While there are previous decisions in British Columbia which awarded interest on litigation loans as a disbursement, 39 they are no longer “good” law after the recent British Columbia Court of Appeal decision in Mackenzie v. Rogalsky 40which reflects the law as it currently stands in that province:
Mackenzie v. Rogalsky 2014 BCCA 446, leave to appeal denied 2015 CanLII 26228 (SCC)
This decision was a joint appeal from two judgements:Mackenzie v. Rogalsky and Chandi v. Atwell 2013 BCSC 830. Both cases arose from motor vehicle accidents and personal injury claims. The Appeal dealt with whether payment of interest incurred as an expense for funding litigation is recoverable pursuant to Rule 14-1(5) of the Supreme Court Civil Rules, B.C. Reg. 168 / 2009. Rule 14-1(5) authorizes a registrar, when assessing costs, to award “a reasonable amount” for disbursements that “have been necessarily or properly incurred in the conduct of the proceeding”.
The Court of Appeal determined that the answer would be found in the correct interpretation of Rule 14-1(5) when read in the context of the purposes of the costs regime and the general legal environment governing recovery of pre-judgement interest, including the Court Order Interest Act, R.S.B.C. 1996, c.79 [“COIA”]. The Court concluded that out-of-pocket interest expenses are not recoverable disbursements for the following reasons:
- Under Rule 14-1(5) the Court found the words “in the conduct of the proceeding” do not contemplate the financing of a proceeding. To be recoverable, disbursements must arise “directly from the exigencies of the proceeding” and be directly related to the “management and proof of allegations, facts and issues in litigation.” Interest expenses arise from unrelated causes, such as a party’s financial circumstances. 41
- The costs regime provides only partial, not full indemnity to a successful party. Costs are not meant to make the Plaintiff “whole”.
- Cost awards should be predictable and consistent across similar cases. 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
- Although costs regimes may affect access to justice, according to the British Columbia Court of Appeal, the Supreme Court of Canada has made it clear that costs are not the means of securing access to justice, except in exceptional circumstances. In Walker v. Ritchie 2006 2 SCR 428 the Supreme Court of Canada considered whether a “risk premium” added to a legal fee was recoverable under the rule governing the exercise of discretion of judges in awarding costs in Ontario. Justice Rothstein noted that the cost regime provided a basis for parties predicting probable costs awards against them and for assessing whether or not to settle or to proceed. By contrast a risk premium was a financial arrangement between the Plaintiff and his or her counsel which would be unknown to the Defendant and the Defendant would be unable to gauge his or her cost exposure. 42 The Supreme Court of Canada denied leave to appeal this decision. 43