Interest on Disbursements in Injury Claims Recoverable "As a Matter of Principle"
Reasons for judgement were released last week by the BC Supreme Court, Vancouver Registry, illustrating a welcome development in BC personal injury law.
As discussed on previous occasions, injury lawsuits can be expensive and oftentimes individuals rely on their lawyers to finance the costs necessary to prosecute their claim. These costs can easily add up to tens of thousands of dollars and significant interest can accrue on these expenses (called disbursements). After claim settlement or trial a debate often arises as to who should pay the interest on disbursements.
Earlier this year Mr. Justice Burnyeat held that “The law in British Columbia is that interest charged by a provider of services where the disbursement has been paid by counsel for a party is recoverable as is the disbursement. The interest charge flows from the necessity of the litigation. If the disbursement itself can be assessed as an appropriate disbursement, so also can the interest owing as a result of the failure or inability of a party to pay for the service provided.” Last week a case was released going further holding that in the appropriate circumstances interest charged by lawyers for financing disbursements can be recoverable as a disbursement.
In last week’s case (Basi v. Atwal) the Plaintiff was injured in a motor vehicle collision. The Plaintiff hired a lawfirm that financed the prosecution of the claim. The lawfirm did so through a line of credit which in turn charged interest. The interest was passed on to the client. After settlement ICBC argued that the interest charged was not a reasonable disbursement. Registrar Bolton disagreed and provided the following instructive reasons:
…In… Milne v. Clarke , BCSC 317, the learned judge quite clearly says that the successful party is entitled to interest on a specific disbursement where the provider of the service in question had charged interest to counsel for that party.
I see no reason in principle to distinguish this decision on the basis that in the Milne case, the interest has been charged by the provider of the service to the law firm and, therefore indirectly to the client, whereas here the interest is being charged directly by the lawyers pursuant to an agreement they have with their own bank.
So I am satisfied that the charge is potentially proper, give the appropriate circumstances. Here, the circumstances are that the law firm has an arrangement with its own bank to fund disbursements. They are funded on the basis of an agreement of paying six percent over prime. I am satisfied that that is a reasonable interest rate in these circumstances…
So to summarize: first of all, I accept that the principle of allowing interest is one that the law recognizes, at least since this decision of Mr. Justice Burnyeat. Secondly, I am satisfied that the accounting that would be required to satisfy the court that the charge does relate specifically to this particular file, has been properly done. Thirdly, I am satisfied that the interest rate being charged by the bank is reasonable…
In those circumstances, that only leaves the question of amount to be decided…as a matter of principle, or law, I suppose, I am satisfied that a claim for interest here is proper.
As readers of this blog know, I like to link to the full judgments of the cases discussed here. As of the date I write this post Basi v. Atwal remains unpublished. I will link to the case should this change but in the meantime am happy to e-mail a full copy of the case to anyone who may need it.