Court allows claim on interest paid for litigation loan

The New Brunswick Court of Appeal has allowed an impecunious man to claim the interest on a litigation loan he needed to fund a damages claim resulting from a motorcycle accident.  

While the province’s Rules of Court don’t expressly categorize loan interest as a disbursement, Chief Justice Ernest Drapeau found the loans need only be “necessarily incurred” and the interest rate “reasonable” to qualify for reimbursement.

“Mr. [Francis] LeBlanc lacked the means to finance the litigation and his impecuniosity resulted in the loans that generated the interest in issue. Accordingly, it is an expense that was ‘necessarily incurred,’ Drapeau wrote for the unanimous court in his Oct. 18 judgment. “Finally, I am driven to conclude the interest claimed was ‘reasonable’ since the respondents adduced no evidence to establish Mr. LeBlanc could have borrowed money at a rate of interest lower than the one he negotiated with the independent third party.”

Drapeau ordered the defendants to pay almost $13,000 to Le Blanc to cover the interest on his $26,000 loan from litigation funder Seahold Investments, and said there was “every reason for satisfaction with the resulting regime, one that contributes significantly to improving access to justice for the citizens of our province.”

“As the Chief Justice of Canada, the Honourable Beverley McLachlin, regularly reminds us, access to justice is one of the cornerstones of the rule of law, and it behooves courts, whenever possible, to do their part in fashioning means conducive to its improvement. Courts must walk the talk,” he added.

Le Blanc was 17 in September 2004, when he was seriously injured as his motorcycle went off the road when a van driven by an employee of the New Brunswick Power Corporation crossed into his lane. The accident left him unable to work, and his only income was $200 per week in disability payments, according to the decision.

When the statement of defence came back laying the blame entirely at Le Blanc’s feet, he went to a bank and credit union looking for money to fund his action, but was turned down by both. Litigation funder Seahold Investments stepped in, loaning him $26,000 at a compounded monthly rate of 2.4 per cent, for an effective annual rate of 33 per cent.  

“The interest rate it set reflected an assessment of the risk assumed in granting the loans in question, a risk that two financial institutions had previously deemed prohibitive. Only a foolhardy lawyer would have agreed to undertake that risk,” Drapeau wrote.

A Court of Queen’s Bench judge found the power corporation employee entirely at fault, awarding costs of $20,000 to Le Blanc, plus taxable disbursements. That’s when Le Blanc claimed the interest on his loan, but was turned down by a court clerk tasked with deciding which disbursements were allowable.  

The decision stands in contrast to a 2011 Ontario case, Giuliani v. Region of Halton, in which a judge disallowed the plaintiff’s claim for recovery of interest paid on a litigator loan, and criticized her lawyer for referring her to a lender charging “unconscionable” rates of interest. The rate in that case was 3.5 per cent compounded monthly for an effective annual rate of 51 per cent.

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