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Ottawa, 2 July 1991
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Taxation Order CRTC: 1991-3
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In re: The Island Telephone Company Limited - Revenue Requirement for 1990 and 1991
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Ian Lawson, for the Rural Dignity of Canada (P.E.I. Chapter), Social Action Committee, P.E.I. Council for the Disabled, Alert on Welfare and P.E.I. Senior Citizens Federation (Rural Dignity et al.).
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Ronald J. Keefe, for The Island Telephone Company Limited (Island Tel).
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TAXATION OF COSTS OF RURAL DIGNITY ET AL.
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Taxing Officer: Sheridan Scott
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This order constitutes the taxation of costs awarded to Rural Dignity et al. in the case of The Island Telephone Company Limited - Revenue Requirement Proceeding for 1990 and 1991, which culminated in Telecom Decision CRTC 90-29 (Decision 90-29). Costs were awarded to Rural Dignity et al. by Telecom Costs Order CRTC 91-1, 11 February 1991, (Costs Order 91-1) in accordance with subsection 44(1) of the CRTC Telecommunications Rules of Procedure.
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Rural Dignity et al. submitted a Bill of Costs in the amount of $49,035.56, consisting of $17,100.00 in fees and $31,935.56 in disbursements. In the course of the taxation, which proceeded by way of written submissions, the following issues were raised and discussed.
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Costs Allowable pursuant to Costs Order 91-1
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In Costs Order 91-1, the Commission specified that Rural Dignity et al. should not receive any costs associated with the issue of switching equipment modernization (SEM). The Commission indicated that these costs should not be allowed since the record of the proceeding leading to Decision 90-29 provided no support for Rural Dignity et al.'s submissions regarding the recovery of expenditures for SEM.
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Rural Dignity et al. submitted its Bill of Costs on 13 March 1991. According to this Bill of Costs, counsel for Rural Dignity et al. spent 139.7 hours preparing for and five days attending the hearing into the revenue requirements for Island Tel. Rural Dignity et al. indicated that counsel had spent 25% of his preparation time on the SEM issue and, accordingly, claimed costs for 104.8 hours only. In addition, Rural Dignity et al. discounted costs associated with fax transmissions and photocopying by 25%.
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Island Tel filed its comments on the Bill of Costs on 26 March 1991. Island Tel submitted that, after reviewing the record of the proceeding, it was of the view that a significant adjustment to the costs submitted by the interveners was necessary to account for the time spent dealing with the SEM issue. Island Tel argued that the main thrust of the participation of Rural Dignity et al. related to this issue and that much time was spent discussing it at the hearing. In Island Tel's view, the costs associated with the preparation of the hearing should therefore be discounted by 50% rather than 25%. In this connection, Island Tel noted that Rural Dignity et al. had proposed a 40% discount for its costs associated with a similar intervention at the hearing into the revenue requirements for Maritime Telegraph and Telephone Company Limited (MT&T) for 1990 and 1991 which culminated in Telecom Decision CRTC 90-30.
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Island Tel submitted further that counsel fees associated with attendance at the hearing should be adjusted by the same amount, on the grounds that the majority of the cross-examination of Island Tel's principal witness related to the SEM issue.
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In its reply, dated 9 April 1991, Rural Dignity et al. denied that the main thrust of their intervention was the SEM issue. Rather, the main purpose was to challenge the company's rate of return evidence and present in depth evidence on rate of return matters. Rural Dignity et al. submitted that the evidence and submissions on SEM were in fact quite simple and were made difficult only by virtue of the company's claim that it had no SEM program. Rural Dignity et al. argued that a greater portion of preparation time for the MT&T hearing was spent on SEM issues because of the anticipated denial of the existence of any such program in that proceeding and because of the necessity to review the Island Tel evidence in order to prepare a different approach for the MT&T hearing. Finally, Rural Dignity et al. submitted that counsel was required to attend the full hearing regardless of the issues at hand on a particular day and to limit costs any further would be punitive in effect and contrary to Costs Order 91-1.
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On 29 April 1991, I wrote to counsel for Rural Dignity et al. asking whether the amounts for telephone calls, external photocopying, and postage and courier services had been discounted by 25% and, if not, why not. In addition, I asked him to indicate the number of days for which he was claiming meal expenses for himself and Drs. Booth and Berkowitz. In his response dated 8 May 1991, Mr. Lawson indicated that he had inadvertently failed to discount the amounts for external photocopying and postage and amended his claim accordingly. He also confirmed that the amounts claimed for telephone calls and courier services did not contain any amounts related to the SEM issue. Mr. Lawson also indicated that he was claiming meals for one day meetings in Toronto and Charlottetown, for his time at the hearing and for two dinners with Drs. Booth and Berkowitz. Finally, Mr. Lawson confirmed in a subsequent telephone conversation that costs for airline travel were inadvertently overstated by $569.00.
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As noted above, the Commission did not allow this intervener to recover any of its costs associated with the SEM issue because the Commission found no support in the record for Rural Dignity et al.'s submissions relating to the recovery of expenditures for SEM. It is clear from the Commission's decision that the time spent exploring whether Island Tel had a SEM program did not contribute to a better understanding of the issues. Accordingly, it seems to me that any time spent by the interveners in an attempt to show that there was such a program does not qualify for costs, in accordance with the scope of Costs Order 91-1. The simple fact that counsel was in attendance for each day of the hearing surely does not entitle him to costs for the time during which the lengthy debates took place on this issue. I have re-read those portions of the transcript involving counsel for Rural Dignity et al. According to my estimation, approximately 45% of his time was devoted to the discussion of the SEM issue. This represents approximately 8% of the total transcript time. I am of the view that Island Tel should not be obliged to pay for the interveners' attendance during this time.
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Rural Dignity et al. has claimed costs for five days in attendance at the hearing. I note that the Commission sat for 30 minutes only on one of the five sitting days and for four and a half hours on another. This situation seems somewhat analogous to the one discussed in Taxation Order 1988-5, where the Consumers' Association of Canada (CAC) claimed for costs while travelling from Ottawa to a hearing in Vancouver. The taxing officer noted that an intervener may spend travel time engaged in activities unrelated to the interests of the telephone company's subscribers and concluded that subscribers should not be called upon to subsidize these activities. This position was confirmed in Telecom Letter Decision CRTC 89-5, which disposed of CAC's appeal of Taxation Order 1988-5. In my opinion, the company should similarly not be obliged to pay costs for attendance when the hearing was adjourned.
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In light of the considerations set out above, I have concluded that Rural Dignity et al. are entitled to recover costs for four days of attendance at the Island Tel hearing and that only 92% of these costs should be allowed. This amounts to $2,944.00 rather than $4,000.00 as claimed. As for the appropriate discount factor to be applied to preparation time, I have discussed this below, in conjunction with the parties' submissions on the number of hours of preparation that should be allowed.
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Preparation time
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The company submitted that the 139.7 hours spent in preparing for the hearing is excessive. Island Tel argued that, in accordance with the established standards of the CRTC, 80 hours would be more appropriate and only 50% of the associated costs should be allowed to reflect the scope of Costs Order 91-1.
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In reply, Rural Dignity et al. indicated that counsel had in fact spent considerably more than 139.7 hours preparing for the hearing. They submitted further that there is no "rule" for calculating preparation time in proportion to hours spent at the hearing. Rural Dignity et al. pointed out that they were proposing three hours preparation for every hour of hearing time and argued that this was a modest ratio by any standard of professional competence in representing clients before courts or administrative tribunals.
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Over the years, taxing officers have applied a general guideline of two hours of preparation for each hour of attendance at a public hearing. Such an approach was followed, for example, in Taxation Orders 1986-6, 1987-3, and 1987-5. However, in Taxation Order 1988-4, the taxing officer noted that "the guideline of two days preparation for each day of attendance is exactly that, a guideline, and ... slavish adherence to it in all circumstances would be neither realistic nor appropriate". In determining whether the guideline is appropriate in a particular case, some of the factors considered are the complexity of the case (e.g. Taxation Order 1988-6), the scope of the representative's involvement in the proceeding and the amount of preparation required by other interveners in the same or similar proceedings (e.g. Taxation Order 1989-4).
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In the present case, I note the interveners' argument that the preparatory work associated with the SEM issue was relatively straightforward and was not reflected in the amount of time spent at the hearing exploring this issue. I also note the fact that counsel did not claim all of his preparation time, since he spent some of this time simply familiarizing himself with CRTC decisions and rate of return matters. In considering this issue, I have had regard to claims for costs in other hearings from groups representing similar interests to those of Rural Dignity et al. I note, for example, that the interveners whose costs were taxed in Taxation Orders 1989-3 and 1989-4 devoted approximately the same number of hours to preparation but for cases involving a broader range of issues and extending over a longer period of time. I also note that the organization representing Rural Dignity et al. in the Island Tel hearing has been allowed up to 500 hours of preparation time in other proceedings, but these have been major proceedings lasting more than six weeks and involving a large number of parties (see Taxation Orders 1987-1 and 1988-2). In my opinion, the circumstances of this case do not justify exceeding to a significant degree the Commission's general guideline of two hours preparation for one hour hearing attendance.
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As discussed above, I have allowed for four days of attendance, which amounts to 32 hours calculated on the basis of an eight hour day. In light of counsel's assertion that most of his preparation time was devoted to matters other than SEM, I have allowed for 57 hours preparation time, at a rate of $125 per hour for a total of $7,125. I have calculated this on the basis of 76 hours, discounted by 25%, which represents the proportion of preparation time which counsel estimates was spent on the SEM issue. I note, in passing, that the rate of $125 per hour appears to be in line with that granted counsel with similar experience and knowledge.
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Fees for witnesses
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Island Tel objected to paying fees and expenses for both Drs. Booth and Berkowitz to deal with a single issue. Island Tel noted that their evidence was presented as the evidence of one expert and suggested that either one of them could have attended the hearing to answer questions. In addition, the company pointed out that the evidence presented two weeks later in the MT&T case was similar to that presented at the Island Tel hearing and argued that only half the amount requested should therefore be awarded. The company also found that the amount of time claimed for cross-examination, rebuttal and reply and aid in preparation of final argument was excessive, as was the rate of $1800 per day which was requested for the witnesses' attendance at the hearing.
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In reply, Rural Dignity et al. argued that Drs. Booth and Berkowitz work as a team and cannot be retained individually. Moreover, they submitted that interveners should not be limited to one expert on rate of return matters which are very complex. These interveners denied that the Island Tel evidence was simply repackaged for the MT&T hearing since the two companies are different in many respects which are significant to the assessment of a fair return for each. Rural Dignity et al. also argued that the time devoted to the production of rebuttal and reply evidence was required by virtue of the company's production on short notice of lengthy rebuttal evidence from the company's witness. Finally, they submitted that their fee was reasonable in light of the complexity of the issues they were called upon to address.
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In my opinion, it is reasonable for Rural Dignity et al. to have made use of two experts to address rate of return matters. In this regard, I note that it is not uncommon to make use of two rate of return experts in hearings into revenue requirements and that similar arguments with respect to the use of more than one expert were rejected in Taxation Orders 1985-3 and 1986-6. I can see no reason for taking a different position in the present case. I have reviewed the resumés of Drs. Booth and Berkowitz and observe that each possesses a particular expertise which was brought to bear on the rate of return issues raised in their evidence. I therefore consider that it was not unreasonable that both should be present to deal with any questions that might arise within his own area of expertise.
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A total of 24 days has been claimed for time spent by the two experts in preparation for cross-examination, rebuttal and reply, and final argument. I note that in Taxation Order 1989-2, the CAC was awarded costs for 33 days of work conducted by rate of return experts, while in Taxation Order 1987-1, the National Anti-Poverty Organization was awarded costs for 48 days of work carried out by Drs. Booth and Berkowitz. I do not consider that the rate of return issues raised in the Island Tel proceeding are significantly less complicated or plentiful than those raised in the hearings upon which Taxation Orders 1987-1 and 1989-2 are based. In the circumstances, I have concluded that the amount of time devoted to preparation is reasonable. I note that the fee requested for preparatory work is in line with the amount granted in Taxation Order 1988-2 for Drs. Booth and Berkowitz and have therefore taxed the hours for preparation at the rate of $900 per day for a total of $21,600.
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With respect to fees for attendance, I note that Drs. Booth and Berkowitz testified for approximately two and a half hours only and that the hearing was adjourned for almost an entire day following their testimony in order to allow parties to prepare final argument. Both were then in a position either to return to Toronto to pursue other interests or to remain at the hearing in order to assist in the preparation of final argument. In these circumstances, it is my opinion that the company should not be obliged to pay for their attendance at the hearing for an entire day. I have therefore allowed a total of one day attendance for the two experts. In addition, I note that the fee requested for attendance is significantly more than the per diem rate of $900 that was allowed in Taxation Order 1988-2. As noted in that Taxation Order, the starting point for assessing the reasonableness of the fee for a particular expert is the amount that has been previously granted that person in previous rate proceedings before the Commission. In addition, in accordance with previous taxation orders, I have had regard to the fact that Drs. Booth and Berkowitz have considerable experience testifying before the Commission on rate of return matters and that the inflation rate in the Toronto area where Drs. Booth and Berkowitz reside has been approximately 5% each year since 1988. In these circumstances, I have concluded that a per diem rate of $1100 is reasonable. I am therefore allowing a total of $1100 for attendance.
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Travel expenses
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Island Tel questioned the disbursements for airfares, taxi and ground transportation. The company agreed that the costs for travel to the hearing should be paid for a single counsel but that the amounts submitted were in excess of these particular costs.
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Rural Dignity et al. noted that the expenses claimed were for one trip to Toronto to meet with Drs. Booth and Berkowitz and two trips to Charlottetown to meet with the five client groups represented by counsel and to attend the hearing.
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In my opinion, the amounts related to all three trips are necessarily and reasonably incurred in connection with the intervention and should be allowed.
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Costs as taxed
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I hereby tax the fees and disbursements as follows:
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Fees:
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Counsel fees: $10,069.00
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Disbursements:
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Accommodation and meals for counsel 841.68
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Consultants:
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Fees 22,700.00
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Disbursements 2,074.08
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Copies 308.68
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Telephone 394.32
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Travel (air and ground transportation) 1,362.73
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Transcripts 1,040.50
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Courier Services, faxes and postage 291.63
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$39,082.62
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Sheridan Scott
Counsel
Canadian Radio-television and Telecommunications Commission
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