Ocean Rodeo Sports Inc. v. Oyen

2019 BCSC 1393 Ocean Rodeo Sports Inc. v. Oyen

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Ocean Rodeo Sports Inc. v. Oyen, 2019 BCSC 1393 Date: 20190820 Docket: 11-3283 Registry: Victoria Between: Ocean Rodeo Sports Inc. Plaintiff/Respondent And: Gerald O.S. Oyen, Oyen Wiggs Green and Mutala LLP and Gerald O.S. Oyen Law Corporation Defendants/Appellants On Appeal from a Registrar's Report dated February 5, 2019. Before: The Honourable Mr. Justice B.D. MacKenzie Reasons for Judgment Counsel for the Plaintiff/Respondent: J. Langlois Counsel for the Defendants/Appellants: J. G. Dives, Q.C. and L. Mauro Place and Date of Hearing: Victoria, B.C. July 10 and 11, 2019 Place and Date of Judgment: Victoria, B.C. August 20, 2019 Introduction [1] This is an appeal by the defendants from a costs assessment made by a Registrar. The defendants/appellants ask that the "sizeable" disbursement for one set of expert reports be denied entirely, and that the disbursement for another set of expert reports be reduced by almost half, to $70,000. The respondent, Ocean Rodeo Sports Inc. ("Ocean Rodeo"), says the appeal should be dismissed. Background [2] Around 2001, the principals of Ocean Rodeo invented a safety release device for the sport of kiteboarding, which they believed would revolutionize the sport. Ocean Rodeo retained the appellants, who specialized in patent law, for the purpose of securing patent rights for this invention.

Some years later, Ocean Rodeo sued the appellants, alleging that Mr. Oyen negligently failed to secure protection for the invention by missing a filing date for Ocean Rodeo's patent, resulting in what Ocean Rodeo described as a "devastating loss" of what it believed would be a "highly valuable commercial asset." [3] The Notice of Civil Claim was filed on August 8, 2011. The appellants admitted a breach of the standard of care on the part of Mr. Oyen, but disputed the multi-million-dollar quantum of damages proposed by Ocean Rodeo. [4] However, on June 16, 2017, just prior to the commencement of the trial, the parties agreed to settle the litigation for $1,500,000 CAD, plus taxable costs and disbursements in favour of Ocean Rodeo. The appellants have emphasized throughout the costs assessment and on the appeal that the amount of the settlement was less than one-third of Ocean Rodeo's initial position on damages in 2013, and approximately one twenty-fifth of the eventual position of Ocean Rodeo's expert on damages, some $34,000,000 CAD. At the same time, on an application to have costs assessed at Scale C, the chambers judge noted the complexity of the issues and the need for expert evidence, a common theme throughout these proceedings, and for these reasons, he ordered costs to be assessed at Scale C. [5] Following settlement, on June 28, 2017, counsel for Ocean Rodeo wrote to

counsel for the appellants with a claim of approximately $509,000 in taxable costs and disbursements. The bulk of Ocean Rodeo's disbursements were the expert fees of Matthew Marquardt, a patent lawyer from Ontario, for his reports on liability and causation (the "Marquardt Account") and the expert fees of a California consulting firm, Consor Intellectual Asset Management, for its reports on the valuation of damages (the "Consor Account"). The claimed fees were $136,864.22 and $216,155.67 respectively. The appellants objected to these fees and other Ocean Rodeo disbursements. [6] Because the parties could not reach an agreement on the costs and disbursements owed to Ocean Rodeo, a protracted assessment hearing was heard before Master Bouck, sitting as a Registrar. The Assessment [7] The taxation of the bill of costs of Ocean Rodeo was heard by the Registrar on October 29, 30, and 31, 2018. It is clear from the transcripts of the three days of evidence before the Registrar that the question of costs was a hotly contested issue. Much evidence was heard and many affidavits filed, with lengthy written submissions subsequently being provided by both sides. In due course, on February 5, 2019, the Registrar granted Ocean Rodeo the amount sought for the Marquardt Account and discounted the disbursements sought for the Consor Account by approximately 35%. The Registrar allowed Ocean

Rodeo's costs and disbursements at $334,619.64, which included the full amount of the charges for the Marquardt Account and $140,000 for the Consor Account. [8] The appellants take issue with the Registrar's decision as to the reasonableness of the costs of these expert reports, and now ask this Court to fix the Marquardt Account charges at $70,000 and to preclude Ocean Rodeo from recovering any amount for the Consor Account. Standard of Review [9] The standard of review applicable to a review of an assessment of costs by a registrar under Rule 14-1(29) of the Supreme Court Civil Rules is not in dispute. A court will not interfere with a registrar's decision involving the exercise of discretion unless the registrar has made an error in principle or was clearly wrong as to findings of fact: Fairhurst v. Anglo American PLC, 2014 BCSC 827 at para. 18; Jiwan v. Davis & Company, A Partnership, 2008 BCCA 494 at para. 15, citing Walker v. Schober, 2008 BCCA 19 at para. 34. [10] The standard of review on questions of principle is correctness (Housen v. Nikolaisen, 2002 SCC 33 at para. 8; Jiwan at para. 17), while the "clearly wrong" standard that applies to findings of fact is synonymous with the standard of palpable and overriding error (see Waters v. Michie, 2018 BCSC 1206 at para. 6). Determining "what constitutes reasonable costs is a question of fact", and registrars are entitled to deference on review due to their expertise and the discretionary, fact-specific nature of costs assessment: Wright v. Sun Life Assurance Co. of Canada, 2015 BCCA 312 at para.

10. Grounds of Appeal [11] In this appeal, the appellants submit that the Registrar made errors of fact regarding the Marquardt Account charges by: a. Failing to conclude that Mr. Marquardt provided services as counsel to [Ocean Rodeo], despite the admissions of both Mr. Marquardt and [Ocean Rodeo's lead] counsel under cross-examination. b. Misunderstanding and misapplying the expert evidence of David Wotherspoon, a witness called by the [appellants] at the assessment hearing. [12] The appellants also say the Registrar made errors of law and/or principle with respect to the Marquardt Account charges by: a. Failing to consider important uncontroverted expert and lay evidence. b. Refusing to apply her experience and expertise to compare the claimed disbursements to those awarded in the ordinary course. c. Failing to apply the following legal principles: i. Excessive and extravagant expert fees ought not to be the responsibility of the opposing party. ii. A settling party must be able to expect that disbursements will fall within a reasonable and proportional range. [13] Turning to the Consor Account, the appellants say the Registrar's errors of fact include: a. Failing to conclude that Consor provided services that ought to have been conducted by counsel and provided to Consor in the form of assumed facts. b. Failing to conclude that the charges were excessive and

extravagant. [14] The appellants also submit the Registrar's errors of law and/or principle with regard to the Consor Account include: a. Failing to require [Ocean Rodeo] to discharge its onus of proof by providing proper evidentiary support for the claimed amounts. b. Refusing to consider whether the claimed amounts were "preposterous" in view of the issues and the amount of the settlement. c. Refusing to apply her experience and expertise to compare the claimed disbursements to those awarded in the ordinary course, and failing to have regard to the expert evidence of David Wotherspoon. d. Failing to apply the following legal principles: i. Excessive and extravagant expert fees ought not [to] be the responsibility of the opposing party. ii. A settling party must be able to expect that disbursements will fall within a reasonable and proportional range. [15] In response, Ocean Rodeo says that from the beginning this matter was unique and complex and the only issue on appeal is whether the Registrar erred or was clearly wrong in determining the reasonableness of its experts' fees. Ocean Rodeo says while the experts' fees amounted to the bulk of the costs sought, the Registrar determined that they were, for the most part, reasonable costs, given that the claims required specialized expertise in both Canadian and U.S. patent law and complex evidence on a damages assessment due to

"the specialized nature of the kite surfing industry." [16] Ocean Rodeo says the Registrar applied the law correctly and considered the appropriate factors, and even though the appellants disagree with the factual findings that she made in doing so, she was not clearly wrong in reaching her decisions. The Marquardt Account Mr. Marquardt's Services [17] The appellants say Mr. Marquardt's own testimony at the assessment hearing confirmed he was retained not only to provide reports to Ocean Rodeo's counsel, but also to provide "litigation counsel services". They submit that in both his direct evidence and cross‑examination, Mr. Marquardt testified that when he was first consulted he spent a significant amount of time reviewing all the documents to determine what had actually happened. The appellants refer to Mr. Marquardt's testimony that when Ocean Rodeo's counsel first approached him, they did not seem to understand the claim and he had to "educate them" as to what the proper claim was. Mr. Marquardt further testified that he went on to assist Ocean Rodeo's counsel in drafting an Amended Notice of Civil Claim and preparing for an application to file it, including assistance in drafting the argument. The appellants submit the scope of Mr. Marquardt's involvement was due to what they say was counsel's lack of knowledge and understanding of patent issues. [18] Moreover, the

appellants say that when they demanded particulars of the amended claim, Mr. Marquardt drafted Ocean Rodeo's response because he was the "true author" of the Amended Notice of Civil Claim. [19] On this point, the appellants submit that where a lawyer is retained as an expert in a solicitor's negligence claim, it is not open to counsel to simply shift counsel work to the expert and then claim the lawyer's fees in their entirety as expert fees and as a legitimate disbursement. The appellants submit it is not the role of an expert to formulate claims, draft pleadings, prepare arguments, and respond to demands for particulars. They say counsel fees are not recoverable as a disbursement: the tariff is the appropriate vehicle for a party to recover the costs of legal counsel. As a result, the appellants assert that Mr. Marquardt's services to Ocean Rodeo were to a relatively significant degree as legal counsel, providing investigation and assessment of the facts underlying the claim, as well as advocacy. The appellants say this counsel work should be reflected in a significant reduction in the Marquardt Account charges. [20] The appellants point out that despite Mr. Marquardt's acknowledgement that he provided such services, the Registrar made no reduction in his charges. They say this finding of fact was clearly wrong. The appellants say the time Mr. Marquardt spent reviewing and

summarizing evidence is excessive and this cost ought not to be borne by them: Cloutier v. Wong, [1992] B.C.J. No. 2940 (S.C. Chambers). [21] In response, Ocean Rodeo states that the Registrar was not clearly wrong as she concluded that Mr. Marquardt's work was not "duplicative" of the work of Ocean Rodeo's counsel. [22] Ocean Rodeo submits that: It is not improper to ask for the assistance of an expert in drafting court documents, and disbursements for such assistance should not be reduced in a costs assessment. Further, time reviewing documents--another of Mr. Marquardt's activities that [Ocean Rodeo]take[s] issue with--is something that experts do in the normal course of providing their assistance and opinions and this time should not be discounted as unnecessary or duplicative of work done by counsel. This work was integral to Mr. Marquardt forming an opinion about the liability issues he had been asked to evaluate. Jurisprudence in the area has recognized that the role of an expert may encompass more than just the delivery of an expert opinion, and that role may also, legitimately, include providing advice to counsel about matters not addressed in an expert's report. In cases requiring expert engagement, it is wholly legitimate for counsel to interface with an expert to ensure that the pleadings are consistent with the legal and technical opinion evidence to be provided by

the expert. This may require a party to incur costs to obtain assistance from an expert in preparing pleadings and in other steps in the litigation. Recovery of expert fees is not confined to fees directly related to preparing an expert's report. In numerous cases of patent litigation, costs have been awarded for expert fees that relate to matters outside of the preparation of a report, to include costs for experts "assisting counsel in reviewing and understanding other experts' reports, preparing for cross-examination of opposing experts and assisting in preparation for discoveries." [23] Ocean Rodeo acknowledges that during his cross-examination and re‑examination, Mr. Marquardt testified that he segregated his invoices for tasks that did not relate to either of his reports. Ocean Rodeo submits that Mr. Marquardt indicated which invoices related to assistance provided to Ocean Rodeo's counsel in this regard. Ocean Rodeo says these invoices totaled $12,116.30, rather than the nearly $67,000 that the appellants request as a reduction in the Marquardt disbursements. Ocean Rodeo says the appellants "provide no principled basis" for reducing Mr. Marquardt's charges from $136,864.22 to $70,000. [24] In the alternative, if the Court determines that the Registrar was clearly wrong in her determination that there was no overlap in Mr. Marquardt's work, Ocean Rodeo submits the

disbursement should be reduced by only $12,116.30. Mr. Wotherspoon's Evidence and the Registrar's Expertise [25] In support of their position that Mr. Marquardt's charges should be reduced, the appellants rely on the evidence of Mr. Wotherspoon, an Intellectual Property ("IP") litigator with experience in retaining experts. [26] The appellants emphasize that Mr. Wotherspoon provided the only expert evidence in the hearing before the Registrar. As the Registrar noted at para. 3 of her reasons: "Evidence from the defendants consisted of the expert opinion of Mr. David Wotherspoon as to the reasonableness of the plaintiff's experts' charges " Accordingly, Mr. Wotherspoon opined on the matter at issue in the costs hearing -- what charges a reasonable solicitor would be expected to incur in conducting patent litigation. The appellants say that the purpose of Mr. Wotherspoon's expert report was to account for the fact that that the subject matter of this action was not "commonplace", and to assist the Registrar in determining "what would be the expectations of a reasonable lawyer engaging experts of the sort of Mr. Marquardt and Consor". [27] Conversely, the appellants say, Mr. Marquardt is a patent solicitor who opined on the standard of care of a competent patent solicitor. They acknowledge the Registrar stated that Mr. Wotherspoon admitted that he is not as familiar with U.S.

patent law, which the appellants agree was a proper admission, but they submit that the Registrar appeared to take that admission to mean that Mr. Marquardt's evidence was preferable. The appellants say the problem with such an approach is that Mr. Wotherspoon's evidence was on a "fundamentally different" topic. That is, his evidence was with respect to the reasonable retainer of an expert such as Mr. Marquardt, not the standard of care of a U.S. patent solicitor. [28] The appellants submit that the Registrar misconstrued Mr. Wotherspoon's evidence regarding Mr. Marquardt's charges, noting that at para. 68 of her reasons, she included a "single quote" from Mr. Wotherspoon's report, but took it out of context. In their submission, the appellants emphasize Mr. Wotherspoon's entire paragraph, with the excerpt referenced by the Registrar in bold: I note that in the invoices from Mr. Marquardt up to and including April 16, 2016, he is engaged as an advocate, not as a neutral expert providing a ready made opinion to the court. According to his invoices, Mr. Marquardt assisted in drafting revisions to the Notice of Civil Claim, preparing argument in support of amendments to the Claim, assisting in response to requests for particulars. Patent law tends to be somewhat arcane and unfamiliar to most lawyers, so the uninitiated usually rely on the assistance of a patent law expert in

drafting pleadings and other aspects of litigation, but that does not make it "expert evidence" as contemplated by Rule 11. These sorts of fees would not, in my experience, be reflected in the bill for the work of an independent expert providing an opinion to assist the court. They are, however, reflected in the amount referenced by [Ocean Rodeo's lead counsel]. [29] The appellants submit that by referring only to that partial sentence the Registrar misconstrued the essential opinion of Mr. Wotherspoon, that is, that Mr. Marquardt was engaging in and charging for counsel work, which the appellants again emphasize is not a disbursement that can be properly charged to the opposing party. The appellants say that while Mr. Wotherspoon agreed it was perfectly acceptable for Ocean Rodeo's counsel to have Mr. Marquardt assist as counsel, Mr. Wotherspoon and the appellants say it is not acceptable to combine his account for counsel work with his account for his expert opinion. [30] The appellants submit that a review of Mr. Marquardt's evidence and accounts makes it clear that a substantial portion of his accounts related to counsel work, especially his time reviewing all of the documents to determine the underlying facts. [31] The appellants therefore say that this error by the Registrar is a fundamental error of fact that meets the "clearly wrong" standard. They say the Registrar

failed to appreciate Mr. Wotherspoon's expert evidence and did not disallow any portion of Mr. Marquardt's accounts, even though he admitted, consistent with Mr. Wotherspoon's opinion, that some portion of his work was counsel work. [32] The appellants further submit that the Registrar erred by failing to apply her own expertise. They say she had sufficient experience and expertise to compare the Marquardt Account to other experts' reports with which the court regularly grapples. As Registrar Blok said in Hamo v. Khan, 2010 BCSC 205 at para. 32: [T]he registrar has been given the jurisdiction and responsibility to review the accounts of professionals of almost every kind. This is obviously no coincidence, and from this I conclude that, as a matter of principle, registrars have been designated for this wide responsibility because of the experience and expertise they have and which they are expected to apply [33] However, if the Registrar believed that she lacked the expertise to compare Mr. Marquardt's expert account with typical expert accounts in patent litigation, the appellants submit Mr. Wotherspoon's evidence was precisely the type of evidence she required to inform her assessment. The appellants say it is an "error in principle to first state that the finder of fact lacks expertise to make an assessment, and then without reason reject the uncontroverted opinion of a

qualified expert providing the court with precisely the expertise the finder of fact is lacking." [34] On this point, Ocean Rodeo says the Registrar's observation that she had limited experience regarding patent law and specialized damages valuation does not mean that she could rely only on Mr. Wotherspoon's evidence. Ocean Rodeo says she chose not to do so based on her reasonable assessment of the limitations of his expertise, and therefore relied upon the preponderance of the evidence, which was proper. [35] Ocean Rodeo submits that Mr. Wotherspoon was retained to demonstrate what reasonable expert fees would be in an intellectual property case, but was not qualified to provide expert opinion evidence on the reasonableness of the Marquardt Account charges. It says Mr. Wotherspoon's qualifications were based on the fact that he has reviewed and commissioned many expert reports in his career. His opinion therefore was merely that of an informed layperson, who was no more able to provide an opinion on the reasonableness of expert fees than any other person who has had the opportunity to commission expert reports. Ocean Rodeo says this type of opinion should not oust the Registrar's ability to draw her own inferences. [36] Ocean Rodeo adds that, although Mr. Wotherspoon had some IP experience, this was not a run-of-the-mill IP dispute. Rather, it was an extremely complex patent

case requiring substantial expert assistance to "untangle". Ocean Rodeo says the Registrar was not clearly wrong when she determined that Mr. Wotherspoon's evidence was not helpful in assessing the reasonableness of the Marquardt Account charges, given his lack of expertise in preparing this specific kind of intellectual property case, "particularly given that U.S. patent law was at play, an area where Mr. Wotherspoon did not have experience." [37] Ocean Rodeo says even if the Registrar committed an appealable error by failing to appreciate Mr. Wotherspoon's evidence, which Ocean Rodeo does not concede, that error would have had no effect on the outcome of the Registrar's decision. Mr. Wotherspoon provided his opinion that the disbursements should be discounted for counsel work, but Ocean Rodeo says the Registrar did not require Mr. Wotherspoon to come to a conclusion on that issue. Instead, she relied on her own expertise in cost assessment and exercised her discretion to allow the disbursements in their entirety, given that she saw no duplication of effort between Mr. Marquardt's work and counsel's work. Discussion [38] I have several concerns about the position advanced by Ocean Rodeo. First, it does not appear that the Registrar specifically referred to the appellants' argument that a considerable amount of Mr. Marquardt's time was spent doing actual counsel work, as

opposed to providing expert reports on "what conduct by the defendants in the application process fell below the requisite standard of care and whether any loss or damage might flow from that conduct." It would appear the reason there was no duplication in Mr. Marquardt's work and counsel's work was because counsel left it up to Mr. Marquardt to do work that counsel could have done. [39] While the Registrar noted that "the primary report's narrative" describes the factual underpinnings of Ocean Rodeo's claim in significant detail, she "[did] not read the report as prolix or tediously lengthy" such that there was a "massive" increase in Mr. Marquardt's fees. That specific conclusion is entitled to deference and I see no error in her reaching that conclusion. However, I am persuaded that the Registrar was "clearly wrong" in taking Mr. Wotherspoon's comments out of context with respect to Mr. Marquardt's involvement "in drafting pleadings and other aspects of [patent law] litigation.". I also agree with the appellant that the Registrar erred by misconstruing the point of Mr. Wotherspoon's evidence as to the reasonableness of Mr. Marquardt's fees. [40] I am also unable to agree with Ocean Rodeo's submission that Mr. Wotherspoon was not qualified to give expert opinion evidence on the reasonableness of Mr. Marquardt's charges, as this suggestion is contrary to the Registrar's

finding at para. 3 of her reasons. [41] Furthermore, I accept the appellants' submission that after the Registrar declined to apply "her own experience and expertise" to the Marquardt Account because it was "unusual to assess the charges of patent lawyers or those of an expert carrying business outside of this jurisdiction" and her experience "[did] not extend to some of the experts' charges at issue here", she erred in failing to consider Mr. Wotherspoon's evidence on the reasonableness of Mr. Marquardt's charges. [42] Having reached these conclusions regarding the respondent's findings on the quantum of the Marquardt Account, I turn to the question of the proper remedy. This Court has little or no expertise when it comes to complex cost assessments, and counsel for the appellants agrees I cannot simply choose an arbitrary figure. However, the appellants do say I can rely on Mr. Wotherspoon's evidence before the Registrar - specifically, his opinion that a reasonable fee for the Marquardt Account would be approximately $70,000, not the approximately $137,000 that was charged. [43] The Registrar is the judicial officer who has the requisite expertise, and who is routinely tasked with deciding what constitutes a proper cost assessment in many complex cases. However, in the present case I have concluded the Registrar erred by not considering in her reasons the fact that counsel

services were "performed" by Mr. Marquardt and the other issues I have just referenced, and that her assessment of what constitutes a reasonable disbursement for the Marquardt Account was clearly wrong. [44] I accept the appellants' submission that Mr. Marquardt did provide counsel work in the guise of an expert report, and combined with Mr. Wotherspoon's evidence before the Registrar, I am persuaded it is appropriate to accede to the appellants' submission and reduce the Marquardt costs to $70,000, rather than remitting the matter to the Registrar for reconsideration. The Consor Account [45] As noted above, the Registrar reduced the $216,155.67 claim for the Consor Account to $140,000. The appellants now seek to have the Consor costs reduced further. They advance numerous submissions in support of that outcome. Ocean Rodeo's Onus [46] The appellants say the Registrar failed to require Ocean Rodeo to properly discharge its onus of proving the Consor Account charges. They emphasize that even though the Consor Account was the largest single item in Ocean Rodeo's bill of costs, it was the only significant item for which Ocean Rodeo did not provide an affidavit from the invoicing party. Instead, Ocean Rodeo provided evidence in the form of an affidavit from Ocean Rodeo's lead counsel, wherein he makes what the appellants describe as a 'bald assertion' that the fees were "reasonable

and focused." [47] As a result, the appellants say they were not provided the opportunity to effectively challenge the reasonableness of any of the specific Consor charges because Ocean Rodeo did not provide any evidence from a person with knowledge of them. They say Ocean Rodeo's lead counsel admitted he had not made the requisite enquiries of Consor representatives in order to enable him to assert in his affidavit that the charges were reasonable. [48] The appellants submit that Ocean Rodeo did not meet the onus of establishing the reasonability of the Consor charges, saying that a broad assertion by Ocean Rodeo's counsel is insufficient. Moreover, as the Registrar herself said in Wheeldon v. Magee, 2010 BCSC 491, with respect to proving expert charges, at para. 25: ... the best evidence to present to the assessing officer will include detailed invoices showing the hours spent by the expert and that individual's hourly rate. This evidence should come directly from the expert who may then be subject to cross-examination on the affidavit's contents. ... The appellants say when a party is seeking to have the Court approve expert charges of the magnitude of the Consor Account charges, this type of evidence is "fundamental". [49] The appellants therefore submit that it was an error of mixed fact and law for the Registrar to conclude Ocean Rodeo discharged the onus of positively

proving any portion of the charges for the Consor Account. They say the Registrar made no mention of whether the evidence provided in support of the Consor charges met the burden to positively prove any of the charges. The appellants say that the Registrar erred in law and fact by not dismissing the Consor bill in its entirety. They submit the failure to "apply the onus" was an error of law, while the approval of some of the charges was an error of fact. [50] In reply, Ocean Rodeo asserts that the Registrar did consider the lack of affidavit evidence from Consor and found "some justification for reducing the amount claimed" due to this lack of evidence - particularly the absence of any "affidavit evidence from a Consor representative that explains or attempts to justify the charges." As a result, the Registrar reduced the Consor fees by an amount that corresponded to the charges for which no explanation was provided. Ocean Rodeo emphasizes that while the Registrar identified the problem of the absence of evidence by a Consor representative, she still found $140,000 of the charges were justified. [51] In this regard, the evidence that the Registrar relied upon in determining the reasonableness of the Consor Account charges was the Consor invoices and the evidence of Ocean Rodeo's lead counsel. Ocean Rodeo says the Consor invoices described the steps taken in the preparation of

the reports, and its lead counsel was able to explain the portions of the invoices containing technical language. Ocean Rodeo says the Registrar based her assessment of the Consor Account charges on this evidence along with her expertise on what would constitute unnecessary or duplicative work, and it submits the appellants have not demonstrated that it was an error for her to rely on this evidence. [52] Ocean Rodeo also says the Registrar had sufficient evidence before her to make a "reasonableness" determination grounded in her expertise in conducting cost assessments. It says the evidence adduced here was more than a broad assertion by counsel, and it submits that proof does not require an affidavit from the expert, citing Wheeldon, wherein the Registrar was able to consider assessments of the reasonableness of an expert's charges in other cases where that expert had given evidence (at para. 80). Preposterousness and Proportionality [53] The appellants say the Registrar failed to consider whether the opinions expressed in the Consor Account were preposterous, and also failed to have proper regard to the principle of proportionality. [54] At the outset, I note that the Registrar referred to the following passage from Bell v. Fantini, [1982] 32 B.C.L.R. 322 at 327 (S.C. Chambers), which nicely summarizes the governing concerns in a cost assessment: I consider that R. 57(4)

entitles the registrar to exercise a wide discretion to disallow disbursements in whole or in part where the disbursements appear to him to have been incurred or increased through extravagance, negligence or mistake or by payment of unjustified charges or expenses. The registrar must consider all the circumstances of each case and determine whether the disbursements were reasonably incurred and were justified. He must be careful to balance his duty to disallow expenses incurred due to negligence or mistake, or which are extravagant, with his duty to recognize that a carefully prepared case requires that counsel use care in the choice of expert witnesses and examine all sources of information and possible evidence which may be of advantage to his client. [55] In the present case the appellants point out the Consor Account assessed damages at $26,141,287.00 USD, which, as of the date of settlement, was the equivalent of $34,599,509.54 CAD. In the final result, Ocean Rodeo settled the matter in its entirety for $1,500,000 CAD, or approximately 4% of Consor's assessment of Ocean Rodeo's loss. In these circumstances, the appellants say it was an error of law for the Registrar to refuse to consider whether the Consor Account was preposterous and to decline to tax off the account entirely on that basis. [56] At para. 56 of her reasons, the Registrar found that while "an expert's fees

can be reduced if there is a finding by the court that the opinion given is "preposterous", a registrar "can make no such determination at this stage of the proceeding". The appellants say this finding is erroneous. They rely on Bell, in which Legg J. upheld a registrar's finding that expert reports were preposterous (at para. 333). [57] The appellants say the Registrar also erred by failing to have proper regard to proportionality, as required by Rule 1-3(2). They note that she made only a single reference to proportionality and Rule 1-3(2) at para. 54, where she stated she must consider the "potential amount involved in the proceeding, not simply the amount of any ultimate settlement or judgment." The appellants say this language supports an inference that the Registrar measured the proportionality of the Consor Account charges against Ocean Rodeo's "preposterous position" on damages, approximately twenty-five times the ultimate settlement amount. They say this approach is improper, citing a Nova Scotia decision, Barrie v. MacDonald, 2004 NSSC 192, where the plaintiff argued that the "amount involved" ought to be measured by the claimed amount and the defendant argued that it ought to be measured by the amount of the settlement. The court in Barrie concluded: The question does not arise very often simply because the amount of costs to be paid is usually negotiated by counsel

as part of the settlement. However, in cases where it is left to the court for determination, the general rule ought to be that for purposes of fixing costs under Tariff C, the amount of the settlement actually paid ought to be adopted as the "amount involved". [58] The appellants also note that this Court has found that the settlement amount is a significant consideration in determining proportionality in costs assessments: Tabah v. Bress, 2018 BCSC 185 at para. 108. [59] The appellants submit that the Registrar's finding that Ocean Rodeo's position on damages is a yardstick for proportionality, taken in concert with her finding that a registrar cannot assess the preposterousness of the damages report, places the appellants in an impossible position. It allows parties to serve "outrageous" reports and run up excessive costs based on those reports, and leaves opposing parties with no avenue for redress. Taken together, the appellants say these finding are clearly wrong in law, and that the result of these findings runs directly counter to the proportionality principle in Rule 1-3(2), which has been held to be an important and specific concern in costs assessments: Salsman v. Planes, 2014 BCSC 45 at para. 30. [60] The appellants further submit that it is a fundamental principle, confirmed by the Supreme Court of Canada in Walker v. Ritchie, 2006 SCC 45, that the potential costs

exposure of a party must be predictable and consistent between cases. Only then can parties accurately assess the risks of engaging in litigation and make rational decisions about settling or prosecuting the case: Chandi (Guardian ad litem of) v. Atwell, 2014 BCCA 446, at paras. 81-82. The appellants say the Registrar failed to apply this principle in making her findings and in reaching her final assessment. [61] In reply, Ocean Rodeo acknowledges that expert charges may be reduced where the suggested damages reported by the expert are found to be "preposterous," but says it is improper to consider the amount of settlement or judgment when making a determination on that point. While the content of an expert report may be reviewed to determine whether the opinion offered is preposterous, in Harvey v. Tooshley, 2014 BCSC 433, the Registrar herself confirmed that "the amount of settlement or judgment should not play any part in the costs assessment process" (at para. 40).On this point, Ocean Rodeo says: Settlement amounts rarely represent the full value of damages suffered by the Respondent given the nature of settlement which serves to mitigate risk to both parties. Settlement inherently involves compromise. For this reason, courts have often declined to find damage calculations provided by experts preposterous given the vicissitudes of litigation and pre-trial negotiations. [62]

Ocean Rodeo says Bell is distinguishable as in that case expert reports were determined to be "preposterous" based on evidence that those reports were premised on a patently false fact. In the present case Ocean Rodeo submits there is no basis for the assertion that the Consor Account was preposterous. Even though Consor's range of damages was significantly higher than the eventual settlement amount, Ocean Rodeo says the appellants have not demonstrated and cannot demonstrate that the valuation exercise was premised on patently false assumptions. Absent such evidence, clearly accessible by a registrar, it says this argument must be dismissed. [63] Further, Ocean Rodeo submits loss of opportunity is a difficult area of law that requires a nuanced analysis of complex facts. Courts are required to speculate on what a plaintiff would have done had the circumstances been different, and in this case the analysis had to be conducted many years after the fact. The lost opportunity claimed was the opportunity to extract royalty payments in the U.S. and world markets. If the world market was captured, Ocean Rodeo says that could have yielded significant damages. Consor's evaluation of potential damages took this potential scenario into account. Ocean Rodeo says the legal and factual complexities of its claims should be considered if this Court deems it proper to compare the settlement amount with the forecasted damages. [64] Ocean Rodeo says proportionality is subsumed and considered within the concept of reasonableness, citing Tabah at para.

111. It submits the Registrar considered whether the Consor charges were reasonable and found that a portion of them were not. [65] Regarding the appellants' suggestion that the Registrar used the wrong "yardstick", Ocean Rodeo argues that a proportionality analysis requires a registrar to assess whether expert fees were necessary or proper when they were incurred, not in hindsight. Accordingly, Ocean Rodeo says the reasonableness of the claimed amount must be judged in relation to the amount at stake in the proceeding, not the amount in an eventual settlement. Assessing the reasonableness of costs in relation to a settlement amount risks ignoring other factors that might influence settlement negotiations, including the extraneous circumstances of the parties and the litigation risk inherent in factually and legally complex cases. Therefore, as the Court said in Bell, assessing officers: must be careful to balance [their] duty to disallow expenses incurred due to negligence or mistake, or which are extravagant, with [their] duty to recognize that a carefully prepared case requires that counsel use care in the choice of expert witnesses and examine all sources of information and possible evidence which may be of advantage to [the] client. [66] Ocean Rodeo says the Registrar properly balanced these considerations and determined that a portion of the Consor Account charges were

unreasonable. However, she allowed $140,000 of the charges, given the amount involved as well as the breadth and complexity of the work performed. Excessiveness of Consor's Bills [67] The appellants say that the Registrar was clearly wrong in respect of certain findings of fact regarding the "reasonability" of the Consor Account charges. For instance, they say she erred in finding that Consor was "in a unique position to offer an opinion on the quantum of damages" as this finding was not supported by the evidence. Ocean Rodeo's previous counsel, who selected Consor as an expert, testified that he "wanted the best report [he] could get" and that while he was not "suggesting that Vancouver experts could not have attempted the work that Consor did", he "was satisfied Consor was the best." Similarly, Ocean Rodeo's lead counsel testified that although Consor's high fees caused worry, Ocean Rodeo decided to continue with Consor because they were "the best" choice. [68] The appellants say Ocean Rodeo clearly indulged in retaining a foreign expert whose charges were well in excess of experts in this jurisdiction, and provided no budget oversight or critical analysis of extremely high charges, as Ocean Rodeo's lead counsel admitted on cross-examination. Indeed, the bar appeared to be set from the outset, when previous counsel advised Consor their budget would be $25,000 and Consor

proceeded to charge $25,000 for a one and one-half page "report". [69] The appellants say it is a fundamental tenet of the law of costs that luxury should be paid for by the indulging party and "the unsuccessful party should only be responsible for a reasonable fee": Hall (Guardian ad litem of) v. Strocel, [1983] B.C.J. No. 506 (S.C. Chambers). They submit the Registrar was clearly wrong in failing to reduce the Consor Account charges to reflect the excessiveness of their fees. [70] The appellants also submit the Registrar erred in failing to reduce the Consor Account charges to reflect work done by Consor that should clearly have been done by counsel. As with Mr. Marquardt, Ocean Rodeo's counsel did not provide Consor with an assumed set of facts upon which to base their expert reports. Instead, counsel permitted Consor to undertake its own investigations to find facts on which its reports were subsequently based. The appellants say such investigatory work is not a proper expert fee disbursement, and it was an error for the Registrar to conclude that any of the Consor Account charges were reasonable. [71] In response, Ocean Rodeo says the Registrar did not err in making the findings of fact that led her to conclude some of the Consor Account charges were reasonable. The evidence before her indicated that while Consor's fees were higher than what might have been found locally,

they were consistent with fees in the U.S. market. Local experts could have provided an opinion on damages, but Consor was the better choice given its extensive experience with U.S. intellectual property valuation. Ocean Rodeo submits is not for the Registrar to second guess counsel's decisions, provided they are reasonable in the circumstances. [72] Ocean Rodeo says that the Registrar's decision, based on the preponderance of the extensive evidence before her, was not clearly wrong. She granted a significant discount but ultimately determined that the specialized knowledge and increased fees were necessary and reasonable in this factually complex case. [73] Ocean Rodeo disputes the appellants' attempt to characterize evidence provided by counsel as admissions that Consor was a "luxury", the cost of which should not be visited upon the appellants. Ocean Rodeo says the Consor Account charges were necessary given the issues involved in the case, which required specialized expertise. It says the preponderance of the evidence justifies the choice of a firm that specialized in US and international patent damage valuation. [74] Regarding the appellants' suggestion that Consor performed counsel work, Ocean Rodeo says that evaluating the potential damages required adducing evidence to demonstrate the value of the invention in the market, the demand for the invention in the market, and

the likely royalties that could be extracted for such an invention. Consor collected this evidence by interviewing witnesses knowledgeable about the kitesurfing market and the commercial arrangements entered into to license kitesurfing technology. Ocean Rodeo submits that this fact distinguishes the work done by Consor from most other expert reports. It says Consor was required to conduct defensible research to build its valuation model rather than work from assumed facts. [75] In conclusion, Ocean Rodeo submits the appellants have not demonstrated that the Registrar was clearly wrong in not applying an even more substantial discount to the Consor bill, and there is "certainly no basis to discount this amount by the 100% which is unreasonably sought by the appellants." Discussion [76] For the reasons that follow, I am unable to agree with the appellants' submission that the Registrar erred in law or fact by not reducing the Consor Account costs more than she did. [77] I agree with Ocean Rodeo's submission that the Registrar acknowledged the lack of evidence to support some of Consor's fees and reduced them accordingly, but found there was sufficient evidence to conclude a portion of the Consor charges should be accepted. While direct evidence from an invoicing expert may be the "best evidence" of expert fees, it is not an essential prerequisite to proving the reasonableness of

such costs: Wheeldon. In all of the circumstances, I am satisfied the Registrar's exercise of her discretion on this point should not be interfered with. [78] Turning to the issue of preposterousness, I agree with the appellants' point that registrars do have jurisdiction to determine whether expert reports are preposterous. However, I find the appellants have failed to demonstrate that the Consor valuation was premised on patently false assumptions, which Bell suggests is a necessary precondition to finding an expert report is preposterous. Thus, even if the Registrar had read Bell as empowering her to reach a determination on the preposterousness issue, she would not have had the necessary evidentiary basis to reach a finding that the Consor Account was preposterous. [79] Regarding proportionality, I am not persuaded that the Registrar ignored or improperly applied the concept when considering the claimed costs for the Consor Account. On the contrary, I am satisfied she applied the principles she articulated in Harvey: [40] [T]he amount of settlement or judgment should not play any part in the costs assessment process. To the extent that any decisions rendered by me unintentionally suggest otherwise, I stand corrected. Proportionality is a broad concept and includes a consideration of the importance of the matter and the amount involved in a proceeding. The most that an

assessing officer could consider is whether the cost of the disbursement, when incurred, was proportionate to the reasonably anticipated loss or damages. The concept of proportionality as it relates to the amount involved should not be applied retrospectively once judgment is rendered or settlement accomplished. [80] I do not read Tabah as requiring the use of a different "yardstick" in this case. The fact that a significant settlement corroborating the plaintiff's reasonably anticipated damages was considered "significant" to the proportionality assessment in Tabah does not imply that settlement figures have supplanted "reasonably anticipated loss or damages" as the focus of the proportionality analysis - particularly when the settlement figure diverges significantly from what was reasonably anticipated when the disbursements were incurred. [81] Additionally, while predictability of costs is a desirable goal, everyone involved in this litigation acknowledges the unique and complex circumstances, including the experienced Registrar. It appears it was difficult to find a comparable case in order to evaluate the costs in comparison to a similarly complex case involving patent litigation and solicitor negligence. In the circumstances, I am satisfied the Registrar's decision does not offend against the principles articulated in Walker and Chandi. [82] In my view, the Registrar's

assessment of the Consort Account charges does not reveal any reversible errors of law or principle. [83] Moreover, I am not persuaded the Registrar was clearly wrong in failing to further reduce the claimed costs of the Consor Account, or in making the findings of fact that led her to conclude the Consor costs she did allow were reasonable. In the absence of palpable and overriding error, her exercise of discretion is entitled to deference. Conclusion [84] The disbursement for the Marquardt Account will be reduced to $70,000. [85] The appeal of the Registrar's decision pertaining to the Consor Account assessment is dismissed. Costs [86] Both parties have achieved partial success and will therefore bear their own costs for this application. "B. D. MacKenzie, J." The Honourable Mr. Justice B.D. MacKenzie