In the Interest of Fairness – Determining Prejudgment Interest in Personal Injury Actions – The Beard Winter Defender, January 2025
by Andrea Jasko, Student-at-Law and Damian Di Biase, Lawyer
Overview
In Aubin v Synagogue and Jewish Community Centre of Ottawa (Soloway Jewish Community Centre), 2024 ONCA 615 (“Aubin”), the Ontario Court of Appeal exercised its discretion to deviate from the default 5% prejudgment interest (“PJI”) rate in Ontario for non-pecuniary damages. In doing so, the Court clarified that this discretion should only be exercised in special or unusual circumstances and requires a complete consideration of the all the relevant factors to give effect to the underlying legislative intent behind the PJI regime.
Ontario Legislation on Prejudgment Interest
Under s. 128(2) of the Courts of Justice Act[1] (“the Act”), PJI on non-pecuniary damages in personal injury cases is the rate determined by the rules of court, specifically Rule 53.10 of the Rules of Civil Procedure which specifies a rate of 5% per year.[2]
However, per s. 130(1)(b) of the Act, the Court retains the ability to exercise its discretion to vary PJI to be higher or lower than the default rate of 5% per year “where it considers it just to do so.”[3] Under s. 130(2) of the Act, the Court is required to consider a variety of factors before exercising this discretion, including:
- any changes in market interest rates;
- the circumstances of the case;
- the fact that an advance payment was made;
- the circumstances of medical disclosure by the plaintiff;
- the amount claimed and the amount recovered in the proceeding;
- the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding; and
- any other relevant considerations.[4]
The onus is on the party seeking a higher or lower rate to justify a deviation from that “presumptive rate.”
The Case of Aubin
In Aubin, the Plaintiff sustained a serious head injury as a result of a slip and fall on the Defendant’s premises and was awarded damages of approximately $3.5 million at trial, with $216,000 allocated to non-pecuniary damages for pain and suffering. The Plaintiff’s spouse was also awarded $85,000 in non-pecuniary damages under the Family Law Act for loss of care, guidance and companionship.[5] The Plaintiffs and Defendant brought competing motions for the trial judge to exercise their discretion under s. 130 of the Act to vary the rate of PJI. The Plaintiffs submitted that PJI on both pecuniary and non-pecuniary damages should be increased to 8.46%, while the Defendant submitted that PJI on non-pecuniary damages should be decreased to 1.3%.
The trial judge set PJI on non-pecuniary and past pecuniary damages at 1.3% and 0.8% (the relevant bank rate), respectively. The Court emphasized that the drop in market interest rates below the default 5% rate at the relevant times was central to its decision to decrease PJI on non-pecuniary damages to 1.3%, as it prevented overcompensation of the Plaintiffs. The Plaintiffs appealed the decision, which was heard together with the appeal in Henry v. Zaitlen, 2024 ONCA 614, as both involved coinciding issues regarding PJI. [6]
Decision of the Ontario Court of Appeal
The sole issue on appeal was the trial judge’s ruling on PJI. The Ontario Court of Appeal held that the trial judge erred by misapplying the statutory PJI rate presumption with respect to non-pecuniary damages. The Court explained that the purpose of PJI legislation is to ensure fairness by accounting for the time before a Plaintiff receives their damages and to encourage the timely settlement of litigation. The Court held that since the default rate of PJI prescribed by legislation is meant to achieve consistency and certainty, PJI should only be varied where the party seeking the variation demonstrates that there are special or unusual circumstances with regards to the factors listed under s. 130(2) of the Act.
Furthermore, the Court of Appeal explained that a plain reading of the factors listed under s. 130(2) of the Act reveals a legislative intention for the court to make a balanced decision in exercising its discretion to vary PJI. Thus, the Court held that the trial judge also erred by placing too much emphasis on fluctuating market interest rates and failing to consider the other factors listed under s. 130(2) of the Act.
In the decision at first instance, the Plaintiffs argued that they could have invested the damages awarded at a much higher rate than the default PJI prescribed by legislation. In support of their argument, the Plaintiffs provided evidence that the average rate of return for the Defendant’s insurer was 12.99% and the average rate of return on the Plaintiffs’ investment portfolios was 8.46% at the relevant time. On the other hand, the Defendant did not offer evidence of any special circumstances that would justify varying the default rate of 5% PJI on non-pecuniary damages. Accordingly, the Court of Appeal held that the Plaintiffs had demonstrated that this was an appropriate case to vary PJI and allowed the appeal, setting PJI on both pecuniary and non-pecuniary damages at 8.46%.
Conclusion
Aubin reaffirms the default 5% rate of PJI for non-pecuniary damages, but serves as a reminder that PJI can be varied at the discretion of the Court after a complete and balanced analysis of all the factors listed under s. 130(2) of the Act. This decision further highlights that the rate of return on the parties’ investment portfolios can be another relevant factor that the Courts may consider as justification for deviating from the default PJI. Aubin is an important case for litigants to keep in mind when considering damages, settlement, and overall litigation strategy.
[1] Courts of Justice Act, R.S.O. 1990, c. C.43, s. 128(2) [CJA].
[2] Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 53.10.
[3] CJA, supra Note 1 at s. 130(1)(b).
[4] Ibid at s. 130(2).
[5] Family Law Act, R.S.O. 1990, c. F.3.
[6] Henry v. Zaitlen, 2024 ONCA 614.