COURT CASES on INTEREST on DISBURSEMENTS
Commencing personal injury litigation, and taking it a long ways throughout the litigation process, can be an expensive endeavour. It is not uncommon in many ICBC claims for disbursements to reach into the tens of thousands of dollars, after factoring in expert reports, and follow up expert reports. Given such large amounts, interest at some point becomes a factor for the client, particularly if their ICBC claims drag on for many years. Although some lawyers do not charge their clients for the amount of interest accumulated on the disbursements incurred on their behalf, most lawyers do, sometimes in excess of 15% percent. If the lawyer cannot recover the interest, the client is still responsible for it. This can definitely impact any ICBC settlement amounts or ICBC payouts, if you as the client has to pay thousands of dollars in interest.
There has been some conflicting case law with respect to the issue of interest on disbursements in ICBC claims. Generally, with respect to litigation loans obtained from lenders who charge exorbitant interest rates, interest on disbursements in ICBC claims does not seem to be recoverable. Interest charged on disbursements incurred by Plaintiff’s counsel on behalf of the Plaintiff in ICBC claims, however, for the most part does seem to be recoverable. Clarity on these issues from the British Columbia Court of Appeal will be welcomed by both Plaintiff counsel and defence counsel.
In Mackenzie v. Rogalasky, the Plaintiff was injured in a motor vehicle collision, and brought an ICBC claim for injuries. He took out a loan for $25,000.00 in order to fund the litigation. After all was said and done, he ended up owing approximately $11,000.00 in interest for his ICBC claim. The Court, in distinguishing earlier decisions that had allowed a claim for interest on disbursements, disallowed the Plaintiff’s claim for interest in his ICBC claim.
 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.
 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.
 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.
 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.
In Chandi v Atwell, the infant Plaintiff was involved in a motor vehicle accident, and brought an ICBC claim through his litigation guardian. The ICBC settlement amount turned out to be $900,000, plus costs and disbursements. ICBC’S lawyer disputed many of the Plaintiff’s disbursements, so the parties had an assessment done, in which the Court allowed most of the disbursements. There was approximately $25,000.00 in interest on such disbursements, which the Court also allowed. Interest had accrued on disbursements incurred by Plaintiff’s counsel on behalf of the Plaintiff throughout the course of his ICBC claim.
 In his brief Mr. Harris properly conceded that I am bound by the decision of Mr. Justice Burnyeat in Milne v. Clarke .He urged me not to follow the decision of Master Bolton (sitting as Registrar) in Basi v. Atwal that awarded the relatively high commercial rate of interest arguing that to do so would result in the potential for “wild swings in the interest rate” brought to bear by outside lenders from unconventional sources at high and fluctuating rates. The amount charged to the Defendant, in such circumstances, would be the rate at which the Plaintiff’s lawyer is able to borrow. He went on to postulate that this would create considerable uncertainty and could result in a considerable increase in the cost of litigation.
 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.
 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.
 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.
In Milne v. Clarke, the Plaintiff was injured in a motor vehicle accident, and brought an ICBC claim. The case eventually settled, with the ICBC settlement amount being $170,000, plus costs. Throughout the course of the ICBC claim, the Plaintiff had two private MRIS. Counsel for the Plaintiff requested that these two amounts, plus interest, be paid by the Defendant, however ICBC’S lawyer refused, necessitating a court application by Plaintiff’s counsel. The Court, in overruling the Master’s decision, would allow the cost of the disbursements with respect to the Plaintiff’s ICBC claim, in addition to the interest on such disbursements. The case eventually went to the British Columbia Court of Appeal, however the Court ruled it did not have sufficient evidence within which to rule on the matter.
 In support of the submission that the Learned Registrar erred in principle, Mr. Milne submits that the law which was binding on the Learned Registrar is set out in McCreight v. Currie,  B.C.J. No. 2494, where one of the matters under consideration was whether to allow the cost of imaging scans plus interest. While it is not clear from the decision, it appears that counsel for the Plaintiff had paid for imaging scans and had paid overdue interest of $92.88 on the disbursements. In allowing the interest, Registrar Young concluded:
… The plaintiff really had no choice but to pay the interest given that she did not have the funds to be retaining experts and paying for their reports up front. I suppose the defendant’s choice was that the defendant could have offered to pay for the report up front once it was disclosed to him, but no offer was forthcoming. Given this was the only way to finance the obtaining of a report, I find this to be a reasonable expense and I will allow it.
(at para. 51)
 In support of the application, it is said that Mr. Milne had no means of paying for the required M.R.I. scans other than to borrow money from the provider and that, since the cost of the M.R.I. had already been agreed upon, so too should the interest on the unpaid accounts rendered by the provider of the M.R.I. images. Here, it is the provider of the M.R.I. and not counsel for Mr. Milne who is charging the interest on the invoices.
 I find that the Learned Registrar erred in principle. The December 29, 2009 decision was clearly wrong. First, even if the Learned Registrar was not bound by the decision in McCreight, I am not bound by the decision reached by the Learned Registrar herein. I am satisfied that the statement set out in McCreight accurately represents the law in British Columbia. Second, the decision in Hudniuk relates to the question of whether disbursement interest is a head of damage and not to the question of whether it is recoverable as costs on an assessment.
 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.
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