Interest on Disbursements Disallowed in Personal Injury Claim

Update November 17, 2014 – in Reasons released today the BC Court of Appeal overruled the below decisions and found interest on disbursements cannot be recovered.
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Update – May 17, 2013 – the below decision was overturned on Appeal.  You can click here to read about this development
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A very uncertain area of the law relates to recovery of interest on disbursements.  Last year the BC Court of Appeal declined to resolve this uncertainty.  Reasons for judgement were released today by the BC Supreme Court, New Westminster Registry, further weighing in on this inconsistent area of law finding that interest on disbursements is not recoverable.
In today’s case (MacKenzie v. Rogalasky) the Plaintiff was injured in a motor vehicle collision.  In the course of the lawsuit the Plaintiff borrowed $25,000 to finance the disbursements in his case. Following trial the interest on this loan was over $11,000.  The Plaintiff sought to recover this interest but Registrar Sainty declined to allow this claim.  In doing so the Court provided the following reasons:

[33]Based on all of the matters that I have considered — and I have had this matter under consideration for some time; I reviewed all of the submissions before coming here today and then today I have heard even more comprehensive submissions from counsel — I find that I am not bound by the decision of Mr. Justice Burnyeat in Milne. None of the decisions cited to me in favour of awarding interest, including Milne, are on all fours with the facts before me. Milne arose in the context of settlement of an action. Here, the matter was decided following a trial. Further, I find that Mr. Justice Burnyeat’s comments in Milne were obiter and are not binding on me. The case before me is also distinguishable from the decision of Registrar Cameron in Chandi as, in that case, counsel told the Learned Registrar that he was bound by Milne. His Honour was not given the benefit of the submissions I have had regarding the nature of that decision; nor of the impact of theCourt Order Interest Act on his decision. On that basis I may distinguish his reasons.

[34]That, of course, does not end the matter because the fundamental question still remains to be answered: Is this a disbursement that is recoverable by the plaintiff? I think that it is not on the basis of the arguments made by Mr. Parsons, most particularly those related to the impact of the Court Order Interest Act on claims of this nature.

[35]Firstly, a successful party’s right to claim disbursements does not actually arise until the action itself has been determined and so, until the judgment has been rendered, no entitlement arises to recover any costs or any disbursement. Accordingly there can be no right to claim any disbursement until the determination of the action.

[36]The decision in Milne was made without the benefit of the extensive argument that was before me, particularly the argument based on the application of the provisions of the Court Order Interest Act. That Act makes it clear that the legislature did not intend that interest be recoverable on disbursements.

[37]Nor can it be said that the object of costs (as compared to damages for a tortious act) is to return a party to his pre-litigation status and thus interest ought not to be recoverable. Costs are not intended to provide full indemnity to a successful party and the successful party is only entitled to recover necessary or proper disbursements at a reasonable amount. In my view it cannot be said that interest on disbursements is a necessary and proper adjunct of litigation. It is simply one of those unfortunate matters that arose in the circumstances of this particular plaintiff and I find it is not reasonable that the plaintiff recover it.

[38]So, for all of these reasons, I am going to disallow the plaintiff’s claim for interest paid to the third party lender in respect of the loan to fund the disbursements.