to estimate at what time in the future taxation of the subject property would have reached the point where use as a golf course would have to cease, attempting to foresee the possible value of the property at such date, calculating the present worth, examining membership trends and loss of revenue from entrance fees and members' accounts during the period of uncertainty between the expropriation and the abandonment, calculating the increased cost of deferred capital expenditures during this five-year period, and trying to calculate the diminution in value of the property as a result of the servitude prohibiting any residential de velopment thereon. This was an entirely different approach and involved very extensive additional research and study by the experts resulting in additional costs to plaintiff of some $25,000. As a
result of this study the amount claimed on the abandonment was now $758,180 while all the Crown was prepared to offer was $49,165.32, again a very wide discrepancy as a result of which plaintiff instituted the present proceedings.
The eventual judgment, although finding the report of the experts as to the amount to be awarded on abandonment too theoretical, as a result of being based on too many variables and imponderables nevertheless found it of some use and the judgment awarded $180,000 less $45,000 credit for taxes which had been paid by the Crown to the exoneration of plaintiff during the time the property was owned by the Crown due to the expropriation.
The pronouncement of judgment read:
Judgment in favour of Plaintiff for $135,000.00 with interest from September 23, 1974 and costs including fees and disburse ments of experts and costs of exhibits.
It will be noted that the judgment did not simply award costs but specifically provided for the fees and disbursements of experts and costs of exhibits. In rendering this pronouncement I did so specifi cally bearing in mind the difference between the former Expropriation Act, R.S.C. 1970, c. E-19, under which the proceedings were conducted and the new Act R.S.C. 1970 (1st Supp.), c. 16. Under the former Act section 33 dealing with costs read as follows:
33. The costs of and incident to any proceedings hereunder shall be in the discretion of the Court, which may direct that the whole or any part thereof shall be paid by the Crown or by any party to such proceeding.
I believe that the words "incident to" are signifi cant as are the words "in the discretion of the Court", and would seem to foresee costs in excess of what would normally be provided in the Tariff provided the Court deemed this advisable. While nothing specifically is said about experts, disburse ments for them might possibly be considered as "incident to proceedings". In the new Act section 27 provides:
27. (1) The Crown shall pay to each person entitled to compensation under this Part an amount equal to the legal, appraisal and other costs reasonably incurred by him in assert ing a claim for such compensation, except any such costs
incurred after the institution of any proceedings under section 29.
as a result of which all the experts' costs and legal costs prior to the institution of the present pro ceedings now form part of the claim and should be so included instead of being taxed after judgment. Moreover section 36 provides that where the amount awarded is greater than the offer made by the Crown and unless a claim is found to be unreasonable costs shall be determined on a solici tor and client basis and paid by the Crown. While I am not of course suggesting in any way that this Act is applicable to the present proceedings as such, the equitable principles enunciated therein were certainly in the mind of counsel for both parties and of the Court which accounts for the wording of the pronouncement, which followed the wording in the conclusion of the statement of claim, in specifically providing that costs should include the fees and disbursements of experts and costs of exhibits none of which had been claimed as items to be included in the award in the state ment of claim as would have been done under the new Act.
With respect to the question of fees and dis bursements of experts and costs of exhibits I believe that the pronouncement is quite clear that this was intended to be included as an item in the bill of costs and there is therefore no need for a reconsideration under Rule 337 on this issue although it may be necessary by way of explana tion as to what I had in mind to specifically make a direction pursuant to Rule 344(7) that pursuant to paragraph 4(2) of Tariff A the experts should be allowed "a reasonable payment for the services performed by the witness in preparing himself and giving evidence". This gives authority to the taxing officer under section 2(2)(a) of Tariff B to allow as a disbursement such "reasonable" payment. In determining what is a reasonable amount all the surrounding circumstances should be taken into account by the taxing officer. The account of Warnock Hersey in this case amounts to $50,478.03 of which, as already stated about $25,000 was in preparation for the negotiation of settlement or a trial of the matter on the issue of the value of the property. In the long run this evidence proved unnecessary, but this is no fault of the experts nor of plaintiff's counsel who had
instructed them to prepare on this basis, the change in the nature of the claim being the result of the abandonment five years later by the expro priation authorities which led to an entirely differ ent appraisal involving approximately $25,000. The account is supported in great detail by exhib its showing the time spent, the average daily fees varying between $114 and $185 and the hourly rates of the appraisal teams varying from $10 an hour for juniors to approximately $12 for techni cians, $15 for intermediates and $35 for seniors. These charges do not appear to be excessive or unreasonable. However in the result whereby the net award was only increased by some $85,000 over the Crown's offer the charge would clearly be out of line with the results obtained. It would be inappropriate for the Court to make a finding as to whether as a consequence the charges made by the experts to plaintiff should be or would be reduced. This is a matter for possible negotiation between them. It appears to me that the appropriate direc tion to be given to the taxing officer in this case is therefore that while it would be inappropriate to tax the entire amount of $50,478.03 as a disburse ment to the experts in the costs to be paid by defendant on a party and party basis especially as one half of this was of no direct use in the present proceedings it would certainly seem that a sub stantial part of it could be considered as "reason- able", especially that part pertaining to the actual proceedings brought.
When we come to the question of costs of plaintiff's attorneys the situation is more difficult in that the pronouncement did not provide for a lump sum and the Court cannot now do this as this would constitute a change in the pronouncement. The fact that the Court did not do so was perhaps, as defendant's counsel admits the result of an error in law induced by him. He conceded that at some stage during the course of the trial plaintiffs counsel suggested that judgment be sought from the Court to award costs in a lump sum and that defendant's counsel indicated that he did not con sider this necessary as the question of what con stituted reasonable fees for plaintiffs counsel could be taken care of on taxation. In any event no such order was sought but had it been sought I
would readily have acceded to it. I seriously doubt however whether this constitutes a matter which would justify the variation of the pronouncement by Rule 337(5)(b) on the ground that it is "[a] matter that should have been dealt with [which] has been overlooked or accidentally omitted". However I do not believe that the jurisprudence excludes me from granting the motion for direc tions and giving special directions to the taxing officer concerning costs. I am not dealing with a review of a taxation nor attempting to make direc tions under Rule 344(7) on such a review as in the cases of Crelinsten Fruit or Thermos which proce dure was found to be unacceptable in the Crabbe and Smerchanski cases, nor am I attempting to make an order establishing the amount of costs myself as was sought in the Smerchanski case rather than having same taxed by the taxing offi cer. I merely propose, with the approval of counsel for defendant, to give certain directions to the taxing officer to enable him to reach a conclusion increasing the amounts set out in the Tariff by applying guidelines which I will now set out.
The account of plaintiff's counsel for $25,000 outlines in detail extensive services commencing in 1971. At least half of these services were in con nection with consultations with his clients, experts, representatives of the Minister, town officials, and others, and negotiations attempting to establish the amount to be paid on expropriation, and it would be unreasonable to conclude that since most of this was a waste of time as the expropriation eventually was abandoned and the action had to eventually be brought on an entirely different basis plaintiffs counsel should not be paid for this. However we are taxing costs which must be taxed on the proceedings which were eventually brought. As in the case of the experts' fees it would be inappropriate for me to attempt to say whether the sum of $25,000 is an appropriate fee for counsel to charge when the eventual judgment in favour of plaintiff was for a net amount of $135,000, only some $85,000 more than the offer. It is of interest to look at Rule 89(1) of the Regulations of the Bar of Quebec establishing a proposed tariff for expropriation matters which reads as follows:
89. (1) In expropriation matters, the suggested extrajudicial fees are as follows:
(a) A fee of one per cent (1%) of the amount of the indemnity (save in cases where the advocate is already entitled to an equivalent fee under the tariff of judicial costs), plus
(b) A fee of ten per cent (10%) of the difference between the amount of the indemnity and the amount of the initial offer made by the expropriator or, when the expropriator has made no offer, the difference between the amount of the indemnity and the minimum amount established by the experts acting for the expropriator.
If this tariff were applied the appropriate extrajudicial fee would then be in the neighbour hood of $9,850. This tariff is of course in no way binding on this Court. The taxing officer should bear in mind, moreover, the admonition of Jackett C.J. in the Smerchanski case that party and party costs are not designed to provide full reimburse ment, the tariff costs not being designed to provide complete compensation for the successful party for the costs incurred by him in the litigation. It would obviously be unreasonable however on the facts of the present case to expect the plaintiff which, though successful in its proceedings, has already had its claim substantially reduced by the judg ment to the amount of $135,000, to have to pay $50,000 for experts' and $25,000 for legal fees to obtain this award, leaving a very small balance indeed. It is for that reason that I direct that the very low and unrealistic sums provided in the tariff be increased so as to provide part, but not full, compensation to plaintiff for the disbursements for experts' and for counsel's fees in these proceedings. Moreover it might be added that this is the manner in which the claims of all other parties expropriated in the Mirabel Airport expropriations were dealt with, before the judgment in the Smer- chanski case, and while there is no principle of law that error, (if indeed these taxations were errone ously made) made in previous cases must be per petuated, and that a different procedure cannot be adopted in later cases as a result of a judgment of a higher tribunal, it would appear discriminatory to plaintiff, if as a result of a different reasoning in its case it should be allowed costs only pursuant to the very small amounts set out in the Tariff.
ORDER
The time for bringing this application is, extend ed to today and it is directed, pursuant to Rule 344(7) and paragraph 2(2) of Tariff B that plain tiffs disbursements in respect of its expert witness be taxed and allowed under paragraph 4(2) of Tariff A at a reasonable amount for the services performed by the witness in preparing to give evidence and giving evidence at the trial, due regard being had to the amount of the award made in the action, to the question of the reasonableness in the circumstances of the extent of the time spent by the experts preparing to give evidence and to the reasonableness of the rate to be paid for such time, as well as for the time required to attend the trial and give evidence, and furthermore that pur suant to Rule 344(7) and paragraph 2(3) of Tariff B fees of plaintiffs counsel be taxed at an increased amount due regard being given to the amount of the award in the action, the question of the reasonableness of the extent of the time spent by counsel in connection with the present proceed ings, the reasonableness of the rate to be paid for such time, and the minimum amount which he would have been entitled to have claimed as extrajudicial fees if the tariff for expropriation proceedings applicable in the Province of Quebec were applicable, but also bearing in mind that the amount so awarded is not intended to provide complete compensation to the successful party for all costs incurred in the litigation but only a reasonable portion of same. Costs of this motion may be taxed as part of the costs.
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