COURT OF APPEAL FOR ONTARIO

DATE: 20240815

DOCKET: COA-23-CV-0806

Roberts, Coroza and Gomery JJ.A.

BETWEEN

Doris Aubin and Aimee Zweig Plaintiffs (Appellants)

and

Synagogue and Jewish Community Centre of Ottawa operating as Soloway Jewish Community Centre, John Doe Inc. and Jane Doe Maintenance Inc. Defendants (Respondents)

Counsel: Joseph Y. Obagi and Elizabeth A. Quigley, for the appellants Joseph Lin and Riley McIntyre, for the respondents

Heard: January 19, 2024

On appeal from the order of Justice Heather J. Williams of the Superior Court of Justice, dated June 30, 2023, with reasons reported at 2023 ONSC 3926.

Roberts J.A.:

A. Overview

[1] This appeal turns on the correct analytical approach to the application of the five per cent presumptive prejudgment interest rate on non-pecuniary damages 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 court’s discretion under ss. 130(1) and (2) of the CJA to deviate from the presumptive prejudgment interest rates for both non-pecuniary and past pecuniary losses under ss. 127(1) and 128(1), (2) and (3) [1] of the CJA.

[2] This appeal was heard together with the appeal in Henry v. Zaitlen, 2024 ONCA 614 because both appeals involved overlapping issues concerning prejudgment interest. My analysis of the trial judge’s reasons in this case should therefore be read in conjunction with my reasons in Henry, 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.

[3] On January 2, 2015, the appellant, Doris Aubin, suffered a serious head injury when she fell on the premises owned by the respondent, Synagogue and Jewish Community Centre of Ottawa operating as Soloway Jewish Community Centre. On November 18, 2022, following an approximately five-week jury trial, the appellants were awarded total damages of $3,602,839.83 (after a five per cent deduction for contributory negligence). Of that amount, $216,000 represented Ms. Aubin’s non-pecuniary damages for pain and suffering and $665,595 was awarded as her past pecuniary damages. Her spouse, Aimee Zweig, was awarded non-pecuniary damages of $85,000 under s. 61 of the Family Law Act, R.S.O. 1990, c. F.3, for loss of care, guidance, and companionship (the “FLA damages”). The balance of the jury’s award was for future losses.

[4] The only issue on this appeal is the trial judge’s prejudgment interest order with respect to the jury’s awards of non-pecuniary damages for personal injury and past pecuniary damages. The trial judge ordered prejudgment interest payable on the jury’s awards for non-pecuniary damages at a rate of 1.3 per cent and on past pecuniary damages at a rate of 0.8 per cent. The trial judge allowed the respondents’ motion to deviate from the presumptive five per cent statutory prejudgment interest rate for non-pecuniary damages and dismissed the appellants’ cross-motion to set prejudgment interest on their awards for both non-pecuniary and past pecuniary damages at 8.46 per cent based on their evidence of the rate of return earned by the respondents’ insurer and their own investments’ rates of return.

[5] For the reasons that follow, I agree that the trial judge erred in her approach to setting the prejudgment interest rates and in the exercise of her discretion. The trial judge’s order was the product of analytical error: she failed to give effect to the statutory presumption of the five per cent prejudgment interest rate for non-pecuniary damages; she misconstrued the purpose of non-pecuniary damages as covering future as well as past losses; and she misinterpreted and allowed the criterion of prejudgment interest rates to overwhelm her analysis to the exclusion of all the relevant criteria under s. 130(2) of the CJA that she was required to consider, including that she gave no weight to relevant evidence of the interest earned by the respondents’ insurer and the interest earned by the appellants on their investments.

[6] I would therefore allow the appeal.

B. Background

[7] On January 2, 2015, Ms. Aubin attended the respondents’ premises. She slipped as a result of a worn and peeling anti-slip strip and fell down the stairs. She suffered a serious head injury. She was 47 years old at the time of the accident and employed as a lawyer in a senior government position. Her spouse, Ms. Zweig, has been her primary caregiver. Since Ms. Aubin’s accident, Ms. Zweig has been managing both her own and Ms. Aubin’s finances, including their respective investment portfolios.

[8] Liability and damages were both at issue at the trial before a judge and jury. Following a five-week trial, the jury found the respondents 95 per cent liable for Ms. Aubin’s accident and her injuries and held Ms. Aubin five per cent contributorily negligent. The jury awarded the appellants total damages of $3,602,839.83 (after a five per cent deduction for contributory negligence), which consisted of the following categories:

1. For Ms. Aubin: a. $1,833,210.38 – future loss of income; b. $216,000 – non-pecuniary general damages for pain and suffering; c. $25,094.09 – out-of-pocket expenses; d. $640,501 – past loss of income; e. $16,442.50 – future medication and assistive devices; f. $281,189 – future professional services; g. $636,193 – future personal support services; and h. $58,833 – future housekeeping and home maintenance services.

2. For Ms. Zweig: a. $85,000 – non-pecuniary FLA damages for loss of care, guidance, and companionship.

[9] Following the jury verdict, the parties brought competing motions asking the trial judge to exercise her discretion under s. 130 of the CJA with respect to setting of the prejudgment interest rate: the respondents sought to reduce the five per cent prejudgment interest rate on the appellants’ non-pecuniary damages to 1.3 per cent; and the appellants requested that prejudgment interest on the awards of non-pecuniary and past pecuniary damages be set at 8.46 per cent.

[10] The trial judge determined that “[w]hether filed under changes in market interest rates under s. 130(2)(a), or any other relevant consideration under s. 130(2)(g) [of the CJA], the most relevant factor in this case is … that the prejudgment interest rates from the date of Ms. Aubin’s fall to the date of the jury’s award have been well below five per cent.”

[11] The trial judge did not give effect to the appellants’ arguments that the prejudgment interest rates under ss. 128(1) and (2) of the CJA do not overcompensate or even fully compensate the appellants because prejudgment interest is simple not compound interest. She concluded that the jury’s awards for non-pecuniary damages for both appellants compensate for future, as well as past losses.

[12] The trial judge also rejected the appellants’ argument that five per cent interest on non-pecuniary damages could not result in overcompensation. The appellants based their argument on the unchallenged evidence that from the date of Ms. Aubin’s fall to the date of the jury verdict, the respondent’s insurer had earned an average annual rate of return of 12.99 per cent on its investments. In particular, she found that the appellants’ evidence of the insurer’s rate of return was “irrelevant” to her analysis, relying on what she summarized as the observation by Valin J. in Pilon v. Janveaux, [2001] O.T.C. 251 (Sup. Ct.) (“Pilon 2001”), 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”.

[13] The trial judge declined to take into account the appellants’ evidence of the combined weighted average of the rates of return on their investments of 8.46 per cent. First, she reasoned that “prejudgment interest, while intended to compensate a plaintiff, is not intended to match market interest rates or the return a plaintiff might earn in an investment portfolio.” Second, she dismissed the appellants’ submission that it was appropriate to consider a “weighted” average return rate based on both of their investment portfolios and noted that the rate of return on Ms. Aubin’s portfolio was well below 8.46 per cent.

[14] With respect to prejudgment interest on non-pecuniary damages, the trial judge reviewed the legislative history of the rationale behind the setting of the five per cent interest rate. She relied on the observation of Matheson J. in Awan v. Levant, 2015 ONSC 2209, at para. 27, that the trial judge stated was “applied” by this court in Macleod v. Marshall, 2019 ONCA 842, 148 O.R. (3d) 727, which she interpreted was “to the effect that the mischief that gave rise to s.128(2) has not been served by a five per cent rate, given the interest rate climate.”

[15] The trial judge concluded that it was therefore just in the circumstances of this case to exercise her discretion to reduce the five per cent prejudgment interest rate. She effectively equated the prejudgment interest rate under s. 127(1) as the market interest rate: she determined that the average of the prejudgment interest rates for pecuniary damages under s. 127(1) from the time of Ms. Aubin’s accident to the date of the jury verdict was 1.175 per cent and found the proposed 1.3 per cent rate was reasonable. She reduced the five per cent interest rate on the appellants’ non-pecuniary damages to 1.3 per cent.

[16] As a result of her conclusions regarding the prejudgment interest rates over the relevant period and her rejection of the appellants’ evidence concerning the rates of returns on their investment portfolios and the rates of return earned by the respondent’s insurer, the trial judge was not persuaded that it would be just to increase the prejudgment interest rate on non-pecuniary damages beyond 1.3 per cent nor increase the prejudgment interest on past pecuniary damages above the 0.8 per cent prejudgment interest rate extant at the time the appellants’ action was commenced.

C. Issues

[17] The appellants submit that the trial judge made several reversible errors that I would summarize as follows:

1. 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; and
2. She misinterpreted some factors and failed to consider other relevant factors under s. 130(2) of the CJA that she was required to take into account, as well as she 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.

[18] The appellants submit that the trial judge’s prejudgment interest order should be set aside and that the prejudgment interest rate for the appellants’ pecuniary and non-pecuniary losses should be set at 8.46 per cent or such other variation that is just. Alternatively, the rates should be set in accordance with their respective default rates under the CJA.

[19] The respondents argue that the appellants have identified no reversible error of law or palpable and overriding error that would justify appellate interference with the trial judge’s discretionary order. They maintain that the trial judge correctly referenced and applied the statutory framework under the CJA and the Rules in accordance with the governing principles from the case law that govern an award of prejudgment interest. They submit that the appeal should be dismissed.

D. Analysis

(1) Standard of Review

[20] This court in MDS Inc. v. Factory Mutual Insurance Company, 2021 ONCA 594, 465 D.L.R. (4th) 294, at para. 24, leave to appeal refused, [2021] S.C.C.A. No. 382, adopted as the standard of appellate review of a judge’s exercise of discretion under s. 130 of the CJA the following passage from Krieser v. Garber, 2020 ONCA 699, 70 C.C.L.T. (4th) 40, at para. 46:

The court will only interfere with the exercise of discretion if it was based on an error of law (determined on a correctness standard), a palpable and overriding error of fact, the consideration of irrelevant factors or the omission of factors that ought to have been considered, or if the decision was unreasonable in the sense that it is not compatible with the judicial exercise of discretion. [Citations omitted.]

[21] In particular, errors of law include the misinterpretation and misapplication of the correct analytical framework and governing principles, the consideration of irrelevant factors, or the omission of factors that ought to have been considered: British Columbia (Minister of Forests) v. Okanagan Indian Band, 2003 SCC 71, [2003] 3 S.C.R. 371, at para. 43.

[22] As I shall explain, there are several analytical flaws in the trial judge’s reasoning that affect her conclusions. These are errors of law. As a result, no deference is owed to her order.

(2) Presumptive statutory prejudgment interest rates and exercise of discretion

[23] The trial judge began her analysis by correctly noting that s. 128 of the CJA “contemplates two default rates of prejudgment interest” – the prejudgment interest rate under s. 128(1) for pecuniary damages and the exception to s. 128(1) under s. 128(2), the five per cent prejudgment interest rate for non-pecuniary damages for personal injury. She also noted her discretion under s. 130(1) to deviate from the default rates where “it is just to do so” in accordance with the factors set out in s. 130(2) of the CJA.

[24] While properly instructing herself, the trial judge erred by misapplying the statutory prejudgment interest rate presumption with respect to non-pecuniary damages and, with respect to prejudgment interest on past pecuniary and non-pecuniary damages, by failing to consider all relevant factors under s. 130(2) of the CJA required to exercise her discretion under s. 130(1) in accordance with correct principles. As a result, she erred by lowering the presumptive five per cent prejudgment interest on the award of non-pecuniary damages and by failing to increase the prejudgment interest rates on the awards of non-pecuniary and pecuniary damages.

(a) Governing statutory provisions and legal principles

[25] I start with a review of the relevant provisions of ss. 128(1)-(2) and 130(1)-(2) of the CJA, and r. 53.10 of the Rules, including the legislative purpose and policy underlying them. I then turn to the governing approach articulated in the case law to the treatment of prejudgment interest and the exercise of the court’s discretion to deviate from the presumptive prejudgment interest rates.

[26] Section 128(1) of the CJA sets out the presumptive entitlement to prejudgment interest:

A person who is entitled to an order for the payment of money is entitled to claim and have included in the order an award of interest thereon at the prejudgment interest rate, calculated from the date the cause of action arose to the date of the order.

[27] Under s. 127(1) of the CJA, “prejudgment interest” is defined 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”. In accordance with s. 127(2), the prejudgment interest rates are determined and published in a table by the Ministry of the Attorney General. At the relevant time, the prejudgment interest rate applicable to past pecuniary damages was 0.8 per cent.

[28] Section 128(2) of the CJA stands as an exception to s. 128(1). It provides for the application of a set rate of interest to non-pecuniary loss on personal injury:

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.]

[29] The rate determined by the rules of court is set out under 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.”

[30] The presumptive statutory entitlement 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:

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.]

[31] Doherty J.A., writing for this court, in Graham v. Rourke, [1991] 75 O.R. (2d) 622 (C.A.), at p. 627, set out the correct approach to the exercise of the court’s discretion under s. 130 of the CJA:

Reviewing the trial judge's exercise of his discretion as to the prejudgment interest rate, I begin from the premise that a party is prima facie entitled to pre-judgment interest at the rate prescribed in ss. [127] and [128] of the Act. The onus is on the party seeking a higher or lower rate to justify a deviation from that “presumptive rate” [Emphasis in original. Citations omitted.]

[32] A party’s prima facie entitlement to a presumptive statutory prejudgment interest rate does not amount to an absolute or a vested entitlement to the presumptive rate: Cobb v. Long Estate, 2017 ONCA 717, 416 D.L.R. (4th) 222, at paras. 85, 90. However, it sets up a rebuttable presumption that should only be deviated from where the party seeking a higher or lower rate demonstrates 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: Agribrands Purina Canada Inc. v. Kasamekas, 2011 ONCA 460, 106 O.R. (3d) 427, at para. 74; Tuffnail v. Meekes, 2020 ONCA 340, at para. 113. Each factor informing the exercise of the court’s discretion need not, by itself, amount to unusual or special circumstances, so long as the court is satisfied that, in considering the relevant circumstances as a whole, there are unusual or special circumstances. The rationale for the rebuttable presumption and onus is that prejudgment interest should be viewed as part of the compensation due to the plaintiff: see Irvington Holdings Ltd. v. Black (1987), 58 O.R. (2d) 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 v. Fournier (2002), 60 O.R. (3d) 225 (C.A.), at para. 23.

[33] The establishment of a presumptive prejudgment interest rate scheme represents the will of the legislature to establish a coherent scheme that sacrifices perfection “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 et al. v. Peel (Regional Municipality) et al., [1994] 66 O.A.C. 137 (C.A.), 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.

[34] Given that the statutory interest scheme represents the will of the legislature, it is not open to the courts to depart from it except where it is just to do so. 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 prejudgment interest.” Rather, the court’s discretion is informed by the mandatory list of factors under s. 130(2) that must be taken into account: MDS Inc., at para. 24. Section 130(2) of the CJA provides as follows:

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.]

[35] A plain reading of the factors under s. 130(2) reveals the legislative intention that the court’s exercise of its discretion under s. 130(1) must be a balanced one, based on the wide consideration of justice and not curtailed by any one particular factor. The specified factors go beyond a mathematical calculation and comparison of market interest rates, and, as I discuss in more detail below, of prejudgment interest or bank rates as defined under the CJA. They seek to animate in a measured consideration of all relevant factors the question of overall fairness as reflected in the legislative policy and purposes underlying these provisions.

(b) Did the trial judge err in her treatment of the presumptive five per cent prejudgment interest rate for non-pecuniary damages?

[36] The trial judge did not correctly apply the presumptive five per cent prejudgment interest rate for non-pecuniary damages. She therefore did not properly give effect to the onus on the respondents to demonstrate with appropriate evidence that it was “just” to decrease the presumptive five per cent prejudgment interest rate.

[37] Rather, the trial judge mistakenly relied on criticisms in the Ontario Law Reform Commission, Report on Compensation for Personal Injuries and Death (Toronto: Ministry of the Attorney General, 1987) and obiter remarks in Awan, at para. 27, [2] that “the mischief” that gave rise to the five per cent rate prescribed under s. 128(2) of the CJA and r. 53.10 of the Rules “was no longer being served by a five per cent rate given the interest rate climate”, to justify departing from the statutory presumption established by the legislature.

[38] Respectfully, the trial judge misinterpreted the reference to Awan in MacLeod, at paras. 45-46, as meaning that this court effectively determined that the five per cent rate could be ignored as no longer relevant given the fluctuations in interest rates. MacLeod does not stand for that conclusion. In MacLeod, this court reiterated that relevant factors under s. 130(2) had to be considered in the court’s exercise of its discretion and that the trial judge in that case therefore erred by failing to look at changes in market interest rates.

[39] 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.” To the extent that the trial judge exercised her discretion on the erroneous principle that she was no longer bound by the plain language of s. 128(2) and r. 53.10 of the Rules, she erred.

(c) Did the trial judge fail to consider relevant factors under s. 130(2) of the CJA while relying on irrelevant factors?

[40] The trial judge correctly instructed herself that she was required to look at the factors under s. 130(2) of the CJA. However, she failed to do so because her focus remained fixed on prejudgment interest rates to the exclusion of the other applicable criteria under s. 130(2) that she was required to consider and led her to reject the relevant rates of interest earned by the appellants on their investment portfolios, as well as the rate of return enjoyed by the respondent’s insurer, during the relevant period. This erroneous approach affected her consideration of prejudgment interest on past pecuniary and non-pecuniary damages.

[41] With respect to her consideration of non-pecuniary damages, the trial judge’s concern about overcompensation of the appellants because of the lower range of prejudgment interest rates at the relevant period compared to the five per cent presumption is an analytical error and ignores the legislative policy underlying s. 128(2) of the CJA.

[42] Interest rate fluctuations are well known to the legislature. It has nonetheless chosen to leave the five per cent presumptive rate in place for non-motor vehicle accident personal injury claims. As this court observed in Ben-Israel v. Vitacare Medical Products Inc. et al. (1999), 122 O.A.C. 57 (C.A.), 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 pre-judgment interest period there necessarily will be some element of over (or under) compensation. [Emphasis added.]

[43] This court, in Andani, at para. 17, a decision cited to by the trial judge although not on this point, criticized the same argument advanced by the respondents and accepted by the trial judge that there is a risk of overcompensation where there have been fluctuations in interest rates. The court in Andani noted that the interest scheme does not fully compensate a plaintiff or measure the costs of delay:

To achieve full compensation, an award of damages must include prejudgment interest in an amount which will compensate the plaintiff for the loss of use and the loss of value of a monetary award until it is paid. The statutory scheme for prejudgment interest does not provide for the payment of compound interest. There is no doubt that compound interest would more accurately compensate a plaintiff, or as it was put by the British Columbia Law Reform Commission “… more accurately measure the costs of delay to a successful plaintiff”. [Citations omitted.]

[44] In her consideration of prejudgment interest on non-pecuniary damages, the trial judge ignored the fact, referenced and relied upon in her consideration of past pecuniary damages, that prejudgment interest does not generally provide full compensation for a plaintiff because it only provides for simple interest.

[45] The trial judge’s analysis was further affected by her conclusion that “there is no doubt that the jury’s awards for non-pecuniary damages for both [appellants] compensate for future, as well as past losses”. This conclusion runs contrary to this court’s clear determination of the same issue in Spencer v. Rosati et al. (1985), 50 O.R. (2d) 661, at pp. 665-66:

With respect to the second ground, that is, the one that gives effect to the appellant’s enduring part of the pain and suffering after the date of fixing the damages, we think that this introduces an unnecessary complexity into the determination of interest which is at odds with the terms of the legislation. Even if part of a judgment for non-pecuniary loss is notionally to cover the future our law requires a single, once and for all, payment to be made now. We see no warrant for extending judicially the policy set forth in s. 36(5)(d) [of the Judicature Act, R.S.O. 1980, c. 223, now s. 128(4)(d) of the CJA] respecting future pecuniary loss.

[46] Further, this court’s decision in Borland v. Muttersbach (1986), 53 O.R. (2d) 129 (C.A.), at pp. 146-47, citing to and following the above noted passage from Spencer, expressly rejected the trial judge’s erroneous conclusion here that awards of non-pecuniary damages include compensation for future losses. This court approved the trial judge’s rejection in Borland of the same proposition that “non-pecuniary damages in a case of serious personal injuries are designed to provide solace in the future and to that extent are damages for future pecuniary loss.”

[47] The trial judge’s focus on overcompensation caused her to lose sight of the other purposes of prejudgment interest and neglect the other criteria under s. 130(2) of the CJA in relation to both past pecuniary and non-pecuniary damages.

[48] In Kinbauri Gold Corp. v. Iamgold International African Mining Gold Corp. (2004), 192 O.A.C. 24 (C.A.), at para. 120, this court reiterated that “the legislature’s policy in providing for the payment of pre-judgment interest is intended to encourage early settlements and the timely compromise of litigation”. Those purposes are reflected in the other factors under s. 130(2), as, for example, in s. 130(2)(c) “the fact that an advance payment was made”.

[49] The balanced concept of fair compensation to a plaintiff by the payment of prejudgment interest is illustrated by the consideration of one of the other purposes of prejudgment interest, namely, to deprive the wrongdoer “of a windfall benefit he would otherwise receive” because of the use of monies that should have been paid to the plaintiff: Apotex Inc. v. Wellcome Foundation Ltd., [2001] 1 F.C. 495 (C.A.), at para. 122. As this court observed, respecting this purpose, 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. [Emphasis added.]

[50] The trial judge’s narrow focus on prejudgment interest rates and her failure to consider all the applicable factors in s. 130(2) in deciding what was just in the circumstances “were not in accordance with a full and balanced application of the factors set out in s. 130(2) and amounted to an error of law”: Pilon v. Janveaux (2006), 211 O.A.C. 19 (C.A.), at para. 31.

(d) Changes in market interest rates

[51] The trial judge also erred in her consideration of what “market interest rates” mean and are. This error affected her treatment of prejudgment interest on past pecuniary and non-pecuniary damages.

[52] In basing her consideration on an average of prejudgment interest rates for pecuniary damages under s. 127(1) of the CJA, the trial judge effectively equated “market interest rates” with prejudgment interest rates for pecuniary damages, without explaining why she made that determination and without any evidence or agreement that “market interest rates” equal “prejudgment interest rates”. The trial judge’s approach represents analytical error. She failed to engage in the requisite statutory analysis and made a determination without the necessary evidentiary foundation.

[53] Interpreting “market interest rates” to mean prejudgment interest rates or bank rates does not conform with the plain meaning of the prejudgment interest provisions of the CJA, the object, or the legislative intention with respect to these provisions, as is required under the modern rules of statutory interpretation: 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.

[54] “Prejudgment interest rate” and “bank rate” are defined terms under the CJA. As I earlier noted, “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 the banks listed in Schedule I to the Bank Act (Canada).”

[55] Unlike “prejudgment interest rate” and “bank rate”, “market interest rates” is not defined under the CJA. Notably, “market interest rates” is not defined as either “prejudgment interest” or “bank rate”. Had the legislature intended to do so, it would have been a very simple definition to enact. Moreover, it is logical that the term remains undefined given that the ordinary meaning of “market interest rates” under s. 130(2) signifies simply the interest rates available in the market. This is made plain by the French version of the term: “taux d’intérêt au marché”. As such, unlike “prejudgment interest rate” or “bank rate”, the legislature clearly intended “market interest rates” to bear a broad meaning not necessarily defined by reference to any particular index.

[56] This interpretation was reached by the court 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 “change 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”.

[57] The court in Triten, at p. 412, also held that the onus is on the person relying on a change in market interest rates to lead evidence relating to them. The trial judge cannot simply take judicial notice of what market interest rates are. They depend on the circumstances.

[58] I am not persuaded by the respondents’ submission that this court has held that the rates under ss. 127 and 128 of the CJA are determinative or indicative of the meaning of “market interest rates” under s. 130(2)(a) of the CJA. I do not read this court’s decision in Tuffnail as supporting the respondents’ proposed interpretation. This court did not define “market interest rates” under s. 130(2)(a) as meaning “prejudgment interest” rates under s. 127(1) of the CJA. Rather, in Tuffnail, at para. 102, without referencing any agreement or evidence, the court merely stated as a factual finding that “market rates never fluctuated above the 1.3 per cent default rate during the litigation.” Similarly, this court in MacLeod was not asked to and did not interpret or define “market interest rates” as meaning “prejudgment interest rates”. No issue was taken with respect to the 1.3 per cent interest rate requested for the purposes of determining whether the presumptive five per cent rate should be departed from.

[59] Here, in the absence of evidence or an agreement that prejudgment interest rates equated to market interest rates, the trial judge erred in holding that they were equivalent. She therefore proceeded on a wrong principle in exercising her discretion to lower the presumptive interest rate on non-pecuniary damages and in rejecting the appellants’ request to raise the rates on the awards of non-pecuniary damages and past pecuniary damages.

[60] The trial judge further erred in principle by rejecting the evidence concerning the rates of interest earned by the respondents’ insurer from 2015 to 2022. She erroneously relied on obiter comments from Pilon 2001, at para. 9, which she summarized as “large corporations achieve higher returns than individual investors, and market rates may vary depending on the amount available to be invested or borrowed.”

[61] First, the trial judge misconstrued and went farther than the actual statement made by Valin J. in Pilon 2001, at para. 9, is: “In any event, I am reasonably confident that few if any individual investors can match the rate of return achieved by large corporations on their investments.” This is not a finding but an expression of opinion that has no evidentiary foundation but merely repeats a submission made by counsel.

[62] Similarly, there was no evidence before the trial judge here to support her conclusion that “large corporations achieve higher returns than individual investors” nor could the trial judge treat this as a notorious fact about which it was permissible for her to take judicial notice: 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. For one thing, it ignores the benefits achieved for individual investors in pooled investments such as mutual funds. In any event, her conclusions are contrary to the evidence of the appellants that demonstrated that Ms. Zweig’s personal rates of return on her investment portfolio approached the institutional rate of return enjoyed by the respondents’ insurer, with a yearly average rate of return since January 1, 2013, of 9.53 per cent.

[63] It was an error in principle for the trial judge to reject as irrelevant the consideration of the benefits that accrued to the respondents’ insurer by retaining the monies that should have been paid to the appellants. This was a relevant factor in this case that should have been taken into account in the trial judge’s consideration of the overall justice of the case. Fairness requires the court to look at myriad factors, including the legislative purpose of the prejudgment interest scheme earlier referenced to deprive the wrongdoer of the use of the monies that should have been paid to the plaintiff.

[64] Finally, the trial judge’s rejection of the appellants’ rationale behind the proposed weighted average of the rate of return on their investment portfolios was unreasonable and reflected a misunderstanding of the appellants’ position. The appellants’ fundamental argument for a higher prejudgment interest rate was that they could have invested the damages ultimately awarded at a much higher rate than the presumptive prejudgment interest rates of five per cent or 0.8 per cent. In support of their position, they proffered the only evidence of market interest rates during the relevant time period from the date of the accident to the date of the jury verdict that was before the trial judge, which rates were not challenged by the respondents: the actual averaged 12.99 per cent rate of return earned by the respondents’ insurer and the actual rates of return earned by the appellants on their respective investment portfolios.

[65] The trial judge misunderstood Ms. Zweig’s evidence about the investment of the funds. Ms. Zweig did not state that the funds would have been invested in Ms. Aubin’s RRSP account, which, as the trial judge noted, yielded a lower rate of return that Ms. Zweig’s investments. After stating that the average rate of return of their portfolios was 8.46 per cent, she simply stated that they would have invested them in “a similar manner”. Given that it would be Ms. Zweig who would invest them, and the far higher rates of return earned by Ms. Zweig on her investment portfolio, the only fair inference that makes sense is that the monies would have been put into comparable investments that yielded the same or near the rates of return earned by Ms. Zweig on her investment portfolio.

[66] As a result of the trial judge’s analytical errors, her order must be set aside, and the analysis conducted afresh.

(3) Should the court exercise its discretion under s. 130(1) of the CJA in the circumstances of this case?

[67] I turn finally to the question of whether this court should exercise its discretion under s. 130 of the CJA to reduce the five per cent presumptive rate on the appellants’ non-pecuniary damages as requested by the respondents, or to increase the presumptive five per cent rate on the appellants’ non-pecuniary damages and 0.8 per cent rate on Ms. Aubin’s past pecuniary damages.

[68] Under s. 134(1)(a) of the CJA, this court may “make any order or decision that ought to or could have been made by the court…appealed from”. In my view, this court should do so here. The record and arguments of the parties allow this court to determine the prejudgment interest issues in this case, there are no genuine issues of credibility or fact requiring a trial, and it is not in the interests of the parties to return these issues to the trial judge for further determination.

[69] The respondents have not met their onus to demonstrate that it would be just to reduce the five per cent presumptive rate on the appellants’ non-pecuniary damages. They have not provided any evidence of any special circumstances that would justify departing from the presumptive rate of five per cent. They rely solely on the prejudgment interest rates as representative of the “changes in market interest rates” criterion under s. 130(2)(a) of the CJA, and they do not argue that any of the other factors under s. 130(2) favour a reduction. They have not provided any evidence as to what the market interest rates were during the relevant time period or whether there were the kind of material fluctuations that, taken with the other factors under s. 130(2), would warrant departing from the presumptive rate. Reducing the five per cent presumptive rate in these circumstances would hardly be consonant with the statutory interest scheme’s purposes to, for example, encourage advance payments and early settlement of claims as reflected in s. 130(2) of the CJA.

[70] On the contrary, as I shall explain in the following paragraphs, I conclude that, having regard to the factors under s. 130(2) of the CJA, the appellants have met their onus to demonstrate that there are special circumstances and that it would be just in the circumstances of this case to increase the presumptive prejudgment interest rates on their awards of non-pecuniary and past pecuniary damages.

[71] It was not argued and there is no evidence before us that the appellants did anything to extend or delay the litigation timeline or that they failed to produce medical evidence. Nor is there any evidence that the respondents sought to make an advance payment or expedite the proceedings: as far as can be gleaned from the record before us, the respondents appear to have chosen to fully contest liability and damages, as they were entitled to do, including contesting in their statement of defence that Ms. Aubin slipped at the property as alleged, and denying any negligence, act, or omission. Those were tactical decisions in these proceedings that were open to the respondents and their insurer to make. However, they weigh against the respondents in the consideration of whether it is just to lower or raise the presumptive rates.

[72] The appellants’ unchallenged evidence of the actual averaged rate of return enjoyed by the respondents’ insurer during the relevant time period and the actual rates of return earned by the appellants on their investment portfolios show that the average available market interest rates were about double the presumptive rates during the relevant period. Specifically, the average rate of return enjoyed by the insurer was over two times the five per cent presumptive rate on non-pecuniary damages and over 10 times the 0.8 presumptive rate on past pecuniary damages. The respondents’ insurer had the benefit of the use of the funds that were ultimately paid to the appellants to compensate and support Ms. Aubin. Based on the averaged rate of return, the insurer still retains a substantial benefit, even if the prejudgment interest rate is raised to 8.46 per cent as requested by the appellants.

[73] For the reasons earlier explained, I am persuaded that if available those funds could and would have been invested at comparable rates earned by Ms. Zweig.

[74] In my view, it is just in the circumstances of this case that the presumptive rates are not applied. I would therefore set the prejudgment interest rate on the appellants’ non-pecuniary damages and on Ms. Aubin’s past pecuniary loss at 8.46 per cent.

E. Disposition

[75] I would allow the appeal and set aside the trial judge’s prejudgment interest award. I would order that the prejudgment interest rate for the appellants’ non-pecuniary damages be set at 8.46 per cent and that the rate for Ms. Aubin’s past pecuniary damages be set at 8.46 per cent.

[76] If the parties cannot agree on the disposition of the costs of this appeal and the prejudgment interest motions below, they may make brief written submission of no more than two pages, plus a costs outline, within 10 days of the release of these reasons.

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] Section 128(3) of the CJA provides as follows: “If the order includes an amount for past pecuniary loss, the interest calculated under subsection (1) shall be calculated on the total past pecuniary loss at the end of each six-month period and at the date of the order.”

[2] Awan turned on the court’s primary determination that s. 128(2) did not apply to damages for defamation.