Lawyers have been arguing the past several months as to whether the change to the prejudgement interest rate should be applied to claims that occurred prior to the amendment. On January 1, 2015, section 258.3(8.1) of the Insurance Act came into force. The amendment says that the 5% prejudgment interest rate for non-pecuniary losses in motor vehicle accident claims for bodily injury or death no longer applies. Instead, prejudgment interest for non-pecuniary losses is to be calculated using the rate applicable to pecuniary losses, i.e. 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.

This is significant to those with personal injury motor vehicle accident claims prior to the amendment because the interest you can claim on your general damages for pain and suffering from the date you put the at fault party on notice is significantly reduced. The good news is that a case recently decided that the amendment should not apply retroactively, or to claims prior to January 1, 2015.

In the recent decision, El-Khodr v. Lackie, 2015 ONSC 4766 [El-Khodr] the Court had to decide whether or not section 258.3(8.1) is substantive or procedural law to determine the issue of retrospective application. This was also the issue in the recent decision Cirillo v. Rizzo, 2015 ONSC 2440 [Cirillo], in which the motion judge held that section 258.3(8.1) is procedural and thus applies retrospectively.
The defendants in El-Khodr argued that section 258.3(8.1) is retrospective in its application and they relied on Cirillo. The defendants argued that entitlement to prejudgment interest is substantive law, whereas the measure of the amount (which would include the rate of interest) is procedural.

The plaintiffs argued that statutes do not apply retrospectively unless a legislative intention for retrospective application is express or required by implication and that such an intention is neither express nor implied with respect to the amendment to the Insurance Act.

The plaintiffs cited a number of cases confirming that the right to prejudgment interest is substantive [Consolidated Distilleries Ltd. v. Canada, [1932] S.C.R. 419 at 421; Northern & Central Gas Corp, Ltd. v. Kidd Creek Mines Ltd. (1988), 66 O.R. (2d) 11 (C.A.)].

Toscano Roccamo, J. in El-Khadr agreed with the plaintiffs that Cirillo was wrongly decided. The judge concluded that Cirillo was based on a misreading of the decision, Somers v. Fournier (2002), 60 I.R. (3d) 255 which the plaintiff in Cirillo relied on to argue that the amendment was substantive in nature and thus does not have retroactive effect.

Toscano Roccamo, J. also concluded that Cirillo did not address case law holding that entitlement to a particular prejudgment interest rate is substantive law. The decisions, 306793 Ontario Ltd. v. Rimes (1980), 30 O.R. (2d) 158, Sidhu v. State Farm Mutual Automobile Insurance Company 2014 ONCA 920 (CanLII), and Brown v. Flaharty, [2004] O.J. No. 5278 supported the plaintiff’s position in Cirillo that entitlement to a particular prejudgment interest rate is a matter of substantive law in Ontario and His Honour in El-Khadr saw no reason to depart from these cases.

According to Toscano Roccamo, J., the court in Somers held that the entitlement to prejudgment interest under section 128(1) of the Courts of Justice Act and the ability of the court to vary or deny the award for prejudgment interest under section 130 of the Courts of Justice Act are matters of substantive law. Section 258.3(8.1) of the Insurance Act simply requires a court to award prejudgment interest in motor vehicle accident cases in accordance with sections 128(1) and 130 of the Courts of Justice Act. As such, based on Somers, Toscano Roccamo, J. could not see how the amendment could be considered anything but substantive.

His Honour saw no reason to depart from the Supreme Court’s position in Angus v. Sun Alliance Insurance Co. [1988] 2 SCR 256 that statutes should not be given retrospective operation in the absence of an express or implied intention to that effect.

For now, Plaintiff lawyers can argue based on the well reasoned El-Khodr decision that 5% pre judgement interest applies on claims occurring before the amendment came into force.