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Tag: Chandi v. Atwell

BC Court of Appeal – Interest Disbursements Not Recoverable in Injury Litigation

Important reasons for judgement were released today by the BC Court of Appeal (MacKenzie v. Rogalasky) addressing an unsettled area of law, whether interest charges on disbursements incurred during the prosecution of an injury lawsuit could be recovered.  In short BC’s highest court ruled they cannot.
In reaching this conclusion the Court provided the following reasons:

[78]         In my opinion, the various iterations of the rule set out above permitting recovery of expenses focuses most naturally on the exigencies inherent in the particular litigation rather than capturing expenses arising from the financial circumstances or other choices of a party. Embedded in the rule is the requirement for a causal connection between the issues in the case and the expense incurred to prove or disprove them.

[79]         The rule, in its current form, permits the recovery of “disbursements … incurred in the conduct of the proceeding”. In my view, quite apart from the language “incurred in the conduct of the proceeding” the term “disbursement”, when used in the context of a costs rule that relates to the taxation of costs in particular litigation, does contain limits that narrow its potential broad applicability. It appears to me that the purpose of permitting the recovery of disbursements in the context of a costs regime is to permit the recovery of those expenses that arise inherently and directly from the issues in the case which relate, as the appellants suggest, to the direction, management, or control of litigation and which pay for materials and services used to prove a claim or defence. These expenses arise directly from the nature and conduct of the allegations in a proceeding. By contrast, interest expenses do not arise from the nature of the allegations or the conduct of proceedings, they arise from unrelated causes including the financial circumstances of a party. In my view, as such, they do not fall within the meaning of the word “disbursements” in the context of a costs rule.

[80]         It will be apparent that the conclusion I have reached does not depend on limiting the applicability of the word “disbursements” by reference to the phrase “incurred in the conduct of the proceeding”. I consider that the meaning of the words “disbursement” or “expense” has always excluded out-of-pocket interest expenses. The addition of the phrase “incurred in the conduct of the proceeding” in the rule in 1990 did not narrow or change the meaning of the word “disbursement” or otherwise limit its application. Rather, the phrase reinforces and confirms what has always been the case. To be recoverable a disbursement must arise directly from the exigencies of the proceeding and relate directly to the management and proof of allegations, facts and issues in litigation, not from other sources. In my view, that is what is captured by the phrase “the conduct of the proceeding”.

[81]         In my opinion, this interpretation of the rule flows naturally from the purposes of a costs regime and the guidance provided on that subject by the Supreme Court of Canada, most particularly in Walker. Several points emerge which assist in interpreting the rule. The first is that a costs regime serves multiple functions, only one of which is indemnification. Even in respect of that function, the costs regime provides only partial, and not full, indemnity to a successful party. Accordingly, one is not compelled to conclude that interest expenses must be recoverable because the purpose of the rule is to make a successful party whole. To the contrary, partial indemnification underlies both the recovery of costs on a tariff and disbursements (because the reasonable amount awarded may not fully indemnify the cost of necessary or proper disbursements).

[82]         Second, within the context of partial indemnification, costs awards should be predictable and consistent across similar cases. Only if this is the case can parties accurately assess the risks of engaging in litigation and make rational decisions about settling or prosecuting the case. Recognizing interest expenses as recoverable disbursements is inconsistent with this objective because exposure to costs and disbursements would not depend on the nature of the case itself, but on the particular circumstances of a party. These circumstances may well involve the relationship between the party and counsel and be matters the opposing party has no right to know.

[83]         Third, although costs regimes may affect access to justice, the Supreme Court has made it clear that costs are not the means of securing access to justice, except in exceptional circumstances. Of this more below.

[84]         Finally, costs awards relate to the particular case and are made as between the successful and the unsuccessful parties. On the facts of these appeals, it seems reasonable to infer that recognizing interest as an expense would lead to a transfer of resources between classes of parties in which unsuccessful defendants are exposed to the risks of paying high interest rates designed to pay for the cost of lending money, not just to the successful party in the case but other plaintiffs who receive financing but may not recover moneys to pay for their loans…

[93]         I conclude that an out-of-pocket interest expense incurred to finance disbursements is not a recoverable disbursement under Rule 14-1(5). I acknowledge that this result is likely inconsistent with the position in New Brunswick and possibly Ontario. To the extent that this is the case, I am respectfully, and for the reasons set out above, unable to agree with the conclusion those courts reached.

Court Clarifies Recovery of Interest on Disbursements

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.
Prosecuting an injury claim to trial often involves thousands if not tens of thousands of dollars in disbursement expenses.  If a litigant is victorious can they claim interest on these expenses?  Two competing judgement were heard together on appeal clarifying this issue (Chandi v. Atwell).  In short, Mr. Justice Savage held that interest on disbursements can be recoverable.  The Court provided the following reasons:
[28]         In Milne, the plaintiff was injured in an automobile accident. Following the injury, the plaintiff had three M.R.I. examinations over three years. An account was rendered to the solicitor for the M.R.I. examinations, which included interest on the unpaid balances. The account was paid.
[29]         The action was settled for an agreed sum, plus costs. The matter of costs was referred to the registrar, who ruled that the interest component of the M.R.I. account could not be recovered as part of a cost assessment. The appeal came to the Supreme Court as an appeal of the decision of a master sitting as a registrar of the court.
[30]         Mr. Justice Burnyeat considered various decisions of registrars and masters, which were in apparent conflict….
[32]         Mr. Justice Burnyeat held as follows:…
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. In order to obtain the M.R.I., it was necessary to pay not only the $975.00 cost but also the interest on any unpaid balances that were not paid immediately. The cost plus interest was the cost of obtaining the M.R.I. The claim for interest should have been allowed.
[70]         To the extent that Burnyeat J. preferred the reasoning in McCreight to the reasoning in the other cases, I note that of these cases, only Hudniuk was from a fellow judge. Hudniuk is obiter dicta in an oral ruling delivered to counsel while considering a jury charge. When confronted by conflicting decisions from masters and registrars and obiter dicta from a fellow judge in an oral ruling that was at best nisi prius, Burnyeat J. was bound to decide the correct interpretation according to his best lights, which he did: R. v. Pereira, 2007 BCSC 472 at para. 48, citing Young v. Bristol Aeroplane Co., [1944] 2 All E.R. 293 (C.A.).
[71]          In the result, judicial comity persuades me that I should follow the decision in Milne. There is nothing in the interests of justice that persuades me to exercise my discretion to depart from this practice.

Interest on Disbursements Allowed in Significant Injury Claim

Update – May 17, 2013 – the below decision was upheld on appeal this week. You can click here to read about this development
A developing area in BC relating to personal injury law is the ability of a Plaintiff to recover interest charged on disbursements.  Prosecuting personal injury claims, particularly claims with complex injuries, can be an expensive business.  Disbursements can quickly add up to tens of thousands of dollars.  These expenses are often financed through a line of credit which can accrue significant interest over time.
Although the BC Court of Appeal has yet to weigh in on this subject, it appears the law is shifting to allow interest on disbursements to be recovered in personal injury litigation in this Province.  Reasons for judgement were released today by the BC Supreme Court, Vancouver Registry, allowing such a result.
In today’s case (Chandi v. Atwell) the infant Plaintiff was severely injured in a 2004 collision.  The case settled for $900,000 plus costs and disbursements.  Following settlement ICBC took issue with many of the Plaintiff’s disbursements.  The parties had these assessed by the BC Supreme Court.  While some reductions were made the Court ultimately upheld many of the Plaintiff’s disbursements including a medico-legal assessment which alone cost almost $17,000.
The Plaintiff incurred over $25,000 in disbursement interest.  In allowing this expense the Court provided a useful summary of the law at paragraph 71 of the reasons for judgement with District Registrar Cameron coming to the following conclusion:
[73]         While the current state of the law mandates that I make some allowance for the interest expense in my view I am not bound to award full indemnity for the amount of interest charged to the Plaintiff. I am not bound by Basi v. Atwal and with the greatest of respect I decline to follow it.
[74]         In the law of costs it is still only in the relatively rare case that full indemnity is provided to the successful party. Only disbursements that are necessary and reasonable in amount are recoverable.
[75]         In my view the Registrar should endeavour, wherever possible, in assessing the amount to allow for a specific type of disbursement to strive for consistency unless the application of that principle would work a real hardship or unfairness in a particular case. To attain that consistency I will make an allowance for disbursement interest based upon Registrar’s rates with the calculation of the total amount to be akin to the calculation of interest payable on special damages pursuant to the relevant provisions of Court Order Interest Act.
For more on this topic you can click here to accessed my archived ‘interest on disbursement’ posts.  This case is also worth reviewing for the Court’s comments at paragraphs 49-53 on ‘transcription fees‘ finding that this is a disbursement of convenience, not necessity, and therefore not allowable.