Disbursement Loan Interest – Registrar Allows Only Partial Reimbursement

It is becoming more common for counsel to borrow funds from a lender to pay for the disbursements expended on behalf of the Plaintiff.  Whether the Plaintiff should be reimbursed by the Defendant for the interest on that loan has been the subject of recent debate and judicial consideration.  I expect that the recent decision of Chandi v. Atwell will serve to spark further debate. 

Our Court of Appeal in Milne v. Clarke found that interest charged in relation to MRI scans was allowable and confirmed that interest charged by a provider of services where the disbursement has been paid by the Plaintiff’s lawyer, the disbursement and the interest are recoverable if the disbursement is reasonable. 

In Basi v. Atwal (6 December 2010), Vancouver Registry No. M070135 (B.C.S.C.) Master Bolton (sitting as Registrar), allowed interest charged by lawyers pursuant to an agreement with their own bank.  We now have an additional case to consider.  In Chandi, Plaintiff’s counsel borrowed money from a private lender to cover the Plaintiff’s ongoing disbursements at an interest rate of 12% compounded annually.  It amounted to some $25,000.

Defence counsel argued that Basi should not be followed because doing so would result in “wild swings” in the interest rates from unconventional sources, an increase in the cost of litigation and the cost being too uncertain for Defendants (Chandi, para 72).

District Registrar Cameron acknowledged that he is bound by Milne but did not follow Basi.  He stated the following at paragraph 74:

In the law of costs it is still on 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 the end, District Registrar Camera made an allowance for the disbursement interest based on the rate that a Plaintiff would get when getting paid interest on special damages pursuant to the Court Order Interest Act.  He found that this would be the consistent way to do it unless doing that would result in a real hardship or unfairness in a particular case.

I suspect that we are going to see more of these challenges to see how Milne and Basi are applied.  If the interest rate charged by the bank is higher than the rate allowed pursuant to the Court Order Interest Act but is still reasonable, then why shouldn’t the Plaintiff get reimbursed?  Consistency has not been a requirement for allowing disbursements – only reasonableness.