The much anticipated first decision on pre-judgment interest (PJI) following Bill 15 has just been released. Justice MacKenzie ruled in Cirillo v. Rizzo that the changes to the PJI rates in Bill 15, which came into force on January 1, 2015, are procedural in nature, and, therefore, retroactive.
In this case, the Plaintiff was injured in a motor vehicle accident on October 1, 2005. The Statement of Claim was issued on January 29, 2007. The Defendant’s Offer to Settle was accepted in January 2015. The entire settlement was for non-pecuniary damages, so the only issue was the applicable interest rate. Section 128 of the Courts of Justice Act deals with PJI. PJI is defined in s. 127 as being 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” [Emphasis added]. A quarter ends on either March 31, June 30, September 30 or December 31 in each year. Rule 53.10 the Rules of Civil Procedure has always operated as an exception to that rule making PJI a standard 5% per year for non-pecuniary damages in personal injury cases. Bill 15 eliminates that exception, reverting PJI back to the bank rate. The debate among counsel has since been whether that change was retroactive or not. Many parties have settled on the basis that 5% continued to apply until January 1, 2015, after which the bank rate would apply, as a way to compromise until a decision was released.
The Plaintiff argued that PJI is substantive in nature, as per Somers v. Fournier and Skinner v. Royal Victoria Hospital, and that a legislative change to PJI should not apply retroactively. The Defendant argued that neither case was applicable in the circumstances because the issue here is about quantification of PJI and not entitlement. The parties agreed that entitlement to PJI was substantive in nature. Justice MacKenzie ruled that quantification of PJI is procedural in nature, and, therefore, the change in PJI rate applied retroactively.
Since the Statement of Claim was issued in January 2007, the last quarter preceding was December 31, 2006. The applicable bank rate would be calculated as of December 1, 2005, which was 4.5%. The Plaintiff in this case only lost 0.5% per year, granted it was for 8 years. Bank interest rates have, as we know, dropped significantly over the past several years, and have remained steady at roughly 1.3% since 2011. This means that many Plaintiffs will be dramatically affected by the change in rate.
There was no discussion in this case about legislative interpretation or whether PJI should act as a deterrent to Defendants regarding delays in the proceedings. There were no interveners on this motion and there is no word yet regarding whether this decision will be appealed by either side.