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Ottawa, 2 July 1991
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Taxation Order CRTC: 1991-4
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In re: Maritime Telegraph and Telephone Company Limited - Revenue Requirement Proceedings for 1990 and 1991, Telecom Decision CRTC 90-30 and Telecom Cost Order CRTC 91-2
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John Berris, for Rural Dignity of Canada (Nova Scotia chapter), Canadian Pensionners Concerned, Nova Scotian League for Equal Opportunities and People on Welfare for Equal Rights (Rural Dignity et al.).
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Daniel M. Campbell, for Maritime Telegraph and Telephone Company Limited (MT&T).
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TAXATION OF COSTS OF RURAL DIGNITY ET AL.
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Taxing Officer: Lorne Abugov
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This order constitutes the taxation of costs awarded to Rural Dignity et al. in the case of Maritime Telegraph and Telephone Company Limited - Revenue Requirement Proceeding for 1990 and 1991, which culminated in Telecom Decision CRTC 90-30 (Decision 90-30). Costs were awarded to Rural Dignity et al. by Telecom Costs Order CRTC 91-2 (Costs Order 91-2), 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 $49,050.13, consisting of $16,358.00 in fees and $32,692.13 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 91-2
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In Costs Order 91-2, 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 up to Decision 90-30 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 118 hours preparing for and eight days attending the hearing into the revenue requirements for MT&T. Rural Dignity et al. indicated that counsel had spent 40% of his preparation time on the SEM issue and, accordingly, claimed costs for preparation time for 70.8 hours only. In addition, Rural Dignity et al. discounted costs associated with fax transmissions and photocopying by 40%, since total costs in relation to these two general disbursement categories could not be broken down to determine the portion properly attributable to SEM issues.
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MT&T filed its comments on the Bill of Costs on 22 March 1991. In the comments, MT&T agreed that the use of a 40% discount factor represented a reasonable reflection of the issue of recovery of expenditures for SEM relative to Rural Dignity et al.'s overall intervention. MT&T argued, however, that the 40% factor should not have been confined solely to counsel's preparation time and selected disbursements. Instead, MT&T submitted that all costs associated with the SEM issue should be excluded, all taxable costs associated with other issues should be included and all "common costs" of the intervention, including preparation, attendance and general disbursements, should be discounted by the 40% factor. In MT&T's view, there was no clear basis for Rural Dignity et al. having applied the discount to preparation time, but not to attendance time, and to photocopying and fax costs, but not to long distance telephone, postage and courier expenses.
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In its reply, dated 5 April 1991, Rural Dignity et al. submitted that it had observed the spirit and intent of Costs Order 91-2 in preparing its Bill of Costs, and that no costs had been claimed for any expenses associated with the SEM issue. In particular, Rural Dignity et al. indicated that costs claimed in relation to long distance telephone calls, postage and courier expenses did not include any such expenses incurred for the purpose of communicating with the intervener's witness on the SEM issue. With respect to other general disbursements such as transcript fees and travel-related expenses (airfare, hotels and meals), Rural Dignity et al. argued that these were costs necessarily incurred to permit it to participate generally at the hearing, costs that would still have been incurred had the intervener not raised the SEM issue at all. Finally, Rural Dignity et al. submitted that to discount these general disbursements by 40% would be punitive in effect and contrary to the Commission's intent in Costs Order 91-2.
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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, including the evidence of its witness on this issue. It is clear from the Commission's decision that the time devoted during the hearing to the SEM issue, that is, portions of the cross-examination of MT&T witnesses by counsel for Rurual Dignity et al., the cross-examination of the intervener's SEM issue witness and portions of final argument, did not contribute to a better understanding of the issues. I am of the view that the time spent by the intervener during cross-examination and argument with respect to the SEM issue does not qualify for costs, in accordance with the scope of Costs Order 91-2, nor does the time devoted to the cross-examination of its expert witness on the SEM issue.
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I agree with the taxation officer in Taxation Order 1991-3, issued today, in connection with the case of Island Telephone Company Limited - Revenue Requirement Proceeding for 1990 and 1991, when she stated, with regard also to the SEM issue arising during that proceeding, that the mere fact that "counsel was in attendance for each day of the hearing does not entitle him to costs for the time during which the lengthy debates took place on this issue." I also agree with, and have adopted for this taxation, the same methodology that she applied to reduce the allowed costs for time spent by counsel in attendance at the hearing. I have re-read those portions of the transcript involving cross-examination and argument on the SEM issue by counsel for Rural Dignity et al., as well as the cross-examination of its expert witness on the SEM issue. According to my estimation, based upon a page count of the transcripts, approximately 12% of the hearing was devoted to discussion of the SEM issue, and I am therefore of the view that counsel for Rural Dignity et al. should not be allowed costs for 12% of the time spent in attendance at the hearing.
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Rural Dignity et al. has claimed costs for eight days in attendance at the hearing. I note that the Commission sat for only three and one half hours on one of the eight sitting days of the hearing. Similarly, in the Island Tel revenue requirement proceeding, the Commission adjourned that hearing for part of one sitting day and sat for only 30 minutes on another sitting day. I agree with the taxation officer in Taxation Order 91-3, for the reason she cites, that the telephone company should not be obliged to pay costs for attendance of intervener counsel 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 seven and one half days of attendance at the MT&T hearing and that only 88% of these costs should be allowed. This amounts to $5,610.00 rather than $6,800.00 as claimed.
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Preparation Time
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MT&T submitted that counsel's preparation time of 118 hours, equating to 7.4 hours per day for 16 days, precisely equalled the maximum allowable preparation time for an eight day hearing under guidelines expressed in previous taxation decisions. While noting that the hourly rate of $135.00 claimed by counsel was in accordance with established standards of the CRTC, MT&T doubted the necessity of the time spent in preparation in light of the very similar intervention filed in the Island Tel revenue requirement proceeding.
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Rural Dignity et al. replied that MT&T was unclear as to the grounds upon which its doubt was founded and that the company offered no evidence in support of its doubt. Furthermore, the intervener indicated that counsel had in fact spent significantly more than 118 hours preparing for the hearing, and had reduced his normal hourly rate for such preparation from $150.00 per hour to $135.00 per hour. Finally, it was pointed out that counsel's time spent preparing for and attending the Island Tel hearing was not included in the preparation time claimed in respect of the MT&T proceeding (nor in respect of the Island Tel proceeding), despite the fact that it was of assistance in preparing for the MT&T hearing.
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As discussed above, I have allowed seven and one half days of attendance, which amounts to 60 hours calculated on the basis of an eight hour day. Relating this figure to the 118 hours of preparation time claimed by counsel results in a ratio of approximately one hour of attendance time at a hearing to two hours of preparation time, consistent with the Commission's general guideline applied in a number of previous taxations (e.g. Taxation Orders 1986-6, 1987-3, and 1987-5).
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In its comments, MT&T characterized counsel's claim of 118 hours as "the maximum allowable preparation time for an 8 day hearing under the guidelines expressed in previous taxation decisions." It is noteworthy that the guideline to which MT&T refers has come under renewed assessment in several recent taxation orders. For example, in Taxation Order 1988-4, the taxing officer allowed a claim for preparation time in excess of the guideline, noting 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". Similarly, in Taxation Order 1988-6, the taxation officer allowed a claim for preparation time that exceeded the 2:1 guideline.
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The factors which have been taken into consideration in assessing whether the guideline is appropriate in a particular case are outlined in previous Taxation Orders, for example, 1988-6 and 1989-4. Among the relevant factors are the complexity of the case, the scope of the representative's involvement in the proceeding and the amount of preparation time required by interveners in similar proceedings.
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In the present proceeding, the evidence filed by MT&T encompassed the full range of issues necessary to the determination of the company's revenue requirement for the years 1990 and 1991. The proceeding also included consideration, by way of final argument, of MT&T's 1990 construction program. With respect to counsel's involvement, I note the fact that he did not claim all of the time that was actually devoted to preparation for the MT&T hearing. Furthermore, having reviewed the transcripts, I am satisfied that counsel's involvement at the hearing extended beyond SEM-related matters to include a range of financial and rates and tariffs issues of concern to Rural Dignity et al. Finally, I would point out that counsel's claim of 118 hours of preparation time is consistent with claims submitted by counsel for other interveners representing similar interests to those of Rural Dignity et al. in connection with proceedings of comparable length and complexity (see Taxation Orders 1988-6 and 1989-3).
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In light of these circumstances, I have concluded that the amount of 118 hours of preparation time claimed by counsel for Rural Dignity et al. is a reasonable figure, and I have therefore based my calculation of allowable preparation time on this figure. Applying the 40% discount factor, which represents the proportion of preparation time which counsel estimates was spent on the SEM issue, I have allowed for 70.8 hours preparation time, at a rate of $135.00 per hour for a total of $9,558.00. I note, in passing, that the rate of $135.00 per hour appears to be in line with that granted counsel with similar experience and knowledge in previous taxations.
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Fees for Witnesses
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MT&T submitted that the fees claimed for Drs. Booth and Berkowitz were excessive and unreasonable. MT&T noted that their evidence in this proceeding was virtually identical to that presented to the Commission two weeks earlier in the Island Tel proceeding and to that presented to another regulatory agency in a case involving Inter City Gas. MT&T pointed out that, with respect to the preparation of evidence and rebuttal, Drs. Booth and Berkowitz had claimed 16.5 days in connection with this proceeding, 17 days for the Island Tel proceeding and, presumably, some additional time for their presentation of evidence elsewhere. In addition, MT&T regarded as excessive their claim of 5.5 days of consultation with counsel for preparation of interrogatories and general unspecified consultations relating to this proceeding, as well as a corresponding claim of 7 days in connection with the Island Tel proceeding. The company argued that the total fees claimed for the witnesses should be reduced by half and should then be apportioned between MT&T and Island Tel.
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In reply, Rural Dignity et al. disagreed that the evidence given by Drs. Booth and Berkowitz at the MT&T hearing was virtually identical to that provided earlier to the Commission in the Island Tel proceeding and to the Manitoba Public Utilities Commission (PUC) in the Inter City Gas proceeding. While acknowledging that similar analytical methodologies were applied by the witnesses in each case, Rural Dignity et al. argued that the actual analysis performed in each case is unique to the particular financial circumstances of each company under review. The intervener also defended the combined total of 33.5 days of preparation time claimed by the witnesses for both the MT&T and Island Tel proceedings, as well as the apportionment of such time between the two proceedings. Rural Dignity et al. also submitted that the company had failed to demonstrate that a witness fee of $25,000.00 for each of the two hearings was unreasonable, and pointed out that the same witnesses had received costs awards of $37,000.00 and $47,000.00 in connection with their rate of return evidence given in the Inter City Gas proceeding before the Manitoba PUC and a recent Ontario Energy Board case, respectively.
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I note that, according to the original invoice submitted by the two experts and attached as an exhibit to Rural Dignity et al.'s reply, Drs. Booth and Berkowitz have claimed a total of 24 days of preparation time for interrogatories, testimonies, cross-examination, rebuttal and final argument. The bulk of this time, 15 days, was devoted to the preparation of their evidence, which MT&T has characterized as virtually identical to that filed by the two experts in the Island Tel and Inter City Gas proceeding.
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I have reviewed the rate of return evidence and the testimony of Drs. Booth and Berkowitz in connection with the MT&T hearing, as well as their testimony at the Island Tel hearing. I am unable to conclude, as MT&T has, that the rate of return evidence developed for the Island Tel and MT&T proceedings was virtually identical. On the basis of my review, I have found no evidence to suggest that Drs. Booth and Berkowitz, in preparing their MT&T evidence, relied unduly on their evidence prepared for the Island Tel proceeding, or failed to conduct a thorough review and analysis of financial circumstances unique to MT&T. Moreover, their testimony during the MT&T hearing reflects knowledge of key financial differences between MT&T and Island Tel, as well as changes in MT&T's financial position between the filing of their evidence and the commencement of the hearing.
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In the circumstances, I have concluded that the amount of time devoted by Drs. Booth and Berkowitz to preparation is reasonable. I have based this conclusion, in part, on the findings reached by the taxing officer in Taxation Order 1991-3 regarding the preparation time claimed by these witnesses in the Island Tel proceeding. In that Taxation Order, the rate for their preparation time was taxed at $900 per day, the same rate claimed by Rural Dignity et al. in this proceeding. As I consider this rate to be reasonable, I 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 at the hearing for approximately two hours only. Rural Dignity et al., however, has claimed a total of two days in connection with their appearance as expert witnesses at a rate of $1,800 per day. In this regard, MT&T has objected to the attendance rate, noting that a claim containing both an enhanced attendance rate and extensive preparation time represents an element of double billing. I note that the same daily rate of $1,800 claimed for the attendance of these witnesses at the Island Tel hearing was reduced to $1,100 by the taxing officer in Taxation Order 1991-3, and I note further that in that proceeding a claim of two days total attendance time for these witnesses, based upon two and one half hours of actual testimony, was reduced by the taxing officer to one day of attendance. I agree with and have adopted the conclusions reached by the taxing officer in Taxation Order 1991-3 in allowing one day of attendance time for these experts at a per diem rate of $1,100.
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General Disbursements
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MT&T questioned the fact that Rural Dignity et al. did not discount its general disbursements by the 40% factor to reflect Telecom Costs Order CRTC 1991-2. The company claimed the disbursements were reasonable but found no basis for applying the discount factor to photocopying and fax costs, but not to long distance telephone, postage and courier costs.
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In reply, Rural Dignity et al. noted that it had excluded from its Bill of Costs all telephone, postage and courier expenses related to the SEM issue, as it had done for all SEM-related general disbursements except fax and photocopying costs. The 40% discount factor was applied to these latter costs since these could not be broken down to permit an attribution to SEM issues.
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In my opinion, the approach which Rural Dignity et al. has adopted is consistent with Telecom Costs Order CRTC 1991-2 and that the general disbursements claimed by the interveners are necessarily and reasonably incurred in connection with its 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 $ 15,168.00
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Disbursements:
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Expert Witness Fee and Disbursements,
Drs. Booth and Berkowitz 22,700.00
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Photocopies 429.60
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Fax 103.53
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Courier 74.70
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Postage 17.55
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Telephone 382.10
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Transcripts 2 615,50
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Air Fare 699.90
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Taxi 194,93
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Hotel 685.37
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Meals 457.81
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$ 28,360.99
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Total fees and disbursements: $ 43,528.99
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Lorne Abugov
Legal Counsel
Canadian Radio-Television and Telecommunications Commission
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