If I decide to get litigation loans, will ICBC have to pay for the interest on those loans? What if I am financing my life with debt before I am injured?
In the 2012 decision of Campbell v. Swetland 2012 BCSC 423, the plaintiff sought to recover interest on litigation loans she said she incurred as a result of her disabling collision injuries (she couldn’t work and earn income, so she incurred a loan). She did not plead the claim for financing interest in the notice of civil claim, and special damages (out-of-pocket expenses) claim had already been agreed by the parties.
The evidence at trial confirmed that BEFORE the injury, she had borrowed money from friends and family to pay the down payment on her home, had a mortgage on her home starting in 2005, adding two further mortgages of $80,000.00 in the following two years, borrowed $30,000.00 to purchase a truck, and unpaid income tax in the two years immediately before the collision. Just a few months after the crash, her lawyer set her up with a $30,000.00 litigation loan. $3,000.00 was a “processing fee” and after 18 days, $600.00 was already due in interest. The interest owning on her loans at the time of trial was a staggering $42,453.00.
In rejecting her claim for interest and preferring the defence arguments that the loans were to cover pre-injury indebtedness, contributed by a failure to mitigate, and too remote to recover from the defendant, Mr. Justice Wong provided the following reasons:
[100] The Defendant submits that the loan was a result of the Plaintiff’s pre-accident indebtedness, not any losses sustained by the Plaintiff as a result of any negligence by the Defendant. If they were, then such losses are too remote and were not reasonably foreseeable to the Defendant.
[101] If a person’s own impecuniosity is the cause of damage, then that damage is not recoverable [Roopam Fashions v. Greenwood Insurance and Broco (2008) BCPC 0254].
[102] The Defendant further submits that the Plaintiff has not reasonably mitigated her financial situation. She has not tried to sell off her classic and prize-winning Harley motorcycle, her exercise machine and the clay art remaining in her studio.
[103] The cost of litigation financing, while not a recoverable head of damage, may be a proper disbursement. However, the most recent law out of both British Columbia and Ontario is that claims for litigation loan financing and interest are not recoverable [MacKenzie v. Rogalasky, 2012 BCSC 156 and Giuliani v. Region of Halton, 2011 ONS C5119]. In Giuliani, Mr. Justice Murray commented that the loan which the Plaintiff had obtained from Lexfund Inc. was:
in effect a contingency arrangement which allows the lender to make huge profits from the proceeds of litigation rather than from a commercially normative interest rate on a risky loan. (para. 52) and
I am in complete agreement with the submissions of Defendants’ counsel that: “this Court should not reward, sanction or encourage the use of such usurious litigation loans, which in this case has interest provisions that are arguably illegal, otherwise such loans will be seen to be judicially encouraged and could become a common-place tactic.” I agree that an award of interest in this case would likely have an adverse impact on other Defendants’ decisions to proceed to trial or to Appeal. I think the Defendants’ counsel is correct in stating that access to justice is a two-way street. As I have indicated above, to award interest as requested by the [Plaintiff’s counsel] would not facilitate access to justice and would undoubtedly bring the administration of justice into disrepute. (para. 59)
[104] I agree with defence counsels submissions on this head of claim and conclude that it is not recoverable
The above serves as a warning to plaintiffs – after a crash one should live and lend as though there is no windfall coming. Unreasonable lending and interest rates to cover a lavish lifestyle will not be payable by the defendant, particularly where one is in debt before they are injured.
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