IN THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20140320

Docket: M133821

Registry:
New Westminster

Between:

Heather Marie
Phippen

Plaintiff

And

Clifford Hampton

Defendant

Before:
District Registrar Cameron

Oral Reasons for Decision

[1]            
THE
COURT: Counsel, I am prepared to give you my decision on the claim
advanced for reimbursement of interest paid by the Plaintiff, Heather Phippen,
to fund the necessary disbursements to pursue her personal injury claim.

[2]            
I am satisfied based upon the Affidavit evidence provided by Ms. Phippen,
that she has established that her financial situation was such that it was
necessary and proper for her to seek out financing for the disbursements that
needed to be incurred to pursue her claim.

[3]            
The law as to what must be considered in assessing an allowance to
reimburse a party for disbursement loan interest that has been incurred is
found In Chandi v. Atwell, 2013 BCSC 830. Mr. Justice Savage said
at paragraphs 73 and 74 of that decision:

[73]      In my opinion, the registrar in Chandi fell
into error. By applying the registrar’s rate in all circumstances, the
registrar applied a formula without considering specific circumstances. Surely
the use of the terms “necessary”, “properly” and “reasonable” in Rule 14-1(5)
requires a weighing of circumstances as opposed to a formulaic approach. In my
view, the courts and its judicial officers are singularly well-equipped to
fashion remedial measures that consider the particular situation of the parties
and the constellation of circumstances that may arise.

[74]      The plaintiffs, on the
other hand, suggest that there should be a presumption that the interest paid
by a litigant is the appropriate rate. I do not think it is appropriate to
saddle litigants with presumptions in this area. The rule says “a reasonable
amount”. In my view, a party seeking to obtain reimbursement for interest as a
disbursement must establish that it falls within the rule. That said, in
determining reasonableness, the registrar must consider the entire context.

[4]            
In addition to the evidence of Ms. Phippen I have considered the
Affidavit of Frank Mullally, counsel for Ms. Phippen in this case, Mr. Mullally
testified as follows in respect of the disbursement loan interest:

46.       I was formerly a partner and presently am an
employee of the law firm originally known as Robertson Downe and Mullally,
later known as RDM Lawyers, then as RDM Lawyers LLP.

47.       The disbursement financing provided to the
plaintiff in this case is not provided by the law firm of RDM.  It is provided
through a company called PIL Assist Ltd.  Those interested in PIL are seven
companies and five individuals.  These companies (or their principals) and the
individuals all have some form of relationship with RDM.  To give examples, one
of the companies is RDM’s management company, three of the companies are the
personal law corporations of current partners of RDM and all of the individuals
are present or former employees of RDM or relatives of employees.  No one
interested in PIL is entirely unrelated to RDM.  I would also note that many
people associated with RDM do not hold an interest in PIL.  For instance, I
have no interested in PIL and not all of the current partners are interested in
PIL.

48.       It is my understanding that PIL operates as alone. 
Accounts for disbursements are rendered by RDM from time to time and is
authorized by the contingency fee agreement.  They are paid by PIL and PIL
charges interest on the loan.

49.       When the plaintiff’s
action settled, PIL was repaid for both the principal and the interest from the
settlement proceeds which happened in or about December 2013.

[5]            
Mr. Mullally goes on to say — and I do not find this to be
controversial — that it is difficult for most clients who have suffered a personal
injury to finance the necessary disbursements that must be incurred to advance
their case.

[6]            
In passing, of course, this highlights the need for contingency fee
agreements that allow for access to justice and alongside that disbursement
loan arrangements, if they can be accommodated by the law firm or arranged by
the law firm also help with that same purpose in mind.

[7]            
Chandi v. Atwell, supra, was considered by Master Young sitting
as Registrar in Arnason v. Nerio, 2014 BCSC 185.

[8]            
In that case, the contingency fee agreement provided that the law firm
itself would lend the funds required for disbursements to the client.  The loan
agreement with the client provided for interest at 15 percent per annum,
compounded monthly.

[9]            
At paragraph 51 of her reasons, Her Honour refers to the decision of
Master McDiarmid in Franzman v. Munro, 2013 BCSC 1758.  In that case Master
McDiarmid concluded that an allowance for disbursement loan interest should be
made and he determined that an interest rate of six percent was reasonable. That
was the interest rate charged by the law firm being the rate it was paying on
its operating line of credit.

[10]        
In Bodeux v. Tom, 2013 BCSC 2327, Master McDiarmid considered an
agreement to pay disbursement interest of 10 percent that was included in a
contingency fee agreement.  He said at paragraphs 74-76:

[74]      The mere fact that the plaintiff entered into a fee
agreement which provided for charging disbursements at a rate appropriate to be
charged between the client and her lawyer, does not mean that that amount of
the disbursement should be automatically passed on to an unsuccessful litigant.

[75]      For example, retainer agreements often provide that
the law firm will charge its client photocopies at an agreed upon rate. A
photocopy rate allowed by registrars is usually less than the rate agreed to as
between the law firm and its client.

[76]      I am charged with
assessing and allowing a reasonable amount for disbursements. The six percent
allowed in Franzman was a reasonable amount; economic times have not
changed since that decision was rendered in September 2013. I, therefore, allow
the disbursement at six percent of the amount claimed, reducing the $2,730.81
claimed to $1,638.49.

[11]        
Returning to Arnason v. Nerio, supra, Master Young said:

[53]      I have no evidence before me as to why the Law Firm
picked 15 percent per annum compounded monthly interest to charge its clients.
I find it to be an excessive and extravagant rate when the prime bank interest
rate is 3 percent per annum, and I have to assume that the Law Firm can borrow
money at a rate much lower than 15 percent.

[54]      In submissions, counsel for the plaintiff said that
the rate was higher than the interest rate the Law Firm was charged because the
Law Firm is providing a service to the client that the client would not be able
to finance on his own. The provision of that service and the fact that the Law
Firm takes on the obligation of repayment and some risk is the reason the Law
Firm charges some additional interest. For me to determine what a reasonable
interest rate is, the Law Firm needed to provide evidence of what rate they
were charged and what the repayment terms were. We are cautioned by Justice
Savage in Chandi that we should not merely apply a formula or fix a
registry rate, but we should consider the circumstances in each case.

[55]      When the applicant fails to meet its onus to prove
its claim, it runs the risk of having the claim completely defeated. This would
prejudice the plaintiff who has a contractual obligation to pay 15 percent interest.
That was the deal he struck with his lawyer. That does not mean that the
defendant should be required to reimburse that plaintiff in full for at an
inflated rate that includes a profit markup for the Law Firm.

[56]      In the absence of
sufficient evidence, I will therefore rely on my brother master’s determination
that 6 percent per annum simple interest is a reasonable rate of interest to
charge the defendant, having consideration for the fact that the prime rate has
not changed since Master McDiarmid made that decision in September 2013.

[12]        
Turning to the circumstances of this case, Ms. Phippen was charged
an interest rate of 15 percent by PIL.

[13]        
In Chandi, supra, Mr. Justice Savage said that the Registrar
must consider the entire context of the arrangement.  In this case — and I
refer back to Mr. Mullally’s evidence — while the law firm did not itself
lend the funds necessary for the disbursements to the Plaintiff, a company that
the law firm or members of the law firm had a controlling interest in provided
that assistance.

[14]        
Looking at the matter contextually I find that the law firm was not arm’s
length from the lender, PIL. This was properly conceded by Plaintiff’s counsel.
In this case, the law firm arranged the necessary loan for the Plaintiff that
provided for a profitable rate of interest to the lender. In the current
economic climate, I am not satisfied that an interest rate of 15 percent is reasonable
to pass along to the Defendant, and as Master McDiarmid and Master Young have
done in the decisions I  have referred to, I will award a rate of six percent.

“District
Registrar Cameron”