Court Orders NBFL to Pay Interest on Litigation Loans in Knowledge House Claims: Why is this decision important to plaintiffs throughout Nova Scotia?

by John McKiggan

Justice Warner has issued his order for costs in favour of the successful Plaintiffs in their claim against National Bank Financial Limited (NBFL) relating to the collapse of Knowledge House Inc (KHI).

This is just the latest chapter in the ongoing litigation that has gone on for more than 10 years since Knowledge House Inc. collapsed in the fall of 2001.

Last year, Justice Warner ordered NBFL to pay the successful plaintiffs more than two millions dollars in compensatory damages and $200,000.00 in punitive damages as a result of share losses suffered by the plaintiffs after the collapse of KHI.

Lat week, in his decision on costs, Warner J. ordered National Bank Financial Limited to pay the successful Plaintiffs costs and disbursements in excess of 1.6 million dollars.

This is one of the largest cost awards in recent memeory in Nova Scotia.

Interest on litigation loans

However, what I find especially interesting about the costs award is the fact that the court ordered NBFL to reimburse one of the Plaintiffs, Lowell Weir, for interest paid on loans borrowed to continue his litigation.

Mr. Weir was forced to borrow almost $100,000.00 during the course of the lawsuit to pay for the extremely complex and bitter litigation. Evidence filed at the costs motion indicated that interest on the loans amounted to more than $80,000.00.

At paragraph 217 of the decision Justice Warner stated:

“NBFL 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.”

[Emphasis added]

Then further at paragraph 221 Justice Warner determined:

“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.”

First decision in NS

This is the first decision in Nova Scotia that I am aware of where a court has confirmed that Plaintiffs are entitled to recover the cost of interest on funds borrowed in order to continue their litigation.

New Brunswick allows litigation loan interest

In LeBlanc v. Doucet and New Brunswick Power Corporation the New Brunswick Court of Appeal confirmed the Plaintiff was entitled to recover interest on litigation loans borrowed to pay for necessary disbursements.

In that case the Plaintiff was of limited means. The Plaintiff attempted to borrow money from various banks but was denied because the ongoing litigation was thought to be risky. The plaintiff went to a litigation lender and borrowed money at a rate higher than what was typically offered by commercial lenders to pay for expenses necessary to carry on the claim.

The Court of Appeal confirmed the Plaintiff had a right to recover the interest where the disbursements were necessary to commence the ongoing litigation.

BC allows litigation loan interest

Last year the Supreme Court of British Columbia released its decision in Chandi v. Atwell. The Plaintiff had borrowed money to pay for necessary disbursements during the course of a personal injury claim. The BC court allowed the interest charged by a third party lender.

Why is the NBFL – Knowlege House decision important to NS plaintiffs?

While the $80,405.82 interest award is a drop in the bucket compared to the more than 1.6 million dollars that NBFL was ordered to pay to the Plaintiffs, Justice Warner’s decision is hugely important for Plaintiffs throughout Nova Scotia.

Litigation is becoming more and more time consuming and expensive. Often Plaintiffs who have been seriously injured are unable to work and have no ability to pay for necessary and important medical treatment and reports or other expenses required to advance their litigation.

Justice Warner’s decision recognizes that where Plaintiffs are forced to borrow money to advance their claim, the interest on the borrowed funds is a necessary and reasonable claim that the Defendants should be required to pay to a successful Plaintiff.

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