CITATION: Cirillo v. Rizzo, 2015 ONSC 2440
COURT FILE NO.: CV-07-0222-00
DATE: 20150415
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
ANTHONY CIRILLO
Plaintiff
- and -
JOHN RIZZO and 1643703 ONTARIO INC.
Defendants
Michael Walter, for the Plaintiff
David Zuber and Karim Hirani, for the Defendant
HEARD: March 24, 2015
ENDORSEMENT
MacKENZIE J.
Nature of the Proceeding
[1] The Plaintiff moves for judgment pursuant to an accepted offer to settle under Rule 49.09 of the Rules of Civil Procedure. The motion concerns the rate and calculation of prejudgment interest which attaches to the settlement amount of $50,000.00
[2] The question arises as a result of an amendment to the Insurance Act, R.S.O. 1990, c. I.8. This amendment came into force prior to the Plaintiff’s acceptance of the offer to settle. It had the effect of changing the rate of calculation of prejudgment interest.
[3] In short, the Plaintiff’s position is this amendment does not have retroactive application because it is substantive in nature whereas the Defendants’ position is that the amendment has retroactive application because it is procedural in nature.
Background
[4] On or about October 1, 2005, the parties were involved in a motor vehicle accident in which the Plaintiff, a pedestrian, was struck by a motor vehicle operated by the Defendant. The Plaintiff suffered damages as a result of the accident and initiated this action, serving a Statement of Claim on January 29, 2007.
[5] On or about March 24, 2014, the Defendant made an offer to settle pursuant to Rule 49. This offer included payment of the sum of $50,000 for all claims, plus prejudgment interest commencing from the date that the Notice of Claim was served, namely January 29, 2007 up to the date that the offer was accepted.
[6] On January 26, 2015, the Plaintiff accepted the offer. It is not in issue between the parties that the $50,000 settlement sum is entirely attributable to non-pecuniary loss.
[7] As noted above, on or about January 1, 2015 being about three weeks prior to the Plaintiff’s acceptance of the offer to settle, section 258.3(8.1) of the Insurance Act came into force. This amendment changed the rate at which prejudgment interest is calculated. The effect of this amendment is that it reduced the prejudgment interest rate by 0.5 percent. Accordingly, the prejudgment interest rate at the time the Notice of Claim was served was 5.0 percent per annum; the prejudgment interest rate effected by the January 1, 2015 amendment is 4.5 percent per annum.
The Applicable Law
[8] The legislative provisions dealing with prejudgment interest for non-pecuniary damages arising as a result of a motor vehicle accident are encompassed within the Courts of Justice Act, R.S.O. 1990 ch. C.43 (CJA), the Rules of Civil Procedure and the Insurance Act (as above).
[9] Section 128(1) of the CJA deals with entitlement to prejudgment interest in the following manner:
128(1) 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.
[10] The prejudgement interest rate for the purposes of section 128(1) is defined in section 127(1) in the following terms:
127(1) “Prejudgment interest rate” means 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 term “quarter” means the three month period ending with the 31^st^ day of March, the 30^th^ of June, the 30^th^ day of September or the 31^st^ day of December in each calendar year.
[11] An exception for calculating the rate of prejudgment interest for non-pecuniary losses is set out in subsection (2) of section 128 in the following terms:
128(2) 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 made under clause 66(2)(w).
[12] Section 128(2) of the CJA incorporates by reference the Rules of Civil Procedure (the Rules). The applicable provision in the Rules is Rule 53.10 which sets out the prejudgment interest rate for non-pecuniary damages as follows:
Rule 53.10 The prejudgment interest rate on damages for non-pecuniary loss in an accident for personal injury is 5 percent per year.
[13] Section 258.3(8) sets out the application of the above provisions in the context of motor vehicle accidents.
Section 258.3(8) In an action for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile, no prejudgment interest shall be awarded under section 128 of the Courts of Justice Act for any period of time before the Plaintiff served the notice under Clause (1)(b) [the notice referred to herein is the notice of intention to commence an action].
The combination of the foregoing provisions would result in a prejudgment interest rate of 5.0 percent for non-pecuniary losses incurred as a result of a motor vehicle accident, that rate being calculated from the time the Plaintiff served the Notice of Intention to Commence an Action.
[14] On January 1, 2015, as noted above, the Insurance Act was amended. And section 258.3(8.1) was introduced. Section 258.3(8.1) provides as follows:
Subsection 128(2) of the Courts of Justice Act does not apply in respect of the calculation of prejudgment interest for damages for non-pecuniary loss in an action referred to in subsection (8.1).
[15] As a result of the exclusion of section 128(2) of CJA as stipulated above, the default rate under section 128(1) applies. This requires that the prejudgment interest be calculated at the bank rate in effect at the end of the first day of the last month of the quarter preceding the quarter in which the proceeding was commenced. While section 128(1) stipulates that the prejudgment interest be calculated from the date the cause of action arose, section 258.3(8) of the Insurance Act limits the starting point for calculation to the date the Plaintiff served a notice of intention to commence the action.
[16] In this case, the Plaintiff served the Statement of Claim on January 29, 2007. The last day of the quarter preceding this quarter was December 31, 2006. Accordingly, the bank rate in effect at that time would apply and there is no dispute that the rate would have been 4.5 percent per annum.
The Plaintiff’s Position
[17] The central argument of the Plaintiff is that the amendment to the Insurance Act (section 258.3(8.1)) is substantive in nature, not procedural, and accordingly the amendment does not have retroactive effect. As a result of this argument, the Plaintiff contends the prejudgment interest rate should be calculated at the rate of 5.0 percent. A calculation at this rate results in a prejudgment interest sum of $19,975.00, arrived at by applying the 5.0 percent rate to the settlement sum of $50,000 for the period in question, that is, from January 29, 2007 to January 26, 2015, being a period of 8 years less 3 days or 7.99 years.
[18] In support of this position, the Plaintiff cites Somers v. Fournier, (2002) 2002 45001 (ON CA), 162 OAC 1. The Plaintiff contends that Somers has established that prejudgment interest is a matter of substantive law. The Plaintiff also cites the case of Skinner v. Royal Victoria Hospital (1995), 35 C.P.C. (3d) 290 (Ont. Gen. Div.). In Skinner the court (Somers J.) dealt with the interaction of the predecessor of section 128(2) CJA and Rule 53(10), which fixes the interest rate on prejudgment interest for non-pecuniary loss damages.
[19] The Plaintiff contends that the result arrived at by Somers J. in Skinner is that a legislative change to the prejudgment interest rate for damages for non-pecuniary loss in personal injury claims did not apply retroactively. In the result, it is the Plaintiff’s position that prejudgment interest in this case should be calculated on the basis of 5.0 percent per annum and not 4.5 percent per annum as stipulated in the January 1, 2015 amendment to the prejudgment interest rate.
The Position of the Defendant
[20] The Defendant submits that the section 258.3(8) amendment to the Insurance Act is procedural in nature and accordingly has retroactive effect. Based on this interpretation, counsel contends the prejudgment interest should be calculated at a rate of 4.5 percent per annum, which creates a prejudgment interest amount of $17,977.50.
[21] Counsel for the Defendant submits that the Somers case does not assist the Plaintiff. In this regard, counsel argues that the issue respecting prejudgment interest in Somers did not relate to the quantification of prejudgment interest but rather the entitlement to prejudgment interest.
[22] Counsel contends the Somers case drew a distinction between entitlement and quantification of heads of damages and held the former (entitlement) to be substantive in nature and the latter (quantification) to be procedural in nature. The court in Somers held that entitlement to prejudgment interest is a substantive right whereas a cap on prejudgment interest relating to the quantification of prejudgment interest is a procedural right in nature.
[23] In aid of this, counsel submits that section 258.3(8.1) of the Insurance Act deals with the quantification of prejudgment interest because it affects the calculation of the rate of prejudgment interest. In this regard, counsel argues that subsection (8.1) says:
(8.1) Subsection 128(2) of the Courts of Justice Act does not apply in respect of the calculation of prejudgment interest for damages for non-pecuniary loss in an action referred to in subsection (8) [action for loss arising out of bodily injury or death in the use or operation of an automobile].
[24] Counsel further notes that the provisions of subsection (2) of section 129 CJA:
Section 128(2) 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 in clause 66(2)(w). [emphasis added]
[25] Counsel contends that the Rules of Civil Procedure are the means or mechanism by which the end or objective inherent in a substantive right or obligation is conferred or imposed, as the case may be, and that Rule 53.10 is a procedural rule. The Defendant therefore submits that section 258.3(8.1) of the Insurance Act is amending a procedural rule, namely Rule 53.10 and thus the amendment in question is procedural in nature having retroactive effect.
[26] Counsel for the Defendant also distinguishes the Skinner case cited by the Plaintiff on the basis that in Skinner the court was dealing with an amendment to prejudgment interest where the amending statute specifically stated that the amendment “in question … appl[ies] to causes of action arising after the 23^rd^ of October 1989.” In this situation Somers J. ruled that this provision precluded any amendment to prejudgment interest from being applicable to causes of action arising prior to the date of October, 1989. Counsel for the Defendant points out that in the present case there is no such transitional provision. The legislature in passing the section 258.3(8.1) intended that the amendment did apply retroactively.
[27] In this regard, counsel for the Defendant submits that if the legislature had intended the amendment for calculation of prejudgment interest to only be applied to non-pecuniary losses out of motor vehicle accidents occurring after January 1, 2015, the legislature could have and would have included such a transitional provision as it did previously in the Skinner case. Further, inasmuch as the legislature chose not to do so, counsel submits the decision to not include such a transitional provision supports the Defendant’s position that the amendment to the calculation of prejudgment interest for damages for non-pecuniary loss arising from motor vehicle accidents is procedural in nature and thus applies to motor vehicle accidents which occurred prior to January 1, 2015. [See para 32, Defendant’s factum.]
Analysis
[28] The rationale as I perceive it of the Plaintiff’s position on the issue relating to the nature of the calculation of the interest rate for prejudgment interest is that if the entitlement to prejudgment interest set out in section 128(1) CJA and the case law interpreting is substantive in nature, it must be based on the fact that the substantive nature of the entitlement has paramountcy over the mechanism by which the entitlement to prejudgment interest is quantified or calculated.
[29] Although this rationale and the argument in support is theoretically attractive, I find no support for it in the governing case law.
[30] Both counsel have agreed that entitlement is a substantive right and as previously noted, they disagree as to whether or not the mechanism for quantifying that entitlement is substantive or procedural.
[31] I am of the view that the case law cited above supports the position of the Defendant. Using the metaphor of the ends or purpose (the substantive nature) in relation to the means by which the entitlement can be quantified (the procedural nature), I am of the view that the weight of authority favours the position of the Defendant. I am also of the view that on the basis of the above “means to an end” metaphor, it also favours the Defendant.
[32] In this regard, it is acknowledged that a reduction in the interest rate as happened here may work to the financial detriment of a Plaintiff, but also an increase in the interest rate for prejudgment interest could operate to the benefit of the Plaintiff.
[33] Given the legislative structure in play in this case, both the section 258.3(8.1) Insurance Act amendment and Rule 53.10, are not matters for the court to adjust on the windfall or not to a plaintiff, in the context of this motion.
Disposition
[34] The Plaintiff’s motion is dismissed. An order shall issue in the following terms:
Section 258.3(8.1) of the Insurance Act is procedural in nature and shall be applied retrospectively
The applicable prejudgment interest rate on the $50,000 is 4.5 percent calculated from January 29, 2007, the date of service of the Statement of Claim, to the date the Plaintiff accepted the Defendant’s offer to settle, January 26, 2015.
[35] As there appears to be no authority directly on point, this is not an appropriate case for costs.
MacKenzie J.
Released: April 15, 2015
CITATION: Cirillo v. Rizzo, 2015 ONSC 2440
COURT FILE NO.: CV-17-0222-00
DATE: 20150415
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
ANTHONY CIRILLO
Plaintiff
- and –
JOHN RIZZO and 1643703 ONTARIO INC.
Defendants
ENDORSEMENT
MacKenzie J.
Released: April 15, 2015