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News and Views — Comment on Chandi (Guardian ad litem of) v. Atwell

Chandi (Guardian ad litem of) v. Atwell |

2013 CarswellBC 1232 |

British Columbia Supreme Court

The cost of most types of legal proceedings has been steadily increasing.  Likewise, the need to finance the cost of litigation has come to the fore, along with methods of securing necessary funding to undertake it.  In Chandi (Guardian ad litem of) v. Atwell  the British Columbia Court of Appeal considered whether interest charged on funds used to pay for disbursements could be recovered as disbursements in a costs award. 

The crux of the case can be expressed simply: to be recoverable a disbursement must relate to costs directly incurred by litigant and not the circumstances of the litigant herself.   A loan taken out to fund disbursements will fall into the latter category.  The court found that the core meaning of the word disbursement refers to expenses arising directly from the case, and that the history, context and purpose of the guiding legislation did not permit interest expenses as a disbursement. It was important to note that the Court Orders Interest Act prohibited awarding interest on costs, which included disbursements.  Moreover, allowing recovery of interest for disbursement loans would add an element of uncertainty in predicting the costs of litigation, and should not be used as a method of increasing access to justice.

The two plaintiffs had been involved in automobile accidents.  To fund disbursements in the case, one plaintiff borrowed from counsel’s firm and accessed the representing firm’s line of credit.  The plaintiff in the other action was forced to arrange a loan from a specialized disbursement lender through counsel.  The issue of interest on the loans was heard together, with the Court expressing some surprise the question had not been settled at law before.  

Although it was shown that interest on loans for disbursements was not recoverable in Wales or England, Alberta or the Federal Court, other cases had found the opposite in somewhat similar circumstances.  In New Brunswick, in LeBlanc v. Doucet, the Court of Appeal found interest on a loan taken out to pay litigation fees was recoverable as an expense arising from the action.  In Ontario, the case Clara Herbert v. City of Brantford allowed a plaintiff to recover interest charged by an expert who prepared a report for litigation.   In British Columbia itself, in Milne v. Clarke, a lower court had found that interest could be recovered on charges to a litigant for MRI scans was recoverable.  That case did not involve third-party lenders and arose out of a settlement agreement, so that the issue of interest on third party loans was not directly at before that court.  

Harris J.A. stated that he would not decide the matter in relation to those cases, but would instead determine the issue as a matter of statutory interpretation, especially the BC Supreme Court Civil Rules and the Province’s Court Orders Interest Act.  However, in the second-to-last paragraph of the judgment, the author admits that the determination is “likely inconsistent with the position in New Brunswick and possibly Ontario.” The Supreme Court of Canada’s determination in Walker v. Ritchie also played a role in guiding the policy aspects of the case.

Harris J.A. was also one of the authors of the result in Gichuru v. Smith, which found that special damages could not be calculated by a rough and ready methodology.  This pronouncement regarding R. 14 of the BC Supreme Court Civil Rules is likely to be even more meaningful.  Not only are disbursements far more pervasive in litigation than special damages, the matter remains at odds with different jurisdictions within Canada.

Lack of consistency across the country may not be the only reason that BC lawmakers could wish to revisit the practice.  As early as 1987 the provincial law reform commission suggested allowing pre-judgment interest on disbursements generally.  Moreover, the figures associated with the plaintiff MacKenzie’s claim bear remarking on.  Mackenzie’s loan gathered interest at an effective annual rate of 26.82%, which ultimately created a payment owing of  $11,324.71 in interest payments alone.  Much of this amount was incurred during a year-long period in which judgment was held in reserve and the proceedings could not possibly have been furthered by the plaintiff’s actions. 
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