Feb 9, 2019
In mva action evidentiary ruling, Ont. Super. Ct. holds that evidence of plaintiff's litigation loans cannot be led as these expenses are too remote, and not reasonably foreseeable to the defendants, so cannot be claimed as damages
Author Michael S. Teitelbaum
In Mann v. Jefferson, a mva action being tried by a jury, Ontario Superior Court Justice Trimble in an evidentiary ruling, held that the plaintiff could not be questioned during examination in chief about two litigation loans he took out since the accident, and to introduce into evidence the two loan agreements and discharge statements.
His Honour found that "[e]vidence concerning post-accident loans that the Plaintiff took to pay medical, rehabilitation, or other expenses of any kind is not admissible since those losses are too remote, not reasonably foreseeable to the Defendant at the time of the accident, and therefore, not recoverable as damages".
His Honour wrote in part:
 Mr. Mann argues that public policy requires that these loan expenses be recoverable as flowing naturally and foreseeably from the tortfeasor’s actions.
 I disagree. Public policy suggests that interest paid on loans used to pay post-accident medical, therapy and personal expenses, should not be recoverable as damages. I say this for the following reasons:
1. Pre-judgment and post-judgment interest, statutorily imposed by the Courts of Justice Act indemnifies the Plaintiff's loss of use of money and out of pocket expenses at statutorily mandated rates. Permitting recovery of interest on loans would, in effect, nullify the pre-judgment and post-judgment provisions of the C.J.A. by allowing interest at the rates mandated by the lenders, which often exceed the mandated rates, and reasonable rates in the open market. In this respect, I concur with the reasoning of Lauwers, J. in Warsh v. Warsh, 2013 ONSC 1886 who addressed the same argument with respect to litigation loans being recoverable as disbursements. Lauwers, J., held that to allow interest on litigation loans recoverable as disbursements, nullifies section 128(4) of the C.J.A., which provides that pre-judgment interest does not accrue on costs;
2. Awarding interest on these loans as damages would allow the Plaintiff to recover through the back door, that which, on the current state of the law, is not recoverable as a disbursement;
3. The onus is on the Plaintiff to establish that he is impecunious. If he has assets that could have been utilized to assist in providing him with some financial assistance at much lower costs that interest rates on the loans, he must use those resources. In this case, to the date of my oral reasons, Mr. Mann led no such evidence other than his general statements;
4. Awarding interest on litigation loans is a public policy issue of significant import, and requires much more research than was possible over one night, and fuller argument than was possible in the middle of a jury trial. On this basis, had I jurisdiction to award interest on the loans as damages, I would have declined to do so;
5. Allowing a Plaintiff to recover as damages (or costs) interest charges would create an incentive for parties to borrow money at astronomical interest rates, far in excess of commercially available rates, to fund litigation related expenses, and pass these charges on to the tortfeasor;
A similar issue was the focus of Murray, J.'s decision in Guiliani v. Regional Municipality of Halton et al., 2011 ONSC 5119. In that case, the Plaintiff sought to recover as a disbursement over $97,000 in interest on a $150,000 loan from Lexfund, for which the stated interest rate was 42%, and the effective annual rate was 51.10% when all fees were included. Murray, J. called the effective rate usurious. Murray, J. made other comments which apply, to a certain extent, to the question before me; including,
"…the whole agreement, including the interest rates charged by the lender, allows the lender to make huge profits from the proceedings of litigation rather than from a commercially normative interest rate on a risky loan," (para. 52).
"The concept of reasonableness governs the Court's treatment of disbursements. The interest payments owed by Ms. Guiliani to Lexfund are unreasonable. The Court will not require the Defendants to reimburse interest charges on the Lexfund loan…. To do otherwise would bring the administration of justice into disrepute and encourage predatory lenders whose business it is to extract unconscionable amounts of interest from vulnerable individuals." (at para. 57).
"It is turning the world on its head to assert, as does Ms. Chittley-Young, that this is an access to justice issue that ordering interest payments on the Lexfund [loan] is reasonable. This loan agreement does not facilitate access to justice. This loan agreement does nothing to advance the cause of justice." (para. 56).
6. To permit these damages to be recoverable would increase the complexity of documentary discovery, and the time required at oral discovery and at trial, to explore the pre- and post-accident financial circumstances of the Plaintiff. It would open up a long argument at trial about mitigation, giving rise to such questions as: was the loan interest rate the best one available? Were there others? Did the Plaintiff need the loan? What assets could he or she have used to avoid the loan or as security for a lower rate? How much did the Plaintiff "need"? How did the Plaintiff spend it? Was it repaid? Why not? When ought it to have been repaid?
 The issue of increasing the complexity of the litigation by allowing a claim for litigation loan expense is not mere conjecture or speculation. The evidence between my oral ruling at the beginning of 11 January and the close of the day on 14 January has borne out my concern. I have reviewed some of the additional evidence, below. Because of my ruling, that evidence was not fully developed. I did not rely on this evidence in reaching my decision, but refer to it now as illustrative of my point on complexity. The evidence adduced after my oral ruling suggests that the evidence that would have been made relevant in this action by a claim for litigation loan expenses is significant, would require significant documentary and oral discovery, and require significant trial time.
 For the above reasons, I hold that the litigation loan related expenses are too remote, and not reasonably forseeable [sic] to the Defendants, and cannot be advanced as damages in this action. Therefore, evidence in relation to those loans is not relevant and cannot be admitted.