A plaintiff has already suffered serious personal injury and endured the financial hardship that accompanied it, not to mention the stress of a daunting court case. Your client should not also have to absorb litigation loan costs, which are clearly the responsibility of the insurance company.
Insurance companies use delaying tactics, not to accumulate more information about the file to build a better case, but to force an injured plaintiff to accept an unrealistically poor offer. (Some defence lawyers have claimed that litigation loans and After-the-Event insurance are tactics that plaintiff counsel use to drag out the case for a higher settlement!) In fact, plaintiff counsel does not recommend litigation loans lightly, and certainly not to buy time to get a better offer. The litigation loan is a last resort, the only way the plaintiff can survive a two- to four-year case, put food on the table, pay rent, and receive necessary medical care and therapy.
Interest rates in the litigation loan industry are competitive, having trended downward over the years. They are significantly lower than the daily compounding rate on a credit card cash advance, on which monthly payments must be made. Payday Loan companies require regular income and charge 390% for a cash advance ($15 per $100 borrowed for a two-week period makes the simple annual interest rate 390% – Payday Loan Act 2018).
Recovery of interest charges on litigation loans varies by province. New Brunswick and Nova Scotia allow interest recovery. In British Columbia, the Court of Appeal in 2014 effectively halted recovery of interest charges. In Ontario and Alberta, the provincial Courts of Appeal have not made definitive rulings. In other provinces and territories there have been no court decisions.
The New Brunswick case Leblanc v. Doucet 2012 NBCA 88 has been accepted by Nova Scotia as the basis for recovering loan interest. In this case, the New Brunswick Court of Appeal interpreted the Rules of Court and Tariff “D” to determine that interest on loans, while not specifically listed, was a reasonable expense, saying that, “without financial assistance from a third party, [the Plaintiff] would not have been able to enforce his rights in the courts. The loans … were therefore essential to allow … access to justice.” The Court of Appeal also referred to the Access to Justice concerns raised by then Chief Justice of Canada, Beverley McLachlin.
BC had allowed interest recovery until Mackenzie v. Rogalsky 2014 BCCA 446. This case was a joint appeal of two MVA personal injury judgements. The Court of Appeal interpreted that Rule 14-1(5) of the Supreme Court Civil Rules did not consider interest charges to be recoverable disbursements, for several reasons.
Ontario has a patchwork of decisions, made case by case. Recently the trend there is against allowing interest charges. Alberta courts also tend to rule against allowing interest charges. Plaintiff counsel must prepare their case carefully here.
If your client has litigation loans, here are a few considerations you could use in building your interest recovery strategy:
- Access to Justice
- Plaintiff’s income – or loss of income – since the injury and during the course of the case
- Plaintiff’s assets
- Plaintiff’s attempts to secure other financing, from personal networks or financial institutions
- Affidavits re Plaintiff’s finances before the injury.
- Plaintiff counsel cannot be, or perceived to be, profiting from the interest charges.
- The interest rate should reasonably reflect the lender’s business risk.
- Analyze and document all mitigating factors that support the interest-recovery argument.
- Records of the time added to the case by defence stalling tactics: unnecessary medical examinations or reports, expert witnesses, extension requests or no-show at proceedings, etc.
- Review Leblanc v. Doucet 2012 NBCA 88.
- Review Rule 14-1(5) of the Supreme Court Civil Rules.
- Present everything during litigation, not afterward.
Transparency is key to establishing the case for remuneration of litigation loan interest on behalf of the lender. This requires a diligent construction of the foundation for such a case, clearly and convincingly articulated in front of a judge. You need a legitimate basis for claims, including lucid notes and a clearly thought-out and viable rationale supporting interest recovery in the settlement.