More on the Recovery of Disbursement Interest

Adding to this site’s archived posts addressing the recoverability of interest on disbursements, reasons for judgement were released last week by the BC Supreme Court, Vernon Registry, canvassing the evidence necessary to recover these expenses.
In last week’s case (Bodeux v. Tom) the Plaintiff was injured in a collision and the claim settled however the parties could not agree on various disbursements.  The Court concluded that the majority of claimed disbursements were reasonable along with interest charged on these.  In reaching this decision Master McDiarmid provided the following reasons addressing disbursement interest:
[68]         The defendants say that the plaintiff has not provided sufficient evidence for me to determine that interest was either necessary or proper. They submit that detailed financial information, such as was provided to me in a review of the plaintiff’s bill of costs in Franzman v. Munro, 2013 BCSC 1758, is required before I can conclude that interest is a disbursement which has been necessarily or properly incurred in the conduct of the proceeding. They point to the evidence presented to Registrar Cameron in Chandi v. Atwell, 2013 BCSC 830, where, in an appeal from the decision of Registrar Cameron, Mr. Justice Savage, at para. 14, summarizes a relevant fact as follows:
…In preparing for litigation, the plaintiff incurred disbursements in order to obtain necessary evidence on liability, the extent of injuries, and the quantification of damages. As the plaintiff and his family were of limited means, they required assistance in order to fund the disbursements.
[69]         Similarly, in the appeal from the decision of Registrar Sainty in MacKenzie v. Rogalasky, 2012 BCSC 156, Savage J. summarized the relevant facts in paras. 22-23 as follows:
[22]      However, due to his income loss, Mr. MacKenzie could not afford to pay for the expert reports and other trial expenses. He did not qualify for a loan from a bank or a similar institution, and his credit cards were maxed out. He had already borrowed from his family. The only source of funding available to him was a loan from Lexfund Management Inc. (“Lexfund”), a specialized disbursement lender.
[23]      Mr. MacKenzie obtained the loan from Lexfund on November 26, 2009, only two months before trial. The loan was for $25,000, plus a $1,250 underwriting fee, for a total of $26,250. Under the terms of the loan, Mr. MacKenzie could only use the funds to pay disbursements incurred in the course of litigation. The interest on the loan was 2% compounded monthly, representing an effective annual rate of 26.82%. The loan was secured by any proceeds of the litigation.
[70]         As is apparent from the materials I have reviewed, including the various medical/legal reports and the description of the accident contained in many of those reports and also contained in the affidavit of Mr. Yawney, this was a claim which, in order to be properly presented, required plaintiff’s counsel to obtain many expert reports. Those expert reports cost money. As I wrote in my decision in Franzman:
[28]      We are constantly hearing how difficult it is for ordinary people to afford access to our courts. The fee agreement entered into between the plaintiff and her lawyer facilitated her having access to the courts. …
[71]         Entering into a fee agreement in which the plaintiff’s lawyer agreed to incur the expense of necessary disbursements for the plaintiff and to finance them and charge the plaintiff for that result in the incurring by the plaintiff of a disbursement for interest which I find, on the uncontradicted evidence before me, to be both necessary and proper.
[72]         In Franzman, at para. 28, the balance of the paragraph is as follows:
The interest rate charged by the law firm, that being essentially the interest it was paying on its operating line of credit (a way in which many law firms finance their operations) is reasonable.
[73]         In Franzman, interest on disbursements was calculated at six percent simple interest.
[74]         The mere fact that the plaintiff entered into a fee agreement which provided for charging disbursements at a rate appropriate to be charged between the client and her lawyer, does not mean that that amount of the disbursement should be automatically passed on to an unsuccessful litigant.
[75]         For example, retainer agreements often provide that the law firm will charge its client photocopies at an agreed upon rate. A photocopy rate allowed by registrars is usually less than the rate agreed to as between the law firm and its client.
[76]         I am charged with assessing and allowing a reasonable amount for disbursements. The six percent allowed in Franzman was a reasonable amount; economic times have not changed since that decision was rendered in September 2013. I, therefore, allow the disbursement at six percent of the amount claimed, reducing the $2,730.81 claimed to $1,638.49.