Blog › Commentary

Interest on Litigation Loan Recovered from Defendant in Supreme Court of Nova Scotia Decision

Stephen Pauwels, BridgePoint Financial Group | July 31, 2014

A recent Nova Scotia Costs Order represents the first time in that province that a defendant has been ordered to reimburse interest incurred by a plaintiff in full on litigation loans which were “necessary to continue the litigation”.1 Mr. Lowell Weir was one of a group of plaintiffs who were awarded in 2013 over $2 million in compensatory and $200,000 in punitive damages in a securities-related action against National Bank Financial which arose from the collapse of Halifax technology company, Knowledge House Inc. In order to afford the costs involved in the prolonged litigation, he borrowed approximately $100,000 through three separate litigation loans, incurring total interest costs in excess of $80,000.

In the decision, Justice Warner noted:

“[The defendant] submits that the costs of a litigation loan are recoverable, but only where the loan is necessary to continue the litigation. It submits that there is no evidence before the court that it was necessary for Weir to borrow in order to continue the litigation. I disagree...

"I am satisfied, on a balance of probabilities, that it was necessary for Weir to take out loans at high rates of interest in order to continue the litigation. The court approves the interest claim of $80,405.82”

While this represents the first time that a court in Nova Scotia has ordered the recovery of litigation loan related interest by a plaintiff, it follows the trend of several cases from other provincial jurisdictions addressing the issue including LeBlanc v. Doucet, [2012] NBR (2d) GTBEd. OC 035 (NBCA) ("LeBlanc") and Chandi v. Atwell, 2013 BCSC 830 ("Chandi").

This case further reinforces the adoption by the courts across the country of a ‘reasonable and necessary” standard when considering the issue of litigation loan interest recoverability. In this instance, the Judge noted the fact that (i) the plaintiff “lost his source of income” owing to the cause of action and (ii) his company was unable to afford a $15,000 security for costs order, supported the necessity of the loans “to continue the litigation”. The interest rate incurred on at least two of the three loans in question was 2.4% per month, compounded monthly (effectively 33% per annum), which did not exceed the rates of interest recovered in earlier decisions.2 Note to reader: The litigation loan in this matter was not provided by BridgePoint Financial.

review

1National Bank Financial Ltd. v. Potter, 2014 NSSC 264 (CanLII)
2In LeBlanc, the interest rate was 2.4%, compounded monthly. In Chandi, the interest was the greater of 12% or prime plus 7.5% per annum.

BridgePoint News

We contribute blog entries regarding recent news, court decisions, articles, events and our commentary on relevant developments.

To receive a notification of news items, sign up to our mailing list.

sign up