Whether Interest on Disbursements is Recoverable Depends on Circumstances

The Court of Appeal has spoken on the issue of whether interest is payable on disbursements incurred during the course of a legal action. The answer of the unanimous Court in Milne v. Clarke 2011 BCCA 322 is “maybe”, but the Court declined to decide the issue given the facts of the particular appeal and the issue on which leave to appeal was granted. Accordingly, the decision of the Chambers judge who decided that interest is payable on appropriate disbursements was not subjected to the scrutiny of the higher court and remains good law.

The Chambers judge in Milne v. Clarke, 2010 BCSC 317 concluded:

[9] The law in British Columbia is that interest charged by a provider of services where the disbursement has been paid by counsel for a party is recoverable as is the disbursement. The interest charge flows from the necessity of the litigation. If the disbursement itself can be assessed as an appropriate disbursement, so also can the interest owing as a result of the failure or inability of a party to pay for the service provided. In order to obtain the M.R.I., it was necessary to pay not only the $975.00 cost but also the interest on any unpaid balances that were not paid immediately. The cost plus interest was the cost of obtaining the M.R.I. The claim for interest should have been allowed.

 

In the appeal decision the Court said the following:
[13] There is, as Mr. Justice Frankel observed, divergent authority on the recoverability of interest on disbursements under Rule 57(4) (now Rule 14-1(15)). There may be different answers to that question depending upon the circumstances of the charge, the time and purpose for which the charge was incurred, and the circumstances that caused counsel to pay the bill, but this must be a question for another case. It is clear from the fresh evidence that in this case the recoverability of the interest paid by counsel requires an interpretation of the settlement agreement. One question is whether the amount in issue is properly characterized as a claim for special damages rather than disbursement, and is thus captured within the agreed sum. Another question is whether, on a correct interpretation of the settlement agreement, the amount in issue is recoverable as “a necessary and reasonable disbursement”. The judge, having been presented with the case as an application of Rule 57(4), did not deal with either of these issues.

 

[14]To look at it another way, it was intended that this appeal would be concerned with the recoverability of interest as a disbursement under Rule 57(4). On the material before us, the case turns on the characterization of the charge as a disbursement or special damages, and the interpretation of several terms of the settlement agreement, on only one of which the law on Rule 57(4) might be a reference point, and even there is not directly engaged.

 

[15] In our view this is not the right case to address the issue raised in the leave application. While that issue is of interest to the profession, its answer must await a case that directly engages the rule, in the context of a proper factual matrix rather than a hypothetical.
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