Tag: MacKenzie v. Rogalasky

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.
 
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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 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.

$100,000 Non-Pecuniary Damages Awarded for Chronic Pain From Soft Tissue Injury


Reasons for judgement were released today by the BC Supreme Court, New Westminster Registry addressing damages as a result of chronic soft tissue injury.
In today’s case (MacKenzie v. Rogalasky) the Plaintiff was involved in a 2003 motor vehicle collision.  The Defendant turned into the path of the Plaintiff’s vehicle resulting in a t-bone type collision.  Fault for the crash was admitted by the Defendant with the trial focusing on the value of the Plaintiff’s claim.
The Plaintiff sustained various injuries in the crash.  These included “moderate” soft tissue injuries to his neck, shoulders and back.  The Plaintiff, unfortunately, went on to suffer from long term chronic pain as a result of these injuries.  He had to leave his employment as the Head Chef at a popular Lower Mainland restaurant and eventually opt for less physically demanding employment.
The limitations from his chronic soft tissue injuries were expected to be permanent.  The Plaintiff’s total damages were assessed at just under $400,000 including an award of non-pecuniary damages of $100,000.  In arriving at this figure Madam Justice Ker made the following findings:

[255]     I accept the evidence adduced by the plaintiff that Mr. MacKenzie sustained soft tissue injuries to his neck, shoulder and back as a result of the accident.  The symptoms of chronic pain have continued to bother Mr. MacKenzie, and nearly seven years post-accident, he still experiences pain in his neck, shoulder and back, although primarily in the lower back area.  While the injuries can be described as moderate soft tissue injuries, I accept the diagnosis and opinion of Dr. Hunt that Mr. MacKenzie has developed chronic myofascial pain syndrome and experiences chronic pain to this day.  Thus, the injuries and pain symptoms continue to affect most every facet of Mr. MacKenzie’s work and non-work life.  The pain is most significant when Mr. MacKenzie works and overloads his physical tolerance capacity.  He has had to leave his chosen profession as a chef due to the increasing pain and difficulty he was experiencing and the failure to see any significant improvement in his condition.

[256]     I have concluded that as a result of the accident, Mr. MacKenzie has suffered pain and loss of enjoyment of life, and he will continue to do so for an indefinite period of time.

[257]     Mr. MacKenzie struck me as a very stoic and determined individual.  Despite the ongoing pain he tried to continue to work as a chef, a position he was passionate about and aspired to continue in for as long as possible, perhaps even establishing his own restaurant.  He also tried to remain physically active but found it difficult to do so given the attendant pain associated with the activities he previously enjoyed, including motorcycling, snowboarding and, until recently, golfing.  His return to playing golf is a recent development, but due to the nature of his injuries and ongoing chronic pain symptoms Mr. MacKenzie has had to alter his style of play and is still not able to play to the same intensity and level he did prior to the accident.  He has suffered, and will continue to suffer, some diminishment in his lifestyle.

[258]     The evidence from the plaintiff’s friends and family, coupled with his own evidence, establishes Mr. MacKenzie enjoyed excellent health and was involved in the physically active and demanding position of Head Chef working in a busy restaurant for up to 16 hour shifts prior to the accident.  Mr. MacKenzie also engaged in demanding outdoor sports activities such as snowboarding, mountain biking and rollerblading and engaged in extended periods of riding his motorcycle.

[259]     Taking into account all of these circumstances, the referenced authorities and the nature of Mr. MacKenzie’s injuries, the relatively enduring nature of the injuries as manifested through ongoing symptoms of chronic pain that has developed into chronic myofascial pain syndrome which prohibits him from returning to the profession he has been passionate about since he was a young boy, the pain he has suffered and may continue to experience in the future, as well as the fact he suffered a diminishment in his lifestyle, I conclude a fair and reasonable award for non-pecuniary damages is $100,000.

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ERIK
MAGRAKEN

Personal Injury Lawyer

When not writing the BC Injury Law Blog, Erik is the managing partner at MacIsaac & Company, based in Victoria, B.C. He is also involved with combative sports regulatory issues and authors the Combat Sports Law Blog.

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