COURT OF APPEAL FOR ONTARIO DATE: 20240815 DOCKET: COA-23-CV-0114
Roberts, Coroza and Gomery JJ.A.
BETWEEN
Sean Omar Henry personally and as Estate Trustee for the Estate of Sandy Robinson Plaintiffs (Appellants)
and
Dr. Marshall Zaitlen, Dr. Edgar Jan, Dr. Joseph Fairbrother, Dr. Hilaire Louise Sheehan, Dr. Vera Bril, Dr. Robert Kurtz, Dr. John Doe, Jane Doe, Joan Doe, William Osler Health Centre - Brampton Civic Hospital and University Health Network - Toronto General Hospital Defendant (Respondent)
Barbara A. MacFarlane [1] and Michael Hodgins, for the appellants Frank McLaughlin, Stephanie Sugar and Christine Windsor, for the respondent Duncan Embury, Brandyn Di Domenico and Stacy Bailey, for the intervenor, Ontario Trial Lawyers Association
Heard: January 19, 2024
On appeal from the order of Justice Andrew A. Sanfilippo of the Superior Court of Justice, dated December 22, 2022, with reasons reported at 2022 ONSC 7259.
Roberts J.A.:
A. Overview
[1] The appellants appeal the trial judge’s prejudgment interest order of 1.3 per cent on their non-pecuniary damages for personal injury. They seek to set aside the provisions of that order and request that this court fix the prejudgment interest rate on non-pecuniary damages at five per cent. [2]
[2] This appeal turns on the trial judge’s approach to prejudgment interest for non-pecuniary damages prescribed under s. 128(2) of the Courts of Justice Act, R.S.O. 1990, c. C.43 (the “CJA”) and r. 53.10 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”) and to the exercise of the discretion under ss. 130(1) and (2) of the CJA to deviate from the presumptive entitlement to prejudgment interest.
[3] The appellants put forward the following grounds of appeal: i) the trial judge misinterpreted and misapplied this court’s decision in MacLeod v. Marshall, 2019 ONCA 842, 148 O.R. (3d) 727; ii) the trial judge failed to consider and apply the governing principles articulated by this court in Andani et al. v. Peel (Regional Municipality) et al., [1994] 66 O.A.C. 137 (C.A.), application for leave to appeal dismissed, [1993] S.C.C.A. No. 438, other cases, and the provisions of ss. 130(1) and (2) of the CJA; and iii) the trial judge misdirected himself on s. 258.3(8.1) of the Insurance Act, R.S.O. 1990, c. I.8 and its significance. As a result, the appellants submit, the trial judge exercised his discretion in accordance with incorrect principles and erred in deviating from the presumptive five per cent prejudgment interest rate for non-pecuniary damages for personal injury prescribed under s. 128(2) of the CJA and r. 53.10 of the Rules.
[4] The respondent submits that the appeal should be dismissed. He maintains that the trial judge made no reversible error and that the appellants merely repeat the arguments that the trial judge properly rejected. Specifically, the respondent maintains, the trial judge’s interpretation of MacLeod is correct that the five per cent rate under s. 128(2) of the CJA no longer reflects the reality of market interest rates. The respondent argues that the five per cent rate would unjustly overcompensate the appellants, which would be inconsonant with the purpose of prejudgment interest to fairly compensate but not overcompensate.
[5] These reasons explain why I would allow the appeal and fix the prejudgment interest rate at five per cent for the appellants’ non-pecuniary damages for personal injury.
B. The trial judge’s prejudgment interest order
[6] The trial judge’s prejudgment interest order followed a jury verdict in a medical malpractice action, which was rendered on December 13, 2021, in favour of the appellants. [3] It is common ground that the appellants are entitled to prejudgment interest on the non-pecuniary damages awarded from the date the appellant Sean Omar Henry’s cause of action arose in July 2010 to the date of the verdict in December 2021.
[7] The appellants were successful in proving that they suffered damages as a result of the negligence of the respondent, Dr. Marshall Zaitlen. Among other amounts, the jury awarded Mr. Henry $204,500 in non-pecuniary general damages and awarded the Estate of his late wife, Sandy Robinson, who sadly passed away before the trial, $100,000 in non-pecuniary damages for loss of care, guidance, and companionship under the Family Law Act, R.S.O. 1990, c. F.3, s. 61.
[8] The respondent sought and was granted a reduction by the trial judge of the five per cent prejudgment interest rate prescribed under s. 128(2) of the CJA and r. 53.10 of the Rules, for non-pecuniary damages for personal injury. In the trial judge’s view, the five per cent rate would overcompensate the appellants as he found that market interest rates and/or the rate of prejudgment interest payable on pecuniary damages were lower than five per cent. Based on the changes in market interest rates factor under s. 130(2)(a) of the CJA, he exercised his discretion under s. 130(1) of the CJA and set prejudgment interest on the appellants’ non-pecuniary damages for personal injury at the rate of 1.3 per cent. This rate reflected the prejudgment interest rate on pecuniary damages at the time the statement of claim was issued in 2012.
[9] The trial judge’s determination of the prejudgment interest rate on non-pecuniary damages was contained in an endorsement disposing of two post-verdict issues. After correctly instructing himself on the wide discretion trial judges enjoy under s. 130 of the CJA, he relied on the following principles that he extracted from MacLeod and an earlier case, Cobb v. Long Estate, 2017 ONCA 717, 416 D.L.R. (4th) 222:
Further, in MacLeod, at para. 50, the Court of Appeal applied the principle stated in Cobb v. Long Estate, 2017 ONCA 717, 416 D.L.R. (4th) 222, at para. 86, that the goal in the consideration of the applicable interest rate is to ensure that the injured party is compensated fairly:
Interest rates fluctuate over time and it only makes sense that the interest rates set by the court should reflect these changes as well. The goal is to fairly compensate an injured party and to restore him or her, so far as money is able to do, all that he or she has lost as a result of the injury – but neither too much, nor too little.
Importantly, the Court of Appeal applied, at para. 46 of MacLeod, Justice Matheson’s finding in Awan v. Levant, 2015 ONSC 2209, aff’d 2016 ONCA 90, 133 O.R. (3d) 401, at para. 27, that the “mischief that gave rise to [subsection 128(2) of the CJA] is no longer served by a 5% rate given the interest rate climate during the time relevant to this case.” Subsection 128(2) was enacted to lower the interest rate that would otherwise be applicable to non-pecuniary damages due to the high interest rates prevailing at that time. It was not intended to raise the prejudgment interest rate beyond prevailing market rates. This is seen through the enactment of s. 258.3(8.1) of the Insurance Act, applicable to motor vehicle cases. And I am not persuaded by the Plaintiffs’ submission that the failure to repeal Rule 53.10 upon or after the enactment of s. 258.3(8.1) of the Insurance Act means that the legislative intention was to remove the 5% interest for non-pecuniary damages for only motor vehicle cases. The application of Rule 53.10 and s. 128(2) of the CJA has always been, and remains subject to the court’s exercise of discretion under s. 130 of the CJA.
[10] The trial judge canvassed the range of prejudgment interest rates for pecuniary damages and the average rate in the Consumer Price Index (the “CPI”) from the time the cause of action arose in 2010 to the verdict in 2021. He set the prejudgment interest rate for the appellants’ non-pecuniary damages for personal injury at 1.3 per cent, the prejudgment interest rate for pecuniary damages in effect at the time of the issuance of the claim, because he found that the 1.3 per cent rate was consistent with the principles in MacLeod as he interpreted them, as well as the objective stated in Cobb to fairly but not overly compensate the appellants.
C. Analysis
[11] The trial judge’s exercise of his discretion under s. 130(1) of the CJA to decrease the prejudgment interest rate would ordinarily be entitled to deference on appellate review: MacLeod, at para. 48, citing Stellarbridge Management v. Magna International (2004), 71 O.R. (3d) 263 (C.A.), at para. 85, leave to appeal refused, [2004] S.C.C.A. No. 371. However, as I shall explain, the trial judge’s legal analysis, including his application of s. 130 of the CJA, was flawed. In my view, the trial judge effectively exercised his discretion based on the incorrect principles that there is no presumptive statutory prejudgment interest rate and that, as a matter of principle, the overarching consideration in the exercise of his discretion must be the prevailing market interest rates, which he effectively equated to prejudgment interest rates for pecuniary damages and the Consumer Price Index. As a result, he failed to correctly apply the provisions of the CJA in accordance with the governing principles related to prejudgment interest on non-pecuniary damages. [4] Moreover, in considering the “changes in market interest rates” criterion, the trial judge erred in his interpretation of the meaning of “market interest rates” and the evidence sufficient to establish them.
[12] My analysis of the trial judge’s reasons should be read in conjunction with my reasons in Aubin v. Synagogue and Jewish Community Centre of Ottawa (Soloway Jewish Community Centre), 2024 ONCA 615, in particular the discussion of the legislative purpose and policy of ss. 128(1)-(2) and 130(1)-(2) of the CJA, and r. 53.10 of the Rules, and the interpretation of “changes in market interest rates” in s. 130(2)(a) of the CJA. However, my analysis requires that I repeat some of the same points in both decisions.
[13] The trial judge’s failure to consider all the factors in s. 130(2) in deciding that a lower prejudgment interest rate was just in the circumstances and his narrow focus on and misapplication of “changes in market interest rates” under s. 130(2)(a) “were not in accordance with a full and balanced application of the factors set out in s. 130(2), and amounted to an error in law”: Pilon v. Janveaux (2006), 211 O.A.C. 19, at para. 31.
(1) Presumptive Statutory Prejudgment Interest Rate
(a) The trial judge erred in his interpretation of the language and purposes of the statutory scheme
[14] The trial judge did not apply the principles governing a successful plaintiff’s presumptive right to prejudgment interest at the statutory rate. His analysis under s. 130(1) of the CJA did not proceed from the starting point of the appellants’ presumptive entitlement to prejudgment interest at the five per cent prescribed rate. The trial judge also unduly emphasized the issue of overcompensation and failed to give effect to the broader purposes of the prejudgment interest scheme.
[15] The modern rules of statutory interpretation dictate that “the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament”: Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, at para. 21, quoting Elmer Driedger, Construction of Statutes, 2nd ed. (Toronto: Butterworths, 1983), at p. 87.
[16] The plain language of s. 128(2) of the CJA and r. 53.10 of the Rules is clear. It creates a presumptive or “default” five per cent prejudgment interest rate for non-pecuniary damages: Cobb, at paras. 69 and 71. The trial judge’s failure to give effect to the applicable rules of interpretation in considering this provision is an analytical error.
[17] The statutory presumption that the five per cent rate of interest applies to non-pecuniary loss on personal injury is baked into s. 128(2) of the CJA:
Despite subsection (1), the rate of interest on damages for non-pecuniary loss in an action for personal injury shall be the rate determined by the rules of court under clause 66(2)(w). [Emphasis added.]
[18] The rate determined by the rules of court is set out in r. 53.10 of the Rules: “The prejudgment interest rate on damages for non-pecuniary loss in an action for personal injury is five per cent per year.”
[19] The five per cent rate is the prescribed statutory presumptive rate for non-pecuniary loss. As this court stated in Somers v. Fournier (2002), 60 O.R. (3d) 225 (C.A.), at para. 30, the CJA “confers a substantive right to claim pre-judgment interest on a person who is entitled to an order for the payment of money.” Moreover, there is a prima facie entitlement to the rate provided for in the CJA: Andani, at para. 15.
[20] I disagree with the respondent’s submission that this court in Cobb determined that there is no presumptive statutory prejudgment interest rate. The court in Cobb recognized, at paras. 69 and 71, that s. 128 “contemplates two default rates of prejudgment interest: one for damages for non-pecuniary loss in personal injury actions, and one, called ‘the prejudgment interest rate’, for all other money awards for which s. 128 makes prejudgment interest available”, and that “s. 128(2) creates an exception from this [s. 128(1)] default rate of prejudgment interest for damages for non-pecuniary loss arising from personal injuries”. There is a presumptive entitlement to prejudgment interest at the statutory rate. However, there is not, as this court clarified in Cobb, at paras. 85 and 90, an absolute or vested entitlement to prejudgment interest or to the five per cent statutory rate of interest for non-pecuniary loss. This is because, as Cobb further explained, at paras. 72, 86, 87 and 90, the presumptive statutory entitlement to prejudgment interest and to the presumptive rates can be displaced where the court “considers it just to do so”, in accordance with the discretion afforded under section 130(1) of the CJA. Section 130(1) of the CJA reads as follows:
The court may, where it considers it just to do so, in respect of the whole or any part of the amount on which interest is payable under section 128 or 129 [postjudgment interest],
(a) disallow interest under either section;
(b) allow interest at a rate higher or lower than that provided in either section;
(c) allow interest for a period other than that provided in either section. [Emphasis added.]
[21] Although the presumption can be displaced, the court’s acknowledgement of the presumption at the start of its analysis under s. 130(1) of the CJA is important. The presumption places the onus squarely on the party seeking to depart from the prima facie entitlement to the presumptive statutory interest rate to demonstrate why the court should exercise its discretion to do so: Graham v. Rourke, [1991] 75 O.R. (2d) 622 (C.A), at p. 627; Ben-Israel v. Vitacare Medical Products Inc. et al. (1999), 122 O.A.C. 57 (C.A.), at para. 20; Andani, at para. 15; Novakovic v. Kapusniak, 2008 ONCA 381, 52 R.F.L. (6th) 9, at para. 44; Metropolitan Toronto Police Widows & Orphans Fund v. Telus Communications Inc. (2008), 44 B.L.R. (4th) 140 (Ont. Sup. Ct.), at para. 69, aff’d 2009 ONCA 111, 55 B.L.R. (4th) 12; McFlow Capital Corp. v. James, 2021 ONCA 753, at para. 58, 63-65.
[22] While the court may exercise its discretion under s. 130(1) of the CJA to depart from the presumptive rate of interest, it is not mandatory that it do so. Moreover, it should only do so where “it considers it just to do so”. The rationale for this is that prejudgment interest should be viewed as part of the compensation due to the party: see Irvington Holdings Ltd. v. Black (1987), 58 O.R. (2nd) 449 (C.A.), at p. 487; Graham, at p. 629; Hislop v. Canada (Attorney General), [2005] 73 O.R. (3d) 641 (C.A.), at paras. 145, 147-48; and Somers, at para. 23.
[23] In my view, this means that the prescribed interest rates should not be deviated from as a matter of course but rather where the court determines that there are unusual or special circumstances sufficient to justify such a departure, having regard to the mandatory criteria under s. 130(2) of the CJA and all other relevant considerations: Agribrands Purina Canada Inc. v. Kasamekas, 2011 ONCA 460, 106 O.R. (3d) 427, at para. 74; Tuffnail v. Meekes, 2020 ONCA 340, 449 D.L.R. (4th) 478, at para. 113. This is a cumulative assessment: each factor taken into account by the court does not have to by itself amount to an unusual or special circumstance, so long as, taken as a whole, the factor or factors relied upon by the court amount to unusual or special circumstances.
[24] The discretion under s. 130(1) of the CJA is broad. However, as this court observed in Somers, at para. 30, the legislative policy with respect to prejudgment interest “does not include an unfettered discretion for Ontario courts on whether to award pre-judgment interest.” Rather, the court’s discretion is informed by the mandatory list of factors under s. 130(2) that must be taken into account:
For the purpose of subsection (1), the court shall take into account,
(a) changes in market interest rates;
(b) the circumstances of the case;
(c) the fact that an advance payment was made;
(d) the circumstances of medical disclosure by the plaintiff;
(e) the amount claimed and the amount recovered in the proceeding;
(f) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding; and
(g) any other relevant consideration. [Emphasis added.]
[25] I set out the list in s. 130(2) of the CJA to highlight that the “changes in market interest rates” is only one of the myriad factors that the court “shall take into account” in determining whether to exercise the discretion under s. 130(1) to alter the presumptive entitlement to prejudgment interest. The various specified factors listed in s. 130(2) that may affect an award of interest are not restricted to a mere mathematical difference in market interest rates but reflect the legislative policy and purposes underlying the statutory interest scheme. These include the fair compensation of the plaintiff and the encouragement of efficiently run litigation and early settlements, having regard to such factors as the conduct of the parties and the duration of the proceedings.
[26] While one factor may predominate over others in the circumstances of a given case, it is important for the court not to limit immediately its review to only one factor. Rather, the proper exercise of the court’s discretion requires an examination of all the mandatory factors, including the catchall categories of “the circumstances of the case” and “any other relevant consideration”. This comprehensive review fulfills the overarching consideration that changes to the presumptive interest rates must be in the interests of justice.
[27] The Federal Court of Appeal’s observations in Apotex Inc. v. Wellcome Foundation Ltd., [2001] 1 F.C. 495 (C.A.), aff’d (on other grounds), 2002 SCC 77, [2002] 4 S.C.R. 153, related to the factors set out in s. 130(2) of the CJA, also assist in framing the appropriate analytical perspective to the judicial exercise of discretion in determining the appropriate award of prejudgment interest. Namely, the court in Apotex Inc., at para. 70, emphasized that the discretion afforded to trial judges under s. 130 serves to encourage timely litigation and assists in controlling the litigation process, but does not displace the principle that interest awards are compensatory, not punitive:
Judicial discretion as to the appropriate rate and period at which interest will run is thought to assist the court in controlling the litigation process and to avoid inappropriate compensation. Specifically, such discretion is thought to persuade plaintiffs to commence actions without undue delay so that their entitlement to interest is not slowed. Conversely, discretion as to an award of interest in light of the conduct of the proceedings should compel guilty defendants toward settlement. Considerations as to conduct of proceedings should, nonetheless, only be used to assist the trier of fact in selecting the date at which interest will commence or cease, or the appropriate rate at which interest will accrue. That is, the maxim that an award of interest is compensatory rather than punitive is not displaced by the discretion reserved for the court. [Footnotes omitted. Emphasis added.]
[28] Similarly, in Kinbauri Gold Corp. v. Iamgold International African Mining Gold Corp. (2004), 192 O.A.C. 24 (C.A.), at para. 120, this court emphasized the objective of the prejudgment interest scheme to “encourage early settlements and the timely compromise of litigation”. Relatedly, prejudgment interest also serves to deprive “the wrongdoer of a windfall benefit he would otherwise receive”, namely, the use that the wrongdoer had of the money that should have been paid to the plaintiff: Apotex Inc., at para. 68, quoting M.A. Waldron, The Law of Interest in Canada (Scarborough: Carswell, 1992), at pp. 129-30. This is tied into the concept of compensation – as this court observed in Irvington Holdings Ltd., at p. 487:
Interest should not be used as either a reward or a penalty, but should reflect the value of money wrongfully withheld from the appellant from the date of its demand for payment for its injury to the date when the compensation due it was determined at trial.
[29] The legislative policy underlying the statutory interest scheme seeks fair compensation for a plaintiff having regard to all relevant circumstances. The inclusion of the presumptive interest rates in ss. 127-128 of the CJA eschews mathematical precision “in the interest of consistency and certainty”: Robert McAlpine Ltd. v. Byrne Glass Enterprises Ltd., [2001] O.J. No. 3208 (C.A.), at para. 5. Similarly, this court in Andani, at para. 18, further explained this legislative purpose:
[O]ne of the collateral purposes of the prejudgment interest statutory provisions was to introduce an element of certainty into the determination of the period over which prejudgment interest is to be paid, the award of damages which will and will not attract prejudgment interest and the prejudgment interest rate. No one prejudgment interest formula can, with certainty, resolve all problems, including the problem of compensating plaintiffs fairly. [Emphasis added.]
[30] As noted in Andani, at para. 17, the five percent prejudgment interest rate would not fully compensate a plaintiff even if it perfectly aligned with the annual return on investment that the plaintiff could have obtained had money awarded as damages been received at the date of injury. This is because the prejudgment rate is a simple, rather than compound, rate.
[31] In this case, the trial judge placed undue emphasis on the prospect that the appellants would be overcompensated if the five per cent presumptive rate was maintained. In so doing, the trial judge relied solely on the factor in s. 130(2)(a) – “changes in market interest rates” – and failed to step back and weigh that factor along with other prescribed factors he was required to consider. The trial judge’s approach, in my view, failed to give effect to those legislative policy and purposes of the interest scheme that are also reflected in the mandatory factors under s. 130(2) of the CJA.
[32] A narrow preoccupation with over or under compensation is misplaced and does not reflect the underlying legislative purposes of the interest scheme. That is why changes in market rates is only one of the factors to be considered under s. 130(2) of the CJA and the significance of that factor depends on the extent of the fluctuation: Graham, at p. 627. The court’s application of this factor cannot devolve into a mathematical calculation where any increase or decrease in market interest rates supports the exercise of the court’s discretion. The fluctuations in market interest rates must be unusual or amount to special circumstances sufficient to warrant the exercise of the court’s discretion to depart from the presumptive interest rates on the basis of that criterion alone. Mere fluctuations in interest rates do not warrant deviation from the prescribed rate. This would defeat the legislative purposes of the statutory interest scheme.
[33] Interest rate fluctuations and the concomitant possibility of over or under compensation are not new. They are well known to the legislature that has nevertheless chosen to leave the five per cent presumptive rate in place and, as this court remarked in Andani, at para. 17, “chose not to complicate the prejudgment interest legislation” by, for example, providing a specific mathematical mechanism to deal with fluctuations. As this court observed in Ben-Israel, at para. 21:
In selecting the pre-judgment interest model that is now reflected in the Courts of Justice Act, the Legislature must have recognized that where interest rates fluctuate during the relevant prejudgment interest period there necessarily will be some element of over (or under) compensation.
[34] Relatedly, in Kinbauri, the issue regarding prejudgment interest was whether the trial judge erred in awarding prejudgment interest on pecuniary damages at a rate of 10 per cent per annum notwithstanding significant fluctuations in the interest rate during the ten years following the commencement of the action. Following the principle articulated in Spencer v. Rosati et al. (1985), 50 O.R. (2d) 661, this court declined to alter the prejudgment interest rate, noting that a purpose of prejudgment interest is to encourage the settlement of claims by those who wrongfully resist claims for the payment of money: Kinbauri, at para. 120; and Graham, at p. 628.
[35] The respondent seeks to justify the trial judge’s focus on overcompensation by referencing the historical criticism of the five per cent statutory rate on non-pecuniary damages as leading to overcompensation of plaintiffs. He highlights the recommendation by a majority of the 1987 Ontario Law Reform Commission, in Ontario Law Reform Commission, Report on Compensation for Personal Injuries and Death (Toronto: Ministry of the Attorney General, 1987), at pp. 208-209 (“1987 Report”), that the prejudgment interest rate on non-pecuniary damages should be reduced to 2.5 per cent.
[36] In Spencer, this court rejected similar arguments about overcompensation as those that were advanced here by the respondent and accepted by the trial judge. In Spencer, the trial judge considered the arguments that the plaintiff should be held to an interest rate that she would obtain in the markets and that any more than a certain rate would be in the nature of a windfall. This court found in Spencer, at p. 665, that the trial judge had erred in holding that a higher rate would be in the nature of a windfall, reasoning that this conclusion was effectively “a quarrel with the basic policy of the legislation rather than a rational application of it to the facts of the case”. The court further explained that:
In providing for the prime rate[ [5] ], the Legislature must be taken to know what the credit structure in our economy is and its policy decision should not be ignored simply on the ground that the rate appears to be too high for practical realization…. The same kind of reasoning applies to the “windfall” consideration. If there be a windfall, the policy of the legislation, which is intended to provide an incentive for early settlements or payments, must be assumed to be that it is the plaintiff and not the defendant who is to enjoy it.
[37] Moreover, the trial judge’s conclusion that s. 258.3(8.1) of the Insurance Act suggests that the legislature did not intend to have a prejudgment interest rate beyond prevailing market rates ignores the fact that the legislature did not amend r. 53.10 of the Rules. The continued existence of r. 53.10, which articulates the presumptive five per cent rate on non-pecuniary damages, notwithstanding the change to s. 258.3(8.1) of the Insurance Act, suggests that the legislature did not intend to change the presumptive rate for non-pecuniary damages in other non-motor vehicle contexts.
[38] Again, although bank rates have gone up and down since the five per cent rate was set, the legislature has not altered the prescribed rate under the CJA and the Rules. In that respect, I note that, importantly, the legislature did not adopt the recommendation to reduce the rate to 2.5 per cent that was made by the majority of the Commissioners in their 1987 Report, to which the respondent has made reference. Perhaps, as suggested by the dissent of the Commissioner in the 1987 Report, this is because a reduction of the rate would serve “as a disincentive to settle” and result in “injustice to plaintiffs” (1987 Report, at pp. 211-212), thus undermining the legislative purposes animating the five per cent prejudgment interest rate on non-pecuniary damages.
[39] Only the legislature can change the presumptive rate and the legislature has not done so in the face of years of market rates below five per cent. Similarly, had the legislature intended that changes in market rates should dominate the exercise of the court’s discretion under s. 130(2) of the CJA, it would not have included the list of other mandatory factors to be considered and weighed in the analysis. I agree with the intervenor’s submission that it is inappropriate to replace a legislative presumption for a judge-made presumption in favour of an averaged market rate with respect to non-pecuniary damages. As this court instructed in Graham, at p. 628: “Where the legislature, through specific legislation, has established a policy with respect to pre-judgment interest, it is not for the court to rewrite that legislation to reflect a different policy.”
(b) Did the trial judge fail to consider all s. 130(2) factors in the exercise of his discretion?
[40] I disagree with the respondent’s interpretation of this court’s decision in MacLeod. MacLeod does not purport to narrow the factors or highlight any one particular factor that a court must take into account in deciding whether and how to exercise its discretion under s. 130(2) of the CJA. Specifically, MacLeod does not stand for the proposition that the factor of changes in market interest rates is always the overarching consideration in the analysis. Rather, the error emphasized by this court in MacLeod was, as is the case here, that the trial judge failed to take a relevant s. 130(2) factor into account. In MacLeod, the only potentially relevant s. 130(2)(a) factor mentioned was changes in the market interest rates. Despite this, the trial judge in MacLeod did not consider these changes as one of the mandatory factors under s. 130(2), as he was required to do. MacLeod did not determine that the various legislative purposes and the statutory presumptions underlying the statutory interest scheme as reflected in s. 130(2) no longer apply, or that the changes in market interest rates factor in s. 130(2)(a) is more important a factor than any other factor listed in s. 130(2).
[41] Further, I do not accept the respondent’s submission that the trial judge in this case considered all the relevant factors under s. 130(2) of the CJA. The respondent’s sole rationale for decreasing the five per cent presumptive rate was the “changes in market interest rates” factor under s. 130(2)(a) of the CJA. The trial judge did not address any other factor in his reasons and his interpretation and treatment of “changes in market interest rates” drove his analysis and conclusions. As such, he appears to have proceeded on the basis that the changes in market interest rates factor, as opposed to the other factors under s. 130(2) of the CJA, represents the overarching criterion in the exercise of the discretion under s. 130(1) of the CJA. This was an error. Not only was he required to review the mandatory factors under s. 130(2) but those factors were relevant to his analysis, including whether the respondent’s insurer had the use of the monies that were ultimately paid to the appellants and the absence of any advance payments.
[42] For these reasons, I conclude that the trial judge erred in deviating from the presumptive five per cent prejudgment interest rate on the appellants’ non-pecuniary damages.
(2) Meaning of “changes in market interest rates”
[43] Aside from the analytical errors already noted, the trial judge further erred in his consideration of the meaning of “changes in market interest rates” by equating “market interest rates” under s. 130(2) of the CJA with prejudgment interest rates as defined under s. 127(1) and the Consumer Price Index. The provisions of the CJA do not bear out this interpretation and there was no agreement or evidence that either equated to “market interest rates” or reflected “changes in market interest rates”.
[44] The present interest rate provisions under ss. 127 and 128 of the CJA include changes from the interest rate provisions under s. 36 of the now-repealed Judicature Act, R.S.O. 1980, c. 223. It is presumed that legislative changes are made deliberately and for some intelligible purpose: “Legislative Evolution” in Ruth Sullivan, The Construction of Statutes, 7th ed. (LexisNexis Canada Inc., 2022), §23.02.
[45] The CJA and the Judicature Act expressly defined various terms relevant to the interpretation of the appropriate prejudgment interest rate. Under s. 36(3) of the Judicature Act, there was a prima facie entitlement to interest “at the prime rate existing for the month preceding the month on which the action was commenced”. “Prime rate” was defined under s. 36(1) of the Judicature Act as “the lowest rate of interest quoted by chartered banks to the most credit-worthy borrowers for prime business loans, as determined and published by the Bank of Canada.” “Prejudgment interest rate”, “bank rate” and “market interest rates” were not terms used or otherwise defined under the Judicature Act. Although there was discretion to depart from the prima facie entitlement to interest under the Judicature Act, there was no list of mandatory factors as under s. 130(2) of the CJA for the court to consider.
[46] “Prime rate” as defined under the Judicature Act was not continued under the CJA. “Prejudgment interest rate” and “bank rate” are defined terms under the CJA. “Prejudgment interest rate” is defined under s. 127(1) of the CJA as the “bank rate at the end of the first day of the last month of the quarter preceding the quarter in which the proceeding was commenced, rounded to the nearest tenth of a percentage point.” The “bank rate” is defined as the “bank rate established by the Bank of Canada as the minimum rate at which the Bank of Canada makes short-term advances to banks listed in Schedule I to the Bank Act (Canada).”
[47] Unlike “prejudgment interest rate” and “bank rate”, “market interest rates” is not a defined term under the CJA. Notably, “market interest rates” is not defined as either “prejudgment interest rate” or “bank rate”. The lack of a specific definition indicates a legislative intention that the term is very broad. This is borne out by the plain meaning of the provision under s. 130(2) that it signifies the interest rates available in the market and by the French version of the term: “taux d’intérêt au marché”.
[48] The legislature’s intention for “market interest rates” to mean something broader than the bank rate is further demonstrated on the Bank of Canada’s website relied on by the respondent in the explanation of how financial markets operate within the Canadian financial system:
Financial markets consist of markets for money, bonds, equities, derivatives, and foreign exchange. They are one of the three elements of Canada's financial system. It is mainly through the financial markets that the Bank's key policy rate influences interest rates and the exchange rate. This, in turn, helps the Bank achieve its monetary policy objectives. [6]
[49] In Triten Corp. of Canada Ltd. v. Borden & Elliot, [2000] 45 O.R. (3d) 409 (Gen. Div.), motion for leave to appeal dismissed, [1998] O.J. No. 4750 (C.A.), Rivard J. found that the arbitrator erred in equating “changes in market interest rates” with changes in “prejudgment interest rate” or “bank rate”, reasoning, at p. 411:
The market interest rate is tied to the bank rate. It is also dependent upon other factors such as the nature of the enterprise borrowing the funds, the level of debt of the borrower, and the security given. In my view, the market interest rate must necessarily be different from the prescribed prejudgment interest rate and the bank rate; were it not the case, the legislature would have employed the defined terms “prejudgment interest rate” or “bank rate” instead of the term “market interest rate”. [Emphasis added.]
[50] The court in Triten, at p. 412, also held that the onus is on the person relying on changes in market interest rates to lead evidence relating to them.
[51] The parties put forward the bank rates during the relevant period, the Consumer Price Index, and the growth rate of the Toronto Stock Exchange composite as evidence of the market interest rates. Unlike in other cases, there was no tacit acceptance or explicit agreement by the parties that the market interest rates equaled the prejudgment interest rates under s. 127 of the CJA or any of other rates put forward by the parties.
[52] The trial judge rejected the appellants’ submission that Mr. Henry could have invested in stock investments during the relevant period. The appellants submitted a table from Statistics Canada showing Toronto Stock Exchange statistics, namely, the growth rate of the Standard and Poor’s/Toronto Stock Exchange composite index. He declined to give it any weight, notwithstanding that the respondent did not object to its admissibility. He stated that there was no evidence to support the appellants’ submission that there would be no overcompensation because Mr. Henry could have earned more than a 1.3 per cent return in stock investments, reasoning that there was no evidence that Mr. Henry or the Estate would have engaged in stock investment or that it would have been profitable for them.
[53] The trial judge did not err in refusing to take judicial notice of the significance of the composite tables because the appellants had not provided evidence that the composite table represented market interest rates or reflected changes in market interest rates nor was there any acquiescence or agreement to that effect. The significance of the composite table is not notoriously plain or within common knowledge such that judicial notice of it would have been appropriate: see R. v. Find, 2001 SCC 32, [2001] 1 S.C.R. 863, at para. 48; Taylor v. Hanley Hospitality Inc., 2022 ONCA 376, at para. 30.
[54] However, the trial judge’s analysis on this issue is problematic for another reason. He effectively reversed the onus that was on the respondent to prove that there were special or unusual “changes in the market rates” and that those changes warranted the exercise of the trial judge’s discretion because it was just to do so. Under s. 130(2), the appellants have a prima facie entitlement to prejudgment interest at the five per cent rate. The appellants did not ask for any change in the presumptive rate and therefore were not required to “prove” that they would not be overcompensated by the presumptive rate to which they were prima facie entitled. Rather, the onus remained on the respondent to demonstrate that any alleged overcompensation was of such a magnitude that it constituted special or unusual circumstances and that in all the circumstances, it was just to deviate from the presumptive rate.
[55] Moreover, in the court’s analysis, the factor of “changes in market interest rates” may but does not necessarily have to represent what a plaintiff or a defendant would actually earn in the market. Depending on the significance argued, it may simply serve to signify changes or fluctuations in the financial market that may or may not, along with any other relevant factor, affect the question of whether it is just to deviate from awarding interest at the presumptive rate.
[56] With respect to his treatment of the CPI, the trial judge erred in relying on it without an agreement or evidence that the CPI equated to market interest rates or reflected changes in market interest rates.
[57] As indicated on the Bank of Canada website, referenced by the respondent, the CPI is defined as follows:
The Consumer Price Index (CPI) is an indicator of changes in consumer prices experienced by Canadians. It is obtained by comparing, over time, the cost of a fixed basket of goods and services purchased by consumers.
The CPI is widely used as an indicator of the change in the general level of consumer prices or the rate of inflation. Since the purchasing power of money is affected by changes in prices, the CPI is useful to virtually all Canadians.
The prices of certain CPI components can be particularly volatile. These components, as well as changes in indirect taxes such as GST, can cause sizeable fluctuations in total CPI. In setting monetary policy, the Bank seeks to look through such transitory movements in total CPI inflation and focusses on “core” inflation measures that better reflect the underlying trend of inflation. [Emphasis added.] [7]
[58] In my view, the relationship between the CPI and market interest rates or changes in market interest rates is not obvious without evidence or an agreement, as it is not within common knowledge. As a result, the trial judge erred in taking judicial notice of it for the purpose of interpreting “market interest rates” and “changes in market interest rates”.
[59] Parties are at liberty to agree on what constitutes “market interest rates” or “changes in market interest rates”, including that they are equivalent to bank rates or prejudgment interest rates under the CJA, or any other rates, and to changes in those rates, for the purpose of setting the prejudgment interest rate in a proceeding and the exercise of the discretion under s. 130(1) of the CJA. However, any such agreement does not alter the statutory meaning of “bank rate”, “prejudgment interest rate” and “market interest rates” or “changes in market interest rates”. It is important not to conflate an agreement on what the parties are prepared to have the terms mean for a particular proceeding and the plain meaning of the terms in the absence of any agreement.
[60] In the absence of such an agreement, the party seeking to have the court exercise its discretion to deviate from the presumptive interest rate in issue must produce evidence of rates available in the market over the relevant period. This goes back to the purposes of prejudgment interest rates – to fairly compensate a plaintiff for the loss, to encourage settlements and efficiently run proceedings, and to deprive the defendant of the benefit derived from the use of the funds ultimately awarded.
[61] The legislature’s decision to refer to “changes in market interest rates” shows that it intended this factor to be broad. This precludes a fixed list of the kind of evidence that would suffice to demonstrate “changes in market interest rates” or “market interest rates”. Depending on the use that a party may wish to make of such evidence, expert evidence may be required to explain the meaning of any particular index and its relationship to “market interest rates” or “changes in market interest rates”. However, expert evidence would not, for example, be required where parties sought to rely on the fact of the interest earned by an insurer or by a plaintiff during the relevant period. For example, in Aubin, in seeking an increase in the interest rates awarded, the appellants properly relied on uncontested evidence of the actual rates of return earned by the respondent’s insurer, as well as of the actual rates of interest earned on their investment portfolios, as evidence of market interest rates and changes in market interest rates.
[62] The onus was on the respondent to prove his allegation concerning the prevailing market interest rates and that the changes in those rates justified the exercise of the court’s discretion to deviate from the presumptive five per cent prejudgment interest rate on non-pecuniary damages. The respondent failed to do so.
[63] As a result, there was no evidence to demonstrate “changes in market interest rates”, nor evidence that market interest rates were materially less than the five per cent presumptive prejudgment interest rate. The trial judge therefore erred in departing from the presumptive interest rate of five per cent for non-pecuniary damages on the basis of this factor alone.
(3) Other Factors under s. 130(2) of the CJA
[64] I turn to the other relevant factors under s. 130(2) of the CJA that the court must consider in deciding whether it is just to deviate from the five per cent presumptive prejudgment interest rate.
[65] As discussed, the presumptive rate is five per cent, and the onus is on the respondent to demonstrate that it should be varied. The respondent has not argued that any of the other factors listed under s. 130(2) of the CJA would justify the exercise of the court’s discretion to deviate from the presumptive five per cent interest rate, and I do not see that any of them would warrant it. For example, there is no suggestion that Mr. Henry failed to produce medical evidence in a timely way or that the appellants caused any delay in the proceedings. On the contrary, as earlier noted, that there was no advance payment made by the respondent or his insurer, for example, would militate against the exercise of the court’s discretion to reduce the presumptive prejudgment interest, taking into account the fact that the respondent could have reduced or extinguished the appellants’ entitlement to prejudgment interest by making an advance payment, as well as having regard to the consideration that one of the purposes of prejudgment interest is to encourage early settlement.
[66] As a result, there is no basis to depart from the presumptive five per cent prejudgment interest rate.
D. Disposition
[67] I would allow the appeal, set aside the trial judge’s prejudgment interest order for non-pecuniary damages, and order that the prejudgment interest rate applicable to the appellants’ non-pecuniary damages for personal injury is set at five per cent.
[68] The respondent shall pay the appellants’ costs of the appeal in the agreed upon all-inclusive amount of $15,000. The parties have also agreed that the amount of costs awarded at trial shall now be to the appellants, payable by the respondent.
Released: August 15, 2024 “L.B.R.” “L.B. Roberts J.A.” “I agree. S. Coroza J.A.” “I agree. S. Gomery J.A.”
[1] Counsel for the appellant who appeared at the hearing was appointed to the bench while this decision was under reserve. The appellant subsequently filed a Notice of Change of Lawyer, naming Joni Dobson and Michael Hodgins.
[2] As the two appeals were heard together because of common issues respecting prejudgment interest, this decision is being released at the same time as our decision in Aubin v. Synagogue and Jewish Community Centre of Ottawa (Soloway Jewish Community Centre), 2024 ONCA 615.
[3] Dr. Zaitlen’s appeal from the jury verdict was heard on January 18, 2024, and on April 5, 2024, dismissed by this panel with costs of $25,000, with reasons reported at 2024 ONCA 243.
[4] The governing principles related to the legislative purpose of the interest scheme and the exercise of the court’s discretion under CJA apply to prejudgment and postjudgment interest, including the presumptive entitlement to interest at the statutory rates: see e.g., Apotex Inc. v. Wellcome Foundation Ltd., [2001] 1 F.C. 495 (C.A.), at para. 123, aff’d (on other grounds), 2002 SCC 77, [2002] 4 S.C.R. 153.
[5] That was the defined interest rate provided for under s. 36(1) of the now repealed Judicature Act, R.S.O. 1980, c. 223.
[6] See Bank of Canada, “About financial markets” (last visited 8 August 2024), online: https://www.bankofcanada.ca/markets/about-financial-markets/#:~:text=and%20foreign%20exchange.-,They%20are%20one%20of%20the%20three%20elements%20of%20Canada%27s%20financial,achieve%20its%20monetary%20policy%20objectives.
[7] See Bank of Canada, “Consumer price index” (last visited 8 August 2024), online: https://www.bankofcanada.ca/rates/price-indexes/cpi.
