HomeCase CommentaryA Wise Decision in Retrospect

A Wise Decision in Retrospect

The Ontario Court of Appeal handed down two seminal decisions last month. In the companion cases, Cobb v. Long Estate and El-Khodr v. Lackie,  the Court of Appeal (hopefully) settled the doctrine in a number of areas relevant to motor vehicle accident (“MVA”) litigation.

Cobb and El-Khodr were appeals arising from the assessment damages, prejudgment interest, and costs in the context of MVAs. MVA law is highly regulated, intersecting with numerous statutes and regulations. The Court was tasked with interpreting various statutory and regulatory provisions, each of which had been the subject of conflicting interpretations in the lower courts. On every issue, the Court employed a sober textual analysis, relying on established principles of statutory interpretation, and reached a decision that accorded with the ordinary meaning of the text viewed in its proper statutory context.

Each of the issues the Court dealt with deserves its own separate analysis, and I encourage everyone to read the decisions in full. For the purposes of this article, I intend to focus on what I consider to be the most controversial aspect of the decisions, and the only one likely to be the subject of a leave application to the Supreme Court of Canada: prejudgment interest, and more generally the retrospective application of legislative amendments.


The Statutory Regime

A plaintiff who is awarded damages in Ontario is entitled to prejudgment interest (“PJI”) for damages already incurred at the time of trial. This includes general non-pecuniary damages for pain and suffering in personal injury actions, which are presumed to arise the moment the injury occurs.

The entitlement to PJI is derived from section 128(1) of the Court of Justice Act (“CJA“):

128 (1) A person who is entitled to an order for the payment of money is entitled to claim and have included in the order an award of interest thereon at the prejudgment interest rate, calculated from the date the cause of action arose to the date of the order.

Subsection (2) then creates an exception to this general entitlement for non-pecuniary damages in personal injury litigation:

(2) Despite subsection (1), the rate of interest on damages for non-pecuniary loss in an action for personal injury shall be the rate determined by the rules of court made under clause 66 (2) (w).

Section 66 of the CJA states that the Civil Rules Committee “may make rules for the Court of Appeal and the Superior Court of Justice in relation to the practice and procedure of those courts in all civil proceedings” except Family Law. Rule 53.10 of the Rules of Civil Procedure, enacted pursuant to this section, establishes the PJI rate on non-pecuniary damages in personal injury litigation pursuant to s.128(2) of the CJA:

53.10 The prejudgment interest rate on damages for non-pecuniary loss in an action for personal injury is 5 per cent per year.

Fixing the PJI rate for non-pecuniary damages in personal injury at 5% per anum traditionally made sense. It provided both plaintiffs and defendants with a certain and stable rate, and ensured that each plaintiff was entitled to the same rate of interest regardless of when his or her injury arose.  However, following the onset of the Financial Crisis in 2008-2009, interest rates plummeted, and the default PJI rate was reduced to around 1%, depending on the quarter. In the face of this significant disparity between the default PJI rate  and the rate for non-pecuniary damages in personal injury actions, the Ontario legislature enacted the Fighting Fraud and Reducing Automobile Insurance Rates Act. The Act, inter alia, amended the Insurance Act by adding a new provision – s.258.3(8.1). The provision, which came into force on January 1, 2015, states as follows:

(8.1) Subsection 128 (2) of the Courts of Justice Act does not apply in respect of the calculation of prejudgment interest for damages for non-pecuniary loss in an action referred to in subsection (8).

Subsection 8 of the CJA refers to an action “for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile.”

In sum, section 128(2) of the CJA and rule 53.10 of the Rules of Civil Procedure create an exception to the default PJI rate; but s.258.3(8.1) establishes an exception to that exception – namely, that within the field of personal injury actions, where the injury arose from the use or operation of a motor vehicle, plaintiffs will not be entitled to the special 5% PJI rate and will instead be entitled to the default rate.


The Decision the Court of Appeal

The issue for the Court of Appeal (in the Cobb decision specifically) was whether s.258.3(8.1) of the Insurance Act applied to all actions in the system or whether its application was limited to accidents that occurred on or after January 1, 2015 when the provision came into force. The question, in other words, is whether the provision has “prospective” or “retrospective” application. The law itself was entirely silent on this point. Most of the lower court decisions addressing the PJI issue had concluded that the law was intended to have prospective application only, and that accidents occurring before January 1, 2015 would still enjoy the PJI rate of 5%. The Court of Appeal disagreed and held that the section would have retrospective application.

The Court began its analysis by setting out three interpretive presumptions. First, the common law generally presumes that legislation does not have retrospective application. However, the presumption is subject to rebuttal based on a contextual analysis of legislative intent. The second presumption is that a legislature is presumed not to interfere with vested rights. The third is that procedural legislation is presumed to apply immediately and retrospectively, but only if the legislation does not affect a substantive right. Some of the lower court decisions had framed the issue as whether s.258.3(8.1) was “procedural” or “substantive”. However, as the Court of Appeal noted, the real issue is whether the provision affects a substantive or “vested” right. If so, then it matters not whether the legislation is “procedural” in nature; it would apply prospectively only.

I pause here to note the distinction between the terms “retrospective” and “retroactive,” which have a tendency to be confused. As the Supreme Court of Canada explained in Benner v. Canadaat para. 39,

A retroactive statute is one that operates as of a time prior to its enactment. A retrospective statute is one that operates for the future only. It is prospective, but it imposes new results in respect of a past event. A retroactive statute operates backwards. A retrospective statute operates forwards, but it looks backwards in that it attaches new consequences for the future to an event that took place before the statute was enacted. A retroactive statute changes the law from what it was; a retrospective statute changes the law from what it otherwise would be with respect to a prior event.

The Court of Appeal did not address the distinction, and appears to have simply assumed that the issue was one of retrospective versus prospective application. In my view, the Court of Appeal was ultimately correct, but its analysis would have benefited from some discussion of the difference between retroactivity and retrospectivity and why the PJI issue only concerned the latter.

The Court of Appeal held that the legislative change did not affect a vested right. The Court cited the Supreme Court’s decision in R. v. Puskas, which held that a “right cannot accrue, be acquired, or be accruing until all conditions precedent to the exercise of the right have been fulfilled.” While a plaintiff has an immediate vested right to tort damages at the moment of his or her accident, the rate of PJI is a matter of judicial discretion which “could only be exercised at the time the damage award was made” [emphasis added]. In particular, the Court cited s.130 of the CJA, which provides the court with discretion to disallow PJI or vary the rate or period of calculation. As such, there is no “right” to a predetermined rate of PJI and to the extent there is a right, it does not crystallize until the trial judge determines the issue at trial.

As the matter did not concern a vested right, the Court turned to whether the change to the PJI rate was “procedural” in nature. The Court said that it was unnecessary to decide this issue, however, since a contextual analysis of the relevant statutory provisions and the statutory history clearly pointed toward an intended retrospective application. Prior changes to the PJI regime in Ontario had contained temporal language expressly stating that the change would only have prospective application. Conversely, the 2015 amendment does not contain any similar temporal language. The only plausible conclusion is that the legislature intended for the change to have retrospective application.

Finally, the Court examined the purpose of the amendment, quoting from the Hansard record. As one of the stated goals of the amendment was to reduce auto insurance costs within two years, the Court inferred that the legislature must have intended for the law to apply retrospectively to cases  already in the system.

The Court of Appeal concluded by noting that a trial judge can address any perceived unfairness to the sudden reduction of the PJI rate by exercising discretion under s.130 of the CJA and awarding a PJI rate other than the default rate. Indeed, this is exactly what the trial judge had done in Cobb.



The Court of Appeal arrived at its decision on the PJI rate by employing a traditional textual analysis, interpreting statutory provisions in accordance with their ordinary meaning and in their full statutory context. The provisions of the CJA taken together are clear that the rate of PJI does not form a substantive or vested right and the statutory history strongly suggested that the legislature intended for the amendment to have retrospective application. As stated above, the decision would have benefited from a discussion on the distinction between retrospective and retroactive applications,  but I do not want to quibble with what is a very strong textual analysis.

Where I do take some issue with the Court’s reasoning is in its reliance on the supposed purpose of the amendment. I do not fault the Court for engaging in this inquiry, as the Supreme Court has mandated that statutes be interpreted “purposively” by interpreting the statutory text harmoniously with the legislative purpose. As I have written previously here, here and here, there are problems inherent in this approach, both philosophical and practical. Even if the Hansard record accurately reflects the government’s “true” intention for tabling the bill, we have no way of knowing whether every legislator who voted for it shared this goal. What is more, it is not clear that the government’s stated purpose would necessarily support the position that the lower PJI rate should be applied retrospectively. The government’s expressed goal was to lower insurance premiums “while still ensuring fairness for consumers.” One could fairly argue that a prospective application of the statute best achieves this goal – it reduces costs by lowering the PJI rate on new claims, while still “ensuring fairness” by maintaining the old rate on existing claims.

I do not want to be misunderstood as saying that the stated purpose of the bill supported a prospective application. Rather, I am saying that the stated purpose does not point definitively in either direction. Relying on it can only muddy the waters and cast doubt onto what ought to be an unambiguous textual analysis.


Conclusion: What the Future Holds for PJI

The most important sentence in Cobb is arguably the Court’s final point that future trial judges can ameliorate any perceived unfairness by exercising their discretion under s.130 of the CJA and awarding a different PJI rate. Going forward, we can expect plaintiff lawyers will argue for a higher PJI rate at trial and that trial judges will often oblige, relying on this dicta from Cobb. This is not a bad thing, and the Court of Appeal is correct that the section provides judges with a wide discretion to vary the PJI rate. Where a case has been in the system for a long time and has been delayed through no fault of the plaintiff, a good argument can be made that the plaintiff should not “lose” what could amount to tens of thousands of dollars in PJI simply because the case was delayed in proceeding to trial.

To this end, a court hearing a motion to vary the PJI rate should turn its attention to subsection (2) and weigh the various factors outlined therein. The Reasons of the trial judge should discuss these factors and set out a principled  basis for why the PJI rate should or should not be varied. While there can be no doubt that s.130 affords trial judges wide discretion, this does not preclude the courts from developing legal doctrine that is applied with consistency, just as they have done with the entitlement to costs. If s.130 of the CJA is to become the new “go to” for plaintiff lawyers, then it is essential for the courts to proceed in a principled fashion, fostering certainty and predictable legal doctrine.

The Court of Appeal should be commended for doing just that in Cobb and El-Khodr.