In the decision of El-Khodr v Lackie 2015 ONSC 4766, the court decided that from January 1, 2015 onward, prejudgment interest will be calculated at the bank rate as opposed to the rate of 5% pursuant to Rule 53.10 of the Rules of Civil Procedure (the “Rules”). However, all actions beginning prior to January 1, 2015 will be subject to the prejudgment interest rate of 5%.
The court came to this conclusion after deciding that the amendment to s.258.3 of the Insurance Act R.S.O. 1990 C. I. 8 (“Insurance Act”), which modifies section 128 of the Courts of Justice Act (CJA) with respect to motor vehicle accidents, was a substantive amendment. The amendment states that in actions involving personal injury or death arising either indirectly or directly from the use or operation of a motor vehicle, prejudgment interest will be calculated according to subsection 128(1) and not subsection 128(2) of the CJA.
Subsection 128(1) of the CJA provides that prejudgment interest will be calculated at the bank rate. Subsection 128(2) of the CJA states that the rate of prejudgment interest will be 5% pursuant to Rule 53.10 of the Rules of Civil Procedure. In interpreting legislation, substantive amendments are applied from the date the amendment came into effect, and do not apply retroactively. Therefore, in this case, since the action was started before the amendment came into effect; the plaintiff was entitled to claim prejudgment interest at the rate of 5% as opposed to the bank rate.
This decision is significant because the court overturned its decision in Cirillo v Rizzo where the court had ruled that the amendment to s.258.3 of the Insurance Act was a procedural amendment and should be applied retroactively. As a result, on all actions starting before January 1, 2015, plaintiffs can still claim prejudgment interest at a rate of 5% pursuant to Rule 53.10.
The key issue in this case was:
1) What is the applicable rate of prejudgment interest with respect to the award for past income loss?
1) The applicable rate of prejudgment interest for actions beginning before January 1, 2015 will be 5% pursuant to Rule 53.10. Prejudgment interest for actions starting after January 1, 2015 will be calculated at the bank rate as prescribed by S.128 of the CJA.
The Amendment to the Insurance Act
Subsection 128(1) of the CJA creates a presumptive entitlement to prejudgment interest. Subsection 128(2) states that for non-pecuniary losses in a personal injury action, the rate shall be determined by the rules of the court. The term “rules of the court” means Rule 53.10 of the Rules. Rule 53.10 provides for an interest rate of 5% per year.
On January 1, 2015, the Insurance Act was amended to include section 258.3(8.1). This section stated that, in an action for loss or damage from bodily injury or death, either directly or indirectly from the use or operation of a motor vehicle, interest shall be awarded under subsection 128(1) of the CJA, not subsection 128(2). As a result, plaintiffs will no longer be able to claim prejudgment interest at a rate of 5% pursuant to Rule 53.10.
The issue then became, if a case is ongoing, which interest rate will apply? Is the amendment retroactive?
The Amendment to the Insurance Act was Substantive; therefore it cannot be Applied Retroactively
In its decision, the court quoted sections from Tolofson v Jensen; Lucas (Litigation Guardian of) v Gagnon on the difference between substantive law and procedural law.
Substantive law “creates rights and obligations and is concerned with the ends which the administration of justice seeks to attain.” It also “regulates the conduct of the courts and litigants in respect of the matters litigated.”
Procedural law “is the vehicle providing the means and instruments by which those ends are attained. It regulates the conduct of courts and litigants in respect of litigation.”
The court found prejudgment interest to be substantive because it is a right conferred upon plaintiffs by the CJA. Prejudgment interest also regulates the conduct of the courts and litigants in respect of the matters litigated. The court drew a distinction between its ability to reduce or deny prejudgment interest, to its ability to award costs. Subsection 131(1) (the Rule on costs) of the CJA does not create a presumptive right to costs. Instead, it provides the court with the discretion to award costs or not. In addition, costs are a vehicle to regulate litigants in respect of litigation, as opposed to the matters litigated.
The CJA creates a right to prejudgment interest. Since prejudgment interest is a right conferred on plaintiffs by the CJA, then an amendment to that right is a substantive amendment. Since substantive amendments cannot be applied retroactively, the rate of 5% interest will continue to apply to all actions started before January 1, 2015, when the amendment came into effect.