Personal Injury Lawsuits and Lawyer Lending

Reasons for judgement were released last week by the BC Supreme Court, New Westminster Registry, discussing the propriety of lawyers lending money to clients in the context of a personal injury lawsuit.
In last week’s case (March v. Stanley T. Cope, Personal Law Corporation) the Client was injured in a 2007 motor vehicle collision.  She retained a lawyer to represent her.  In the course of the lawsuit, in addition to funding disbursements, the lawyer provided the client “two $5,000 advances” and charged interest on these loans at 18%.
The Client eventually discharged the lawyer and hired new counsel.  The case then settled.  A dispute arose as to how much the former lawyer was entitled to.  The client argued the 18% rate of interest “should be reduced from the contractual rate to a much lower figure of 4 percent“.   District Registrar Cameron ultimately allowed the rate of interest as charged but provided the following words of caution addressing lawyer/client loans:

[36] I do wish to make some observations respecting the two $5,000 advances. While I have accepted that Ms. March agreed to pay interest on these sums and was reminded of her agreement in the periodic billing she received from Mr. Cope, I am not persuaded that the contingency fee agreement contemplates such advances.

[37] It behooves a solicitor to clearly and carefully document any financial matters between himself and his or her client. If a client is to obtain an advance from a lawyer, he or she should receive a letter from the lawyer setting out the agreement, documenting all of the relevant terms and setting out the reasons for the advance. The client should also be given the opportunity and urged to obtain legal advice before concluding the agreement to borrow money from her lawyer.

[38] This should all be done to guard against the lawyer taking what would be an inappropriate personal interest in the litigation thereby putting at risk his or her obligation to provide the client with objective advice and undivided loyalty.

[39] In this case, I am satisfied that Ms. March did not suffer any detriment from the absence of clear documentation for these two loans but that may not always be the case. Accordingly, I will allow Mr. Cope the interest claimed on the two advances in keeping with his oral agreement with Ms. March.