Disbursement Interest Claim Allowed at 6%

Reasons for judgement were released today by the BC Supreme Court, New Westminster Registry, allowing a Plaintiff to recover interest charged on a loan which financed disbursements.
In today’s case (Phippen v. Hampton) the Plaintiff sued for damages following a personal injury.  In the course of the claim the Plaintiff borrowed funds from a company associated with the lawfirm she hired to advance her personal injury claim.  This loan was for disbursement funding and the lender charged interest at 15%.  The Court was satisfied that the loan was needed but reduced the recoverable interest to 6%.  In reaching this conclusion District Registrar Cameron provided the following reasons:
[2]             I am satisfied based upon the Affidavit evidence provided by Ms. Phippen, that she has established that her financial situation was such that it was necessary and proper for her to seek out financing for the disbursements that needed to be incurred to pursue her claim…
[5]             Mr. Mullally goes on to say — and I do not find this to be controversial — that it is difficult for most clients who have suffered a personal injury to finance the necessary disbursements that must be incurred to advance their case.
[6]             In passing, of course, this highlights the need for contingency fee agreements that allow for access to justice and alongside that disbursement loan arrangements, if they can be accommodated by the law firm or arranged by the law firm also help with that same purpose in mind…
[12]         Turning to the circumstances of this case, Ms. Phippen was charged an interest rate of 15 percent by PIL.
[13]         In Chandi, supra, Mr. Justice Savage said that the Registrar must consider the entire context of the arrangement.  In this case — and I refer back to Mr. Mullally’s evidence — while the law firm did not itself lend the funds necessary for the disbursements to the Plaintiff, a company that the law firm or members of the law firm had a controlling interest in provided that assistance.
[14]         Looking at the matter contextually I find that the law firm was not arm’s length from the lender, PIL. This was properly conceded by Plaintiff’s counsel. In this case, the law firm arranged the necessary loan for the Plaintiff that provided for a profitable rate of interest to the lender. In the current economic climate, I am not satisfied that an interest rate of 15 percent is reasonable to pass along to the Defendant, and as Master McDiarmid and Master Young have done in the decisions I  have referred to, I will award a rate of six percent.