In two recent decisions from the Ontario Court of Appeal, Aubin v. Synagogue and Jewish Community Centre of Ottawa and Henry v. Zaitlen, Justice Roberts, writing for unanimous panels, provided important clarification of the discretion afforded to judges when deviating from the statutory five per cent prejudgment interest on non-pecuniary damages under the Courts of Justice Act (CJA).
Aubin v. Synagogue and Jewish Community Centre of Ottawa: A Question of Legislative Intent
In Aubin, the Plaintiff suffered a serious head injury in 2015 after slipping at the Soloway Jewish Community Centre. A jury awarded her substantial damages, including $216,000 in non-pecuniary damages for pain and suffering. Her spouse also received $85,000 in non-pecuniary damages for loss of care, guidance, and companionship under Ontario’s Family Law Act. However, the trial judge reduced the statutory prejudgment interest rate on non-pecuniary damages from the presumptive five per cent, as set out in section 128(2) of the CJA and Rule 53.10 of the Rules of Civil Procedure, to 1.3 per cent, citing market interest rates as the justification.
On appeal, the Appellants argued that the trial judge erred in lowering the interest rate, especially given the evidence that the Respondents’ insurer had earned an average annual rate of return of 12.99 per cent during the period in question, claiming evidence of the insurer’s rate of return was “irrelevant” to her analysis while relying on the observation by Valin J. in Pilon v. Janveaux, [2001] O.T.C. 251 (Sup. Ct.) at para. 9, that “large corporations achieve higher returns than individual investors, and market rates may vary depending on the amount of money available to be invested or borrowed.”
While the trial judge relied on their interpretation of Pilon for decreasing the prejudgment interest rate, they declined to take into account the Plaintiffs’ evidence of the combined weighted average of the rates of return on their investments of 8.46 per cent, reasoning “prejudgment interest, while intended to compensate a Plaintiff, is not intended to match market interest rates or the return Plaintiff might earn in an investment portfolio.”
Subsequent to the rulings above, the Appellants submitted that the trial judge made two reversible errors. The first being that the trial judge misapplied the governing principles regarding prejudgment interest and the legislative intent in setting the default prejudgment interest rates under s. 128 of the CJA. The Appellants submitted that the second error was that the trial judge misinterpreted some factors, failed to consider other relevant factors under s. 130(2) of the CJA that she was required to take into account, misinterpreted the governing principles and case law concerning the exercise of discretion under s. 130(1) of the CJA, leading her to ignore relevant evidence concerning the applicable market interest rates.
Justice Roberts agreed with the Appellants, finding that the trial judge’s focus on market interest rates was too narrow. The Court of Appeal emphasized that the five per cent rate for non-pecuniary damages is presumptive, and deviations from it should only occur in unusual or special circumstances sufficient to justify such a departure, having regard to the mandatory criteria under s. 130(2) of the CJA and relying on Agribrands Purina Canada Inc. v. Kasamekas, 2011 ONCA 460, 106 O.R. (3d) 427, at para. 74; and Tuffnail v. Meekes, 2020 ONCA 340, at para. 113.
Justice Roberts noted that the legislative purpose of prejudgment interest is to compensate Plaintiffs for the time they are without their damages , and to discourage delays in the resolution of claims. The five per cent rate is intended to achieve this, regardless of fluctuations in market interest rates.
The Court of Appeal concluded that the trial judge had not provided sufficient justification for reducing the interest rate , and failed to consider all the relevant factors outlined in section 130(2) of the CJA. The Court allowed the appeal and set the prejudgment interest rate at 8.46 per cent, reflecting the Appellant’s combined weighted average rate of return on their investments portfolios.
Henry v. Zaitlen: Reaffirming the Presumptive Five Per Cent Rate
Henry involved a medical malpractice claim where the Appellant and his late wife’s estate were awarded damages, including $204,500 in non-pecuniary damages for the Plaintiff and $100,000 in non-pecuniary damages for the estate. The trial judge reduced the statutory five per cent prejudgment interest rate on non-pecuniary damages to 1.3 per cent, based on the lower market interest rates at the time the statement of claim was issued.
The Appellants in Henry argued that the trial judge’s reduction of the prejudgment interest rate was unjustified and that the court had misinterpreted case law, particularly MacLeod v. Marshall. The Appellants submitted that the five per cent rate should be reinstated as it was the legislatively prescribed rate for non-pecuniary damages.
Justice Roberts, in her reasons, reaffirmed the principles set out in Aubin. She explained that the five per cent rate under section 128(2) of the CJA is presumptive, meaning it should apply unless there are exceptional circumstances that warrant a deviation.
By equating market interest rates with the Consumer Price Index without hearing evidence to establish such a relationship, the Court of Appeal found that the trial judge erred in exercising their discretion and applying s. 130 of the CJA.
In Henry, as in Aubin, the Court underscored that prejudgment interest is intended to ensure that plaintiffs are fairly compensated for the time they are deprived of their damages. While market interest rates are a relevant factor under s. 130(2), they are not the sole consideration. The Court reinstated the five per cent rate for non-pecuniary damages.
Clarifying the Application of Prejudgment Interest
Both Aubin and Henry provide important guidance on how Ontario courts should handle prejudgment interest rates in personal injury cases. The decisions highlight the legislative intent behind s. 128(2) of the CJA, which prescribes a presumptive five per cent rate for non-pecuniary damages. While trial judges have discretion under s.130 of the CJA to adjust this rate, it must be exercised with full consideration of all the relevant factors, not just fluctuations in market interest rates.
Justice Roberts’ two decisions make it clear that the five per cent rate should remain the default unless there are clear and compelling reasons to depart from it. This framework ensures that plaintiffs receive fair compensation for the time they are without their damages, and it encourages timely settlement and resolution of claims. At the same time, it prevents a narrow focus on market interest rates from undermining the broader purposes of the prejudgment interest regime.
Takeaways for Practitioners
The rulings in Aubin and Henry provide clear instructions for both plaintiffs and defendants in personal injury cases. Parties seeking to have the court exercise its discretion to deviate from the presumptive interest rate in issue must be prepared to produce evidence of interest rates available in the market over the relevant period. The Court held expert evidence may be necessary to establish the relationship between any particular index and the market interest rates or changes in market interest rates.
In both cases, the Court of Appeal emphasized that prejudgment interest is a critical component of fair compensation, ensuring that plaintiffs are not disadvantaged by delays in receiving their damages. The decisions in the cases above provide valuable clarity on the application of s.128(2) of the CJA and the exercise of judicial discretion under s.130, reinforcing the importance of the legislative framework in guiding courts’ decisions on prejudgment interest rates, and providing insight for practitioners who wish to deviate from the presumptive five per cent.
Kevin Whittington is an articling student at the firm, and author of this blog. If you have a question about these decisions, please contact Kevin at 416-777-2811 ext. 5229.
