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Tag: disbursements

Court Comments on “Disproportionate Burden” Of ICBC 6% Disbursement Regulation

Earlier this year a regulation came into force artificially limiting the recoverable disbursements in many motor vehicle actions to 6% of the damages.  The government made little effort in disguising that this rule was brought in to save a single litigant money, namely ICBC.

In one of the first judicial comments on the regulation the Court noted that this rule places a disproportionate burden on plaintiff’s in proving their claims.

In today’s case (Zhang v. Scrott) the Plaintiff was injured in a 2018 collision (predating the retroactive regulation) and sued for damages.  In advancing his claim the Plaintiff noted his disbursements may exceed the 6% cap.  The Defendant applied for a defence medical exam.  The Plaintiff argued this should be denied because if granted the plaintiff may need responsive evidence which would then result in further disbursements beyond the recoverable cap.

The Court, while granting the application, noted with a more fulsome record a litigant may succeed in arguing that the cap “upsets the balance of fairness and equality. In an appropriate case,  it might be argued that the limit on recoverable disbursements weighs against an additional IME by the defence.”

In granting the application but noting the regulation’s disproportionate burden Master Elwood provided the following reasons:

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Lawyers Changing Firms and Disbursement Carriage

When a lawyer changes firms clients usually have a choice of whether to stay with their present firm or follow their lawyer to the new firm.  In the case of personal injury files prosecuted on a contingency basis there are often disbursements associated with the files.  When a client wishes to follow their lawyer to a new firm and have their file transfered who has the burden of paying for the disbursements?  Reasons for judgement were published today by the BC Supreme Court, Vancouver Registry, tackling this issue.

In today’s case (Sagert v. Cascade Law Corporation) the Petitioner’s employment with the Respondent law firm ended.  Approximately 58 of the Petitioner’s clients elected to have their claims stay with the Petitioner.  The Respondent firm had incurred disbursements on these files.  The firm argued that these had to be paid before the files would be transferred.  The Petitioner brought an application to have the files transferred without up front payment of disbursements.  The Court concluded that the firm was within their right to demand payment of disbursements prior to transfer.  In reaching this conclusion Mr. Justice Wilson provided the following reasons:

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Adverse Costs Insurance "Is Not a Proper or Necessary Disbursement "

Reasons for judgement were released last week by the BC Supreme Court, New Westminster Registry, finding that the cost of an insurance policy protecting a plaintiff from adverse costs/disbursements consequences should the prosecution of an injury claim not proceed favorably is not a recoverable disbursement.
In the recent case (Wynia v. Soviskov) the Plaintiff hoped to recover the costs of the insurance policy from the Defendant in the underlying tort action. In finding the expense was not a recoverable disbursement District Registrar Nielsen provided the following reasons:

[4]             The plaintiff has raised the novel issue of whether the cost of an insurance policy obtained by the plaintiff to insure against own disbursements, and opponents’ costs and disbursements, in a lost or abandoned court case, is a recoverable disbursement pursuant to SCCR 14-1 (5). 

[5]             The defendants object to this particular disbursement and rely upon an Ontario case, Markovic v. Richards et al, 2015 ONSC 6983, in support of their position. In Markovic v. Richards, supra, the issue was stated succinctly as “Is the plaintiff’s premium for after-the-event insurance, a compensable disbursement”. The court concluded at paragraph 7 that it was not, stating:

While it is clearly the plaintiff’s prerogative to obtain ATE insurance [which is after-the-event insurance], I do not accept that such premium should be reimbursed by the defendants as a compensable disbursement. Such disbursements have not, as far as I am aware, ever been entertained in Canada and have certainly not been the subject of legislative reform as was the case in the UK. I can think of no policy reason that such should be compensated as a taxable disbursement. Existence of the policy may well provide comfort to the plaintiff, it is however an expense that is entirely discretionary, does nothing to advance the litigation, and may in fact even act as a disincentive to thoughtful, well-reasoned resolution of claims.   

[6]             In British Columbia, to be recoverable as a disbursement SCCR 14-1(5) provides that the disbursement must have been necessarily or properly incurred in the conduct of the proceeding.  The phrase “necessarily or properly incurred in the conduct of the proceeding” was recently addressed by the Court of Appeal in MacKenzie v. Rogalasky, 2014 BCCA 446. The Court of Appeal  states at paragraphs 78 through 80:

[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”.

[7]             In my view, applying the reasons of the BCCA in MacKenzie v. Rogalasky, supra, the cost of insurance coverage is not a proper or necessary disbursement incurred in the conduct of the proceeding. No doubt it provides a measure of financial comfort to the plaintiff, however, it does not arise from the exigencies of the proceeding and relate directly to the direction, management, or control of the litigation used to prove a claim against the defendants. Accordingly, the cost of the insurance coverage is disallowed.

Disbursements and "Purchasing the Cadillac When the Buick Will Do"

Reasons for judgement were released today by the BC Supreme Court, Victoria Registry, upholding a finding that expert reports from a treating physiotherapist were an unnecessary luxury in a personal injury prosecution.
In today’s case (Salsman v. Planes) a variety of disbursements were at issue following the settlement of a personal injury claim.  One of the challenged disbursements dealt with expert reports from physiotherapists.  In disallowing these disbursements the Court noted that “these reports are an example of the plaintiff purchasing the Cadillac when the so-called Buick would serve the required purpose.“.  In upholding this decision on appeal Mr. Justice MacKenzie provided the following reasons:

[17]         The plaintiff obtained three physiotherapists’ reports. The first was Ms. Cuttiford’s report of September 23, 2010, approximately five weeks after the motor vehicle accident.

[18]         The second report was a neuro-physiotherapy report prepared on September 25, 2010, by Ms. Koshman, a vestibular physiotherapist. A third report was prepared by Ms. Koshman in December 2012, approximately 18 months after the plaintiff returned to work.

[19]         After noting the position of both the plaintiff and defendant, the Registrar observed that plaintiff’s counsel acknowledged the reports of Ms. Koshman could not be relied on to provide an opinion on causation, prognosis or treatment, thereby necessitating a report from another expert, a Dr. Longridge. It is to be noted that the defendant also contested the necessity of Dr. Longridge’s report. The Registrar, however, agreed with the plaintiff that this report was necessary and allowed this disbursement in its entirety. On the other hand, the Registrar concluded the reports of Ms. Koshman were not necessary. In addition, the Registrar noted the defendant’s argument that as the plaintiff had returned to work and counsel was aware the plaintiff’s symptoms had largely resolved by the time the second report was requested, this report from Ms. Koshman was not necessary or proper. The Registrar agreed with the defendant on this point and disallowed the cost of Ms. Koshman’s second report.

[20]         In addition, as far as all three reports are concerned, the Registrar stated at para. 39 of her decision that:

[39]      However, in my respectful view, these reports are an example of the plaintiff purchasing the Cadillac when the so-called Buick would serve the required purpose. The Buick in this case is the therapists’ clinical records. It is those documents which record the contemporaneous symptoms during assessment and provide records of treatment and outcome. Given that the plaintiff was being followed by a family doctor, a rehabilitation consultant and eventually various specialists, I see no need or propriety in commissioning reports from the physiotherapists. Accordingly, these disbursements are disallowed…

[29]         In my view, the Registrar adequately addressed these issues and provided sufficient reasons when exercising her discretion to disallow these very early physiotherapy reports. I am unable to say she was clearly wrong or erred in principle in reaching this decision.

[30]         Given the relevant circumstances, the second Koshman report of December 29, 2012 is even more problematic for the plaintiff. In this report, Ms. Koshman states that she saw the plaintiff for 14 treatment sessions between September of 2010 and March 24, 2011, before he returned to work in April of 2011. For the purposes of preparing the December of 2012 report, she reassessed the plaintiff on November 30, 2012, some 20 months after the plaintiff’s last treatment. Trial counsel deposed as to why these reports were ordered. However, it is not sufficient for the plaintiff to merely demonstrate that these reports and expenses were “very useful in this case”. As such, I do not find that the Registrar was merely second-guessing competent counsel. Given all of her reasons, I find the Registrar turned her mind to all the relevant factors and principles in reaching her decision.

[31]         As a result, I am not satisfied the plaintiff has established that the Registrar was clearly wrong or erred in principle in concluding that Ms. Koshman’s second report was unnecessary and extravagant. This aspect of the plaintiff’s appeal is also dismissed.

[21]         As a result, the disbursements for these three reports were disallowed.

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.

Follow Up Medical Reports After the Passage of Time Are Not "Extravagant" Disbursements

Reasons for judgement were released this week by the BC Supreme Court, Vancouver Registry, addressing the reasonableness of multiple physician reports ordered in the course of a personal injury prosecution.
In this week’s case (Zhang v. Heikkila) the Plaintiff was injured in a motor vehicle incident.  In the course of her lawsuit she obtained multiple medical reports.  The first from her GP in 2009.  This report opined on prognosis.   Following this the Plaintiff obtained a report from a physical medicine specialist and as trial neared the Plaintiff obtained an updated report from her GP.  ICBC challenged the reasonableness of these disbursements arguing they were excessive.  District Registrar Cameron disagreed finding these disbursements were properly recoverable.  In reaching this decision the Court provided the following reasons:
15]         In my view, in evaluating whether or not it was necessary or proper to incur these disbursements for the medical legal reports, one must consider more broadly what should be done in the preparation of the Plaintiff’s case.
[16]         To be properly equipped to advise a client on the merits of settlement in circumstances such as existed in this case competent counsel not only has to investigate and assess the liability issue but also consider the likely range of damages.  It would be expected that competent counsel would obtain medical opinions in a timely fashion and that is what occurred in this case.
[17]         Plaintiff’s counsel obtained the first report from the general practitioner approximately two years after the accident and in my view that report was properly obtained at that time.
[18]         The report documented concerns respecting the Plaintiff’s future in terms of her employability and continuing physical limitations resulting from the injuries sustained in the accident.
[19]         After reviewing this report, Plaintiff’s counsel then decided to obtain an opinion from a specialist in physical medicine being Dr. Kiaii, who provided her report dated April 20, 2012.  That report provided an evaluation of the Plaintiff’s level of function, her symptomatic complaints and some prognosis and recommendations to follow.  Again, obtaining that report at that time was, in my view, proper for the advancement of the Plaintiff’s case.
[20]         The last report in issue was an updated report from Dr. Sun dated February 18, 2013.  While that report was obtained about sixteen months following the first report, given the Plaintiff’s ongoing symptoms and the need to have a more current assessment of those symptoms for the purposes of preparing for trial or for settlement, I do not find that it was extravagant or a sign of excessive caution that Plaintiff’s counsel obtained that report when she did.
[21]         Fundamentally, I am keeping in mind that in a situation such as this, the assessing officer ought not to second guess competent counsel doing a competent job because other counsel might have handled the matter differently.
[22]         Having found that these three disbursements were necessarily or properly incurred and as the amount for each of them is not challenged, they will be allowed as presented.

Disbursement Interest Claim Fails for Lack of Evidence Proving Necessity

While the law in BC presently does allow interest on disbursements to be recoverable in the right circumstances, a prerequisite for recovery is an evidentiary foundation proving that it was necessary to incur the interest claimed.  Reasons for judgement were released this week by the BC Supreme Court, Kelowna Registry (Babb v. Doell) rejecting such a claim due to a lack of evidence.  In reaching this decision Master McDiarmid provided the following reasons:
[11]         A claim for interest by a party entitled to costs might in some circumstances be characterized as necessary, for example, in a situation where the incurring of disbursements such as filing fees or daily hearing fees could only be done by obtaining some funding. Interest could also be a proper disbursement when it was reasonably incurred in the conduct of the proceeding even if, strictly speaking, avoidable. In Franzman, evidence was led which satisfied me that the disbursement interest which the plaintiff agreed to pay to her lawyers as part of a fee agreement was proper and I allowed, as a disbursement, the amount of interest calculated at 6%.
[12]         Most written retainer agreements contain provisions for payment of interest on unpaid accounts. Many retainer agreements contain provisions which are binding as between lawyer and client, for the payment of some disbursements at a rate higher than the rate allowed by registrars when assessing party/party costs. Even in contingency retainer agreements, plaintiffs often agree to and have the means to pay disbursements and do so.
[13]         Unlike in Franzman and in Chandi (Guardian ad litem) v. Atwell, 2013 BCSC 830, the decision relied on by the plaintiff, there is no evidence before me to assist in me establishing either the necessity or the propriety of the plaintiff’s claim for interest.
[14]         As noted above, the onus of proving either the necessity or propriety of disbursements is on the party claiming those disbursements. Absent such evidence, I am unable to make a determination that the interest claimed was either necessary or proper. Accordingly, the claim by the plaintiff for interest is denied.

Private "Non Urgent" MRI Cost Denied as Disbursement

Earlier this year reasons for judgement were released declining to reimburse a private MRI cost as a disbursement due to lack of evidence of urgency.   Reasons for judgmeent were released last week by the BC Supreme Court, New Westminster Registry, reaching a similar conclusion.
In last week’s case (Kumanan v. Achim)the Plaintiff was injured in a collision and her treating physicians requested an MRI for diagnostic purposes although the need for this was described as “non-urgent”..  The Plaintiff arranged the MRI through a private facility.  In declining the disbursement associated with the private MRI the Court noted that while there was nothing unreasonable about obtaining an MRI in there was no evidence justifying straying through the MSP system.  In rejecting the disbursement the Court provided the following reasons:
[4]             In evidence was a note from Dr. Harji dated July 16, 2011 that read:
For diagnostic clarification in regards to this individual’s MVA related injuries, I would advise MRI of cervical and lumbar spine.  I would avoid radiation based imaging, i.e. x-rays and CT as well as bone scans.
[5]             On July 17, 2011, Dr. Suddall who was a physiatrist scheduled to examine Ms. Kumanan also requested an MRI examination of her cervical and lumbar spine.  His note read:
Persistent neck and back pain with minor right sided hand and leg symptoms.  Difficulty functioning and remains unable to resume working.  X-ray report, CT report pending from Mount St. Joseph Hospital.  I have asked patient to proceed with MRI of cervical and lumbar spine privately via lawyer and ICBC.
[6]             Importantly, Dr. Harji describes the Plaintiff’s status for this purpose as non-urgent…
[10]         …In this case, there was no trial date pending when the MRI examination was requested by the two physicians.  Rather, a notice of trial was not filed until August 2012 reserving a trial date for March 2013.  As matters transpired, this case settled in February of 2013.
[11]         I was not provided with any evidence as to what the wait time may have been to have the MRI examination done in the public health care system.  It is also noteworthy that while the recommendation for the MRI examination was made in mid July 2011 it was not acted upon until after some other x-rays were done in October 2011 and only after that, on November 2nd, 2011, was the MRI examination done.
[12]         I am left to wonder whether that if a place had been reserved in the public health care system in July 2011, the Plaintiff might not have had the MRI examination done if not by November of 2011, not too much longer thereafter.
[13]         Accordingly, I am not satisfied that it was reasonable to incur this expense when it was incurred and it is disallowed.

Privileged and Undisclosed Report Recoverable As Disbursement

Reasons for judgement were released recently by the BC Supreme Court, New Westminster Registry, making it clear that the costs of a privileged and undisclosed expert report can indeed be a recoverable disbursement.
In the recent case (Sidhu v. McNair) the Plaintiff was injured in a 2009 collision.  In advancing the case the Plaintiff obtained a report form the Plaintiff’s GP and neurologist.  The GP report was privileged in not disclosed.  ICBC argued that “this disbursement…was not necessary or proper (due to the fact) that Plaintiff”s counsel chose to maintain privilege over its contents
District Registrar Cameron disagreed and allowed the disbursement. In doing so the Court provided the following reasons:
[8]  I was also referred to a recent decision of Master Bouck in Cooknell v. Cooknell, 2013 BCSC 1653.  Her Honour very cogently set out the principles that ought to be applied in determining whether or not a disbursement should be recovered and says:
A “necessary” disbursement is one which is essential to conduct the litigation. A “proper” disbursement is one which is not necessary but is reasonably incurred for the purpose of the proceeding:MacKenzie v. Darke, 2003 BCSC 138 at para. 18..
Her Honour goes on to say:
 When considering whether a disbursement is proper, the correct viewpoint to be adopted by a taxing officer is that of a sensible solicitor sitting in his chair and considering what, in light of his then knowledge, is reasonable in the interests of his client: Francis v. Francis and Dickerson, [1955] 3 All E.R. 837 at p. 840. Also, taxing officers ought not to second guess a competent counsel doing a competent job, solely on the grounds that other counsel might have been more sanguine or less cautious in determining how the job ought to be done
[9]  I respectfully agree with these statements and having been advised of the rationale for obtaining the report and the matters addressed by Dr. Sekhon I am satisfied that the decision that was made to obtain the report was proper ad the cost is reasonable.  The disbursement is allowed as presented.
To my knowledge this decision is not publicly reported but as always I am happy to provide a copy to anyone who contacts me and requests one.

Private MRI Disbursement Disallowed Due To Lack of Evidence of Urgency

Adding to this site’s arcived decisions addressing the recovery of private MRI costs as a disbursement, reasons for judgement were released recently by the BC Supreme Court, Victoria Registry, disallowing such a claim.
In the recent case (Cooknell v. Quinn) the parties could not agree on the reasonableness of a variety of disbursement items including a privately funded MRI.  In rejecting this item Master Bouck held that the claim must fail as there was no evidence supporting the need for a privately funded MRI.  Master Bouck provided the following reasons:
[38]         Dealing firstly with the MRI disbursement, the facts of this case are somewhat analogous to those described by then Registrar Blok in Phelan v. Newcombe.
[39]         Although Dr. Smith did recommend an MRI in this case (it is not clear exactly when), there is no explanation offered for proceeding to a private clinic when a publicly funded scan was available — or at least no evidence to suggest that such a process was unavailable. As the MRI charge is disallowed on this basis, I do not need to consider whether such an investigation was necessary or proper.