“Scanty” Evidence Failed to Establish a Plaintiff’s Entitlement to Recover Interest on Loans Borrowed for the Purpose of Litigation

July 24, 2018 | Fareeha Qaiser

In Isbister v. Delong, 2017 BCCA 340, the British Columbia Court of Appeal upheld a trial judge’s decision that the plaintiff was not entitled to recover, as special damages, interest on money she borrowed from her lawyers.

Facts of the Case

The plaintiff was riding an electric scooter when she was struck by a vehicle driven by the defendant. The action proceeded to trial,  and the main reasons for judgement were indexed as 2014 BCSC 1395. At issue was the nature and extent of the plaintiff’s injuries.  The plaintiff sought damages in excess of $3 million and the trial judge awarded damages of less than $850,000.

The trial judge dealt with the loan-interest issue and several other matters in supplemental reasons indexed as 2014 BCSC 1947.

On appeal, the plaintiff alleged that the trial judge erred in a number of ways including not awarding interest on money she had borrowed from her lawyers to cover living and other expenses pending the outcome of the trial.

The evidence regarding the loans was described by the trial judge as “scanty”.  It appears that at unspecified times the plaintiff borrowed about $135,000 from her lawyers, or a corporation controlled by her lawyers, at an interest rate of around 15 percent, bringing the total amount she owed to approximately $170,000.

At trial the plaintiff submitted that the interest owing on the loans was $41,976 but there was no evidence as to how such interest had been calculated. Neither the plaintiff nor her counsel indicated whether such interest had been paid nor was it established that the payment of interest would be enforced by the lenders.

The plaintiff at trial argued that the loans were necessary to enable her to pay her living expenses because she was unable to work due to her accident related injuries. She stated that the loans were also used to pay for some of the costs of her health care.

Decision of the Trial Judge

The trial judge held that, assuming the interest was actually paid, the interest on a loan to fund general living expenses (including treatment costs during the course of litigation) was not recoverable damages where it was not reasonably foreseeable and arose because of the impecuniosity of the plaintiff.

Further, the trial judge held that only about $3,000 of the loan was actually paid towards treatments related to her accident injuries. The remaining expenses were related to treatments that were unrelated to the accident.

With respect to her impecuniosity, the trial judge held that the plaintiff received $127,000 up to the date of trial in income. That amount far exceeded her income loss and out of pocket expenses such that the loans were not required as a result of the accident.

The plaintiff also made an alternative argument that the loans were borrowed to fund particular disbursements and such were recoverable by relying on an earlier decision of the court: Chandi v. Atwell, 2013 BCSC 830. However, the trial judge held that there was no evidence that the loans were borrowed to fund specific disbursements nor was there any evidence that such disbursements were necessary or reasonable for the purpose of the litigation. Based on the foregoing evidence, the trial judge declined to order that any part of the loans or interest should be treated as a disbursement.

Decision of the British Court of Appeal

The Court of Appeal held that the principal and interest amounts claimed by the plaintiff were unclear. The plaintiff’s discovery transcript evidence and the interest amounts stated in the factum were unsupported by any evidence.

The Court of Appeal held that there was no need, on this appeal, to decide whether interest paid on money borrowed to cover living and other expenses was recoverable as special damages because the plaintiff failed to establish a causal link between the need for the loans and the accident injuries. The Court of Appeal denied this ground of appeal without much further elaboration.

This decision illustrates the importance of a plaintiff providing fulsome evidence at trial outlining the need for the litigation loan and the accident related injuries prior to the court granting such an award. If such evidence is not adduced, the defendants should rely on this decision to oppose any such award. I expect that if the court had found that her urinary and dental difficulties were related to the accident and she had spent most of the loan on treatment of those difficulties, then the outcome with respect to the loan interest may have been different.

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