Pre-Judgment Interest is a Substantive Right

The recent decision, El-Khodr v. Lackie confirms that the pre-judgment interest rate for general damages is substantive and not, therefore, applicable retroactively. This follows the recent amendment to the Insurance Act on January 1, 2015 which changed the pre-judgment interest rate on general damages from 5% to the bank rate, which currently sits at about 1.3%. This change in interest significantly awards, especially considering the length of time it takes to resolve or try a case.

Cirillo v. Rizzo held that since the amount of pre-judgment interest applied to a Judgment is procedural rather than substantive in nature, the interest rate change was retroactive and applied to all cases. The Court relied on the Somers v. Fournier decision, which drew a distinction between substantive and procedural changes with respect to interest rates. Procedural legislative changes can be applied retroactively to cases that were commenced before the change came into effect. However, legislative changes that effect litigants’ substantial rights are not to be applied retroactively. Those changes are only applicable to cases commenced after the date of the change. The court found that the amount of pre-judgment interest is procedural, with only the entitlement to pre-judgment interest being substantive.

Justice Toscano Roccamo in El-Khodr reviewed both Somers and Cirillo, among other cases, and found that the Court in Cirillo misread Somers. In coming to this conclusion, Justice Toscano Roccamo highlighted that whether pre-judgment interest is awarded, and the amount awarded, is discretionary under the Courts of Justice Act, even though there is a presumptive entitlement.   Therefore, pre-judgment interest can effectively be used as a head of damage available to a Plaintiff to respond to a delay in the delivery of the award and is meant to be compensatory rather than punitive.

The Court also looked at the reasoning behind the legislative change in the pre-judgment interest rate. The court found that the purpose of the change was to match the award of pre-judgment to the actual loss incurred as a result of the delay, and decrease insurance premiums. Prior to the legislative change, insurers valued premiums and underwent risk assessment based on a 5% pre-judgment interest award, and not the bank rate. Allowing the change to be retroactive would result in a windfall for insurance companies. Given that the legislature did not express an intention to make the change retroactive, a retroactive application would not achieve a just result.

This decision is likely to be heard on appeal in early 2017. Until the appeal decision comes down, it is important to push for 5% as the pre-judgment interest rate on cases that were commenced before January 1, 2015, despite the Cirillo decision.

For more information on the interest changes and your rights when involved in an accident, contact Melissa Miller at 416-847-1063 or

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