The New Brunswick Court of Appeal has concluded that interest incurred on a litigation loan is a proper disbursement under the relevant legislation in that province and can be recovered under a costs award. This decision is binding on all of the lower courts in that province. While it is not binding on courts in other provinces, it can be persuasive authority.
Leblanc v. Doucet 2012 NBCA 88
The Plaintiff in this case lacked the means to finance his action in damages resulting from a motorcycle accident. He was 17 years old at the time of the accident, lived with his parents, and was unemployed. The $200 a week in disability benefits that he received did not cover his litigation expenses. He was denied loans at two financial institutions due to his lack of financial means and the unpredictability of the action’s outcome. He sought and was provided loans from a litigation financing company for a total of $26,276.20 over the years of litigation. The Plaintiff won his action and was allowed costs, plus disbursements which were assessed before a clerk. At the assessment, the Plaintiff sought to recover $14,158.45 in interest incurred on the loans. The Plaintiff filed an affidavit setting out the reasons why he had to take out a litigation loan, why it was a necessary expense for the litigation, how he was turned down by two financial institutions, and attached the agreement with the financing company. While the assessment officer agreed that the loans were necessary he dismissed the claim for reimbursement of interest. The Plaintiff appealed to the New Brunswick Court of Queen’s Bench and lost.
However at the New Brunswick Court of Appeal the Plaintiff was successful. The Court of Appeal looked at the wording of the Rules of Court and Tariff “D” which covers disbursements allowable to a party entitled to costs. Interest on loans is not an enumerated disbursement, but subparagraph 2(14) of Tariff “D” provides for recovery of “ All other reasonable expenses necessarily incurred, when allowed by the assessing officer”. The Court of Appeal noted that “without financial assistance from a third party, [the Plaintiff] would not have been able to enforce his rights in the courts. The loans granted by [the financing company] were therefore essential to allow [the Plaintiff] access to justice”. 16 The Court of Appeal noted the importance of, and growing concern over, access to justice and quoted extensively from the Chief Justice of Canada, Beverley McLachlin, and her public addresses on the subject. 17
The Court concluded that the “loans taken out by [the Plaintiff] were necessary to prevent a most unjust outcome for his legal dispute with the respondents: the settlement of his claim for a pittance or perhaps even its abandonment. It follows the interest due on those loans constitutes ‘an expense necessarily incurred’ within the meaning of sub-para. 2(14).” On whether the expense was “reasonable”, the Court of Appeal noted that the interest rate “reflected an assessment of the risk assumed in granting the loans in question, a risk that two financial institutions had previously deemed prohibitive”. 18 The Court noted that the onus was on the Defendant to demonstrate that the Plaintiff used unreasonable means to secure a just solution to the dispute. The Defendant provided no such evidence. The Court concluded that the interest claimed constituted a “reasonable” expense and allowed the disbursement.
Bourgoin v. Ouellette 2009 CanLII 27242 (NBQB)
In this case the Plaintiff was in a car accident and settled a civil suit against the Defendant with costs and disbursements to be assessed in accordance with the New Brunswick Rules of Court. The Plaintiff sought $44,361.27 in disbursements. Of those disbursements the Plaintiff sought $4,231.65 for interest incurred on a litigation loan. The interest rate on the loan was 2.4% compounded monthly. The Plaintiff provided a letter from a financial institution showing that he was not approved for a line of credit with that institution before he sought a loan from the litigation funding corporation. The Plaintiff was a first-year forestry student when the accident interrupted his studies. Neither he nor his family could afford to fund such a legal action. Very considerable legal expenses, such as an actuarial report ($17,495.31) had to be made to bring his case to court. The Plaintiff argued that without the assistance of the litigation loan he would not have had the access to justice that he was entitled to.
The assessment clerk relied on Williams et al v. Saint John, New Brunswick and Chubb Industries Ltd. (1986), 71 NBR (2d) 168 in which a party was allowed to recover interest costs. The clerk found that in Bourgoin the interest was also refundable to the Plaintiff by the Defendant. Once it was determined that the interest was refundable, the clerk had to determine if the interest rate was allowable. In Williams, the Court allowed the refund of interest the party had paid on disbursements at the rate of 10%. In Bourgoin, the Clerk noted that the high interest rate charged by the financing company reflected the substantial risk they were taking.19 The assessment Clerk held that the interest was “necessary and reasonable” within the meaning of s.2(14) of Tariff “D” under the Rules of Court of New Brunswick.