Tucker v. Edmonton (City), 2011 ABQB 55

Court of Queen ’ s Bench of Alberta Citation: Tucker v. Edmonton (City), 2011 ABQB 55 Date: 20110202 Docket: 1003 07663 Registry: Edmonton Between: Kara Tucker Appellant - and - The City of Edmonton Respondent _______________________________________________________ Oral Reasons for Judgment of the Honourable Mr. Justice K.D. Yamauchi _______________________________________________________ Appeal from the decision of The Honourable Judge D.G.

Ingram Dated the 16 th day of April, 2010 ( 2010 ABPC 134 , Docket: P0990300712) [ 1 ] This decision is delivered orally, so this Court reserves the right to make any changes to the final form of Judgment. Any changes will not affect the substance of the Judgment.

[ 2 ] The Appellant Kara Tucker ("Tucker") was in an automobile accident with a vehicle that the City of Edmonton (“City”) owned. Tucker paid the City for the repairs to the vehicle. The City sought to recover an additional amount reflecting costs it incurred in its employees coordinating and overseeing the repair work that an outside body shop carried out on the van (“Overhead Charge”). The learned Provincial Court judge allowed the recovery of the Overhead Charge. Tucker appeals that decision. [ 3 ] The Overhead Charge in this matter is trifling.

However, the parties advised this Court that the issues involved could have larger ramifications, so this Court allowed the parties to proceed with this appeal. [ 4 ] How does the City calculate the Overhead Charge? Two City employees are "primarily responsible" for overseeing and coordinating the repair work to City vehicles conducted by the third party auto body shops. Often, these two employees coordinate "multiple repairs at one time" and "approximately 50% of their time [is] devoted to third party collisions".

The vehicle that Tucker damaged was dealt with under what can be termed the City's collision repair coordination system. [ 5 ] This collision repair coordination system has been in place since 2004, dealing with between 82 to 191 claims each year between 2004 and 2007. These are the claims that the two City employees devote about 50% of their time to overseeing and coordinating. [ 6 ] The two City employees do the following tasks when overseeing and coordinating the repairs that are carried out by third party auto body shops: (

a) Review, inspect and examine the damaged vehicles and then tow them to the City's garage; (

b) Deliver the damaged vehicles to an auto body shop, and then return to the office or arrange to have the vehicle towed to the auto body shop; (

c) Secure an estimate for the repairs and arrange for an appraisal if required; (

d) Review the appraisals and update the documents and work orders; (

e) Oversee the repairs; (

f) Pick up the vehicle from the auto body shop, then carry out any further work that might need to be done (such as placement of decals); (

g) Inspect the vehicle once it has been repaired. [ 7 ] Although the learned Provincial Court judge did not find this, the City advised this Court in argument that the Overhead Charge is intended to cover the costs associated with the tasks undertaken by these employees, as well as the employees’ salaries, benefits, and other capital costs. [ 8 ] The issues on this appeal are whether the learned Provincial Court judge erred when he found that Tucker was liable for the Overhead Charge, and in finding that the Overhead Charge was properly recoverable as damages in tort.

[9] This Court must first address the standard of review it must undertake when dealing with an appeal from a decision of theProvincial Court. The base point is the deference an appeal court gives to the trial court on questions of fact and mixed fact and law.Appeals involving questions of fact and of mixed fact and law will be reviewed on a standard of palpable and overriding error Appealsinvolving questions of law will be reviewed on a standard of correctness.

If the trial court has committed an extricable error in principlewith respect to the characterization of a legal standard to a set of facts, this court will review the decision on a correctness standard,Housen v. Nikolaisen, 2002 SCC 33 , [2002] S.C.J. No. 31, [2002] 2 S.C.R. 235; see also, Byersave2 Realty Inc. v. He, 2009ABQB 383; Laforce v. Kaye, 2008 ABQB 249. [10] The evidence that the parties submitted was found exclusively in the affidavits the parties filed before the hearing.

TheAppellant, in written argument, argued that the learned Provincial Court judge had already made his decision, after oral argument, butbefore he had an opportunity to read the written materials that the parties had filed. With respect, this is an unfair characterization of thelearned Provincial Court judge’s approach to this matter. Courts regularly rely on counsel to present the evidence to the court;particularly when the parties are given extensive time to present their arguments, such as in a Queen’s Bench special chambersapplication or a Provincial Court trial.

This is not like a 10-minute morning chambers application. Accordingly, this Court was troubledby the Appellant’s characterization of the learned Provincial Court judge’s approach to this matter. In these types of cases, judges rely oncounsel to present the evidence, hear argument, and then make decisions. That is how the system works. [11] This Court reviewed the learned Provincial Court judge’s decision. The principles he outlines are correct. He distinguishesmany of the cases to which the Appellant referred and this Court agrees with the way in which the learned Provincial Court judgedistinguished those cases.

However, the learned Provincial Court judge said the following, at para. 9: The essence of the Defendant’s arguments turn on the fact that the overhead costs were all in place and would have been incurred in anyevent and are not related to the specific accident caused by the Defendant. Had that been the essence of the Appellant’s case, this Court would agree that the Appellant’s case would fail and this Court woulddismiss this appeal.

During argument, the Appellant advised the Court and this Court agrees that this is not the essence of its case. [12] The essence of this case and thus, the essence of the learned Provincial Court judge’s decision is contained earlier, where hesays, at para. 6: ... [T]he allowance of a percentage of relevant costs for supervision, superintendence, office expenses, and overhead charges is a properhead of damage where such costs arise naturally from the act complained of and are proven to the satisfaction of the court. A fixedpercentage without other evidence in support is “altogether too arbitrary and artificial”.

The onus is on the Plaintiff to show that both thecosts and the percentage have “some reasonable foundation”.

The calculation must be more than the “fancy of an accountant” and mustbe based upon only such expenses as have some definite relation to the particular work in question, in this case, the repair of the City”svehicle. [Emphasis added.] [13] The calculation of the Overhead Charge on the basis of a percentage of the salaries of the two employees who are employed todo the very task of managing this department of the City is “arbitrary and artificial” and are the “fancy of an accountant.” The City’scalculation of the Overhead Charge was a convenient and simplistic way of arriving at a number.

The costs do not arise naturally fromthe act complained of. [14] The learned Provincial Court judge referred to the case Canada Safeway Ltd. v. Guay, 2003 ABPC 49. It should be notedthat, in that case, O’Neil P.C.J. awarded “those costs directly associated” as part of the loss. The learned Provincial Court judge, in thiscase, said that it was clear from the reported decision that O’Neil P.C.J. awarded the amounts for, among other things, the lossprevention agents. This is a direct cost and it is compensatory.

Here there was no evidence of direct costs associated with the City’s loss.The Overhead Charge is an indirect charge based on a percentage of the salaries of two employees. [15] The case of Curt's Trucking Co. v. City of Anchorage, 578 P.2d 975 (Alaska: Supreme Court 1978) is instructive. While thecase is not binding on this Court, this Court finds the approach that the Alaska Supreme Court took in that case to be highly persuasive.The facts were not dissimilar to the facts with which this Court is dealing.

The difference, however, is that the city, in that case,Anchorage, used its own employees to repair the damage. Anchorage then commenced an action to recover the direct costs of repair,along with an additional 20% charge for "overhead." The 20% overhead was composed of two separate sources: (1) a 13% charge forgeneral administrative overhead on the actual repair work, and (2) a 7% charge for what was called risk management expenses involved

in processing claims against third parties who damaged Anchorage property. The 13% charge was an indirect charge, in the sense thatAnchorage did not actually incur that cost. It was a calculation based on what the city would have spent, had it not undertaken the repairsitself. In other words, there was evidence that there was “a sufficient connection between the overhead expense and the necessaryrepairs,” Curt’s at 977.

In the case with which we are dealing, the “overhead” that the City could recover would be the amount it wouldhave had to pay to the independent auto repair shop, had the two employees fixed the vehicle themselves. That is not the case here. [16] The Curt’s court did not allow the so-called risk-management expenses. These expenses were to reimburse Anchorage forvirtually the same tasks as the City undertook to support the Overhead Charge claim.

The court at 981, did not allow Anchorage torecover this claim, as “it does not represent the indirect costs of repairing the City’s property.” It went on to say at 981: Whenever tortious injury is inflicted, the party suffering harm faces, at a minimum, disruption and inconvenience. In the processing ofprotecting a claim and acting upon it, an injured party usually expends time, effort and money.

Some of these items are readilyquantifiable, while others largely defy valuation entirely or are measurable only when the party suffering damage is a large organizationwith a specialized division to conduct the necessary claims activities. Such costs normally should be regarded as unrecoverableexpenses which arise due to the inherent friction within our system of damage recovery through civil litigation. As such, they are notproperly included as items of damage. [17] This is not to say that charges of this nature will never be awarded. In fact, Canadian courts have awarded such charges, seee.g.

Ontario Hydro Electric Power Commission v. Mather, [1954] O.W.N. 382; Canadian Pacific Railway Company v. City ofCalgary, 1971 ALTASCAD 18 , [1971] 4 W.W.R. 241 at paras. 50-51 (Alta. S.C., App. Div.). In Mather at para. 6, the courtsaid that “items of alleged damage must be proven to the satisfaction of the trial Judge in the same manner of any other damages.” Thecourt went on to quote with approval the following from Hi-Speed Tools Limited v. Empire Tool Works, [1923] O.J.

No. 256, 25O.W.N. 172 at 173: “Overhead” was undoubtedly a proper part of the plaintiffs' claim, payment being on a 'cost plus' basis; but the items of overheadchargeable against the defendants in such a case are not all the items which the fancy of an accountant may place under that heading,varying with different systems of accounting; only such items as under the contract bear some definite relation to the particular work tobe performed by the plaintiffs for the defendants should be allowed - they could not be ascertained by an estimated or customarypercentage on the annual turn-over of the business.

The onus was on the plaintiffs to establish the claim; and, unless the overheadexpense claimed was shewn to have some relation to the fulfilment of the contract, it could not be charged against the defendants. [18] The main problem with the case with which we are dealing is that the City has undertaken an arbitrary calculation.

Thelearned Provincial Court judge explained the calculation as follows (excluding references to the source of this information): The City ascertained that there were two City employees who were performing the tasks outlined above and overseeing repairs to Cityvehicles damaged by third parties. The City determined that approximately 50% of their time was devoted to third party collisions.

TheCity then compared the cost of the salaries of these two employees to the actual amount recovered by the City from third party collisions.The City ascertained that the direct salary cost of the two employees as a percentage of the amount recovered from third parties for theyears 2004 to 2007 was, on average, 7.5%. Subsequently, the City reviewed its records and found that the two employees were notinvolved in repairs to ETS vehicles nor repairs to non-vehicular property.

The City revised the calculations and found that the dedicatedsalary as a percentage of amounts recovered from third party collisions for the years in question actually amounted to a low of 12.47% toa high of 24.92%. These calculations do not include additional overheads costs such as payroll benefits including pension contributions,the salaries of other persons involved such as fleet safety members, nor office expenses such as furniture, computer equipment andsupplies etc.

As a result, the City felt justified in adding an Overhead overhead charge in the amount of 10% of the auto body invoice toClaims made against third parties, such as the Defendant in this action. It would be just as logical, and perhaps more reasonable, for the City to look at the tasks the employees undertake with respect to eachaccident and calculate a reasonable time that the employees would take in undertaking each task. Then, the City would multiply thenumber of hours by the employees’ hourly pay, and add a slight bump to cover administrative expenses.

This is not an “impossible task,”as the City would have us believe. Professionals and others do this as part of their respective practices. This method would result in arecovery of costs “directly associated” with the injury and the recovery of costs that “arise naturally from the act complained of and areproven to the satisfaction of the court.” That was not done in this case and it would be difficult to calculate ex post facto. [19] In Mather at para. 6, the Ontario Court of Appeal said:

While the items in controversy in this appeal are, in my opinion, properly included in the computation of compensation, nevertheless such items of alleged damage must be proved to the satisfaction of the trial judge in the same manner as any other damages. To add a fixed percentage to cover such items, without other evidence in support thereof, would be altogether too arbitrary and artificial. In the present case evidence was adduced to support the reasonableness of the percentage allowed by the trial judge.

In the final analysis, regardless of what the additional percentage may be, that is 15 per cent., 35 per cent., or otherwise, the onus is upon the plaintiff to satisfy the trial judge that the percentage added has some reasonable foundation. The learned Provincial Court judge was satisfied in this case that the percentage had a reasonable foundation. When one analyzes the tasks that the employees undertook in this case, however, there is no reasonable foundation on which to rest the percentage calculation that the City used. The employees might have inspected the damaged vehicles.

They did not tow the vehicle, as it was towed by a different City department and Appellant paid for those charges. They waited while the appraiser appraised the damage to the vehicle. They did not oversee the repairs and did not inspect the vehicle after the repairs. And they did not oversee the repairs. What they did was create a file and coordinated the creation and delivery of documents.

To this extent, the learned Provincial Court judge committed a palpable and overriding error. [ 20 ] As a final comment, an arbitrary calculation based on a percentage contains an element of capital recovery or, “additional overhead costs” to use the term that the learned Provincial Court judge used, unrelated to the tort with which the damages were awarded. In other words, there is no nexus between the tort and the damages award. [ 21 ] For the foregoing reasons, this appeal is allowed. Heard on the 7 th day of December, 2010. Delivered orally on the 9 th day of December, 2010.

Final written judgment dated at the City of Edmonton, Alberta this 2 nd day of February, 2011. K.D. Yamauchi J.C.Q.B.A. Appearances: Randal S. Carlson Field Law LLP for the Appellant David S. Woo The City of Edmonton

for the Respondent