Key factor cited is that interest rates were far lower from time of accident to trial verdict
The impact of the Bank of Canada’s decision to steadily raise interest rates over the last 16 months has spilled into the courtroom, with an Ontario Superior Court of Justice judge ruling against two personal injury plaintiffs’ application to apply an 8.46 percent interest rate on pecuniary and non-pecuniary damage awards.
In the case of Aubin v Synagogue and Jewish Community Centre of Ottawa, the defendant, which operates as Soloway Jewish Community Centre, brought a motion for an order setting the prejudgment interest rate on non-pecuniary damages awarded to the plaintiffs by a jury on Nov. 18, 2022. It argued the rate should be 1.3 percent instead of the prescribed rate of five percent for prejudgment interest on non-pecuniary damages in actions for personal injury cases.
The plaintiffs responded with a cross-motion, asking that prejudgment interest on their awards for non-pecuniary and past pecuniary damages be set at 8.46 percent.
In the end, Justice Heather J. Williams granted the defendant’s motion and dismissed the plaintiffs’ cross-motion. She then ordered prejudgment interest on the jury’s awards for non-pecuniary damages at 1.3 percent and prejudgment interest on the jury’s awards for past pecuniary damages at a rate of 0.8 percent.
A $3.6-million award for damages
Doris Aubin suffered a head injury in a fall at the community centre on Jan. 2, 2015. She issued a statement of claim on Dec. 21, 2016. Aubin’s wife, Aimee Zweig, was also a plaintiff.
Following a trial that began on Oct. 12, 2022, the jury awarded just over $3.6 million. That amount included non-pecuniary damages of $216,000 for pain and suffering, past pecuniary damages of $25,094 for out-of-pocket expenses, and $640,501 for past loss of income.
The jury found Aubin to be five percent contributorily negligent.
Zweig was awarded non-pecuniary damages of $85,000 for loss of care, guidance, and companionship under s. 61 of the Family Law Act. The balance of the jury’s award was for future losses.
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Determining rates of interest paid on awards
Under s. 127(1) of the Courts of Justice Act, the prejudgment interest rate applicable to proceedings commenced in the fourth quarter of 2016, such as the plaintiffs’ action, was 0.8 percent.
Section 128(1) of the CJA provides that a person entitled to an award can claim interest at the prejudgment interest rate calculated from the date the cause of action arose to the date of the order. Another section of the act, 127(1), defines the “prejudgment interest rate” 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.
Yet another section, 128(2), provides for an exception that prejudgment interest on the non-pecuniary damages for personal injury can be set at a rate determined by the rules of the court. Rule 53.10 of the Rules of Civil Procedure sets the rate under s. 128(2) at five percent per year,
However, Section 130 of the CJA provides that a court may disallow prejudgment interest when it considers it appropriate and allow prejudgment interest at a rate higher or lower than provided in s. 128 or allow prejudgment interest for a period other than that provided.
The community centre argued that, in this case, the five percent prejudgment interest on the jury’s award for non-pecuniary damages would “over-compensate the plaintiffs.” It suggested interest of 1.3 percent would be fair because it is closer to the prejudgment rate under s. 127(1) that was in effect on the date of loss. The defendant also noted that the 1.3 percent is close to the 1.175 percent average s. 127(1) prejudgment rate from the date of Aubin’s loss to the date of the jury’s verdict.
As for Aubin’s pecuniary damages, the community centre argued, “There is no reason to deviate from the prescribed prejudgment interest rate of 0.8 per cent.”
On the other hand, the plaintiffs argued the defendant was asking the court to lower the prejudgment interest rate on the award for non-pecuniary damages on the basis that there have been “changes in market interest rates,” one of the factors the court can consider in using its discretion on setting rates. The plaintiffs said the community centre offered no evidence about market interest rates and that it “would be an error of law for the court to treat prejudgment and market interest rates as synonymous.”
The plaintiffs also disputed the community centre’s “overcompensation” argument if they received five percent interest on non-pecuniary damages. They argued that if their RRSPs were combined, the weighted average of their rates of return in the years leading up to the date of the jury verdict would have been 8.46 percent. If they had the money the jury awarded them, they argued, they would have invested it and earned a similar rate of return.
Aubin and Zweig also pointed out that the defendant’s insurer, Intact Insurance, earned an average annual rate of return of 12.99 percent on its investments from the date of Aubin’s fall to the date of the jury’s verdict.
The plaintiffs argued that discretion on setting past pecuniary damages should be considered in the same way as setting non-pecuniary damages. They suggested an interest rate of 8.46 percent should be used to reflect “the true time value” of the awards.
Judge not persuaded by defendant’s argument for higher interest rate
However, Justice Williams ruled the “most relevant factor” in this case is that the prejudgement interest rates from the time of Aubin’s fall to the date of the jury’s award “have been well below five percent.”
She also rejected the plaintiffs’ argument that the interest earned by the defendant’s insurer between 2015 and 2022 should have a bearing on her analysis. “I consider this to be irrelevant,” she said, noting 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.
Justice Williams characterized the defendant’s proposal of 1.3 percent as “reasonable.”
Justice Williams also said she was not persuaded that it would be just to increase the prejudgment interest rate on Aubin’s past pecuniary loss to 8.46 per cent, or at all, and that prejudgment interest on Ms. Aubin’s past pecuniary damages should stay at the default rate of 0.8 per cent.
Prejudgement 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.”
The judge also said she had difficulty with the plaintiffs’ argument that since Aubin and Zweig are a married couple and because Zweig has been handling their finances since Aubin’s accident, it is appropriate to consider a “weighted” average return rate based on both of their investment portfolios.
The rate of return on Aubin’s portfolio was well below 8.46 percent, the judge noted. It had a 3.61 percent rate of return since Mar. 31, 2016, a 3.06 percent rate of return in the past five years, a negative 0.41 percent rate of return over the past three years and a negative 11.46 percent rate of return over the past year.
Justice Williams said Zweig “did not explain in her affidavit how she calculated the weighted average rate of 8.46 percent.” Further, although Zweig may have been overseeing Aubin’s portfolio, the judge said, “I see no basis for considering the rate of return on Zweig’s portfolio.”