Law Times

Page 12 OctOber 19, 2015 • Law times www.lawtimesnews.com Ontario courts differ on prejudgment interest Lawyers waiting for clarity following recent legislative amendments BY MARG. BRUINEMAN For Law Times ersonal injury lawyers are eagerly awaiting the Ontario Court of Ap- peal's determination on prejudgment interest and which rate applies to non-pecuniary damages in pre-2015 motor ve- hicle cases following a change in the law earlier this year. In recent months, Ontario courts have come down on either side of the issue following changes in legislation at the start of this year that replaced the former rate of five per cent with the lower cur- rent bank rate. The issue stems from an amendment on Jan. 1, 2015, that changed the amount of prejudg- ment interest for some cases. The question before the appeal court is whether it's retroactive. Until recently, the Courts of Justice Act allowed for prejudg- ment interest and defined it as the bank rate with the exception of non-pecuniary losses determined by the rules of the court. The Rules of Civil Procedure set the interest rate for non-pecuniary damages in motor vehicle cases at five per cent. Among the amend- ments made to the Insurance Act earlier this year was the provi- sion that the Courts of Justice Act doesn't apply to the calculation of prejudgment interest for damages for non-pecuniary losses related to injury or death arising from an automobile accident. One decision earlier this year, Cirillo v. Rizzo, found the change to be retroactive, while another one, El-Khodr v. Lackie, later found that earlier ruling to be wrong. The latter case is un- der appeal. "They're both the same level of court and they're both contradic- tory," says Emily Casey, a lawyer with Tkatch & Associates. "Right now, it's a stumbling block when you're talking about settlement." And both cite the same case law, interpreting it differently and coming to different conclusions. It's an unusual situation that ultimately provides no direction for lawyers until the Court of Ap- peal clarifies the situation. Casey points out that in El- Khodr, Justice Giovanna To- scano Roccamo noted that in- surance companies had been basing their calculations on the old rate of five per cent. She not- ed the companies had already passed the cost to their custom- ers through their premiums. As a result, many plaintiff lawyers suggest a retroactive lower rate is nothing short of a windfall for insurance companies. On the plaintiff side, lawyers have quantified their cases based on the old rate. In El-Khodr, Kossay El-Khodr sued Raymond Lackie, the driver who rear-ended him, and John McPhail, the owner of the ve- hicle that hit him. On April 29, 2015, after four weeks of trial, the jury awarded El-Khodr a total of $2,931,006. "The question to be answered in deciding this issue boils down to whether or not s. 258.3(8.1) is substantive or procedural law, as this will determine the issue of retrospective application. This was the precise issue recently dealt with in Cirillo. Essentially, the motion judge in that case de- cided that the amendment was procedural law," wrote Toscano Roccamo. "With respect, I agree with the plaintiffs that Cirillo is wrongly decided." The judge pointed out that the reason for the recent amendment was to better match the award for prejudgment interest to the actual loss of interest incurred due to the delay in getting dam- ages, which was much less than five per cent, and, as a result, help lower insurance premiums. David Zuber of Zuber & Co. LLP, who successfully argued for the defence in Cirillo, says he continues to use that judgment as guidance. "I believe Cirillo is correctly decided and understand that Ot- tawa case is under appeal," he says of the other ruling. "I am sure other judges will weigh in on the debate since the Ottawa case will be a while before it gets to the Court of Ap- peal. All of my insurer clients follow Cirillo." Both cases referred to the 2002 decision in Somers v. Fournier but interpreted it differently. In Somers, Don Rollo of AMR LLP successfully argued that the law should be substantive, as op- posed to procedural, and won. "I happen to think the Court of Appeal decision in Somers was very clear," says Rollo. The basic point in El-Khodr, he adds, was that the insurance com- pany had had use of the money throughout the period that any awards were pending while the plaintiffs went without. "Those are traditional com- mon laws behind the theory of awarding prejudgment interest in the first place," says Rollo. "Legislation is basically not ret- rospective anyway." He points out that interest becomes a large part of the cov- erage for cases that linger and the difference between the bank rate, which currently hovers at around the one-per-cent mark compared with five per cent un- der the old rules, can add up to a significant amount of money for the insurance companies. Connolly Obagi LLP's Joseph Obagi says that the difference between the two interest rates in Cirillo amounted to about $2,000, suggesting that arguing the is- sue of prejudgment interest was perhaps an effort to establish a precedent that would later favour the insurance companies and result in a "multimillion-dollar windfall" for them in subsequent cases. Obagi, with Beth Quigley, represents El-Khodr. In his case, the difference amounts to more than $45,000. He expects the pro- fession may have to wait a year or more for the Ontario Court of Appeal to hear the case. "There's no question that the previous case seems to have missed some important jurispru- dence," says Obagi. "What Justice Roccamo points out very clearly was the reverse onus was wrongly applied by the previous judge." While lawyer Darryl Singer agrees with El-Khodr, he under- stands the reasoning in Cirillo. And while he notes that the mon- etary difference in the latter case isn't substantial, the overall issue for insurance companies is. "It can't possibly be fair for them to, many years later, take ad- vantage of the legislative change," says Singer. "It's an important is- sue for the personal injury bar." Charles Gluckstein, a per- sonal injury lawyer who special- izes in catastrophic injury cases, notes that settled law has accept- ed that when something is pro- cedural, it changes everything and goes back retroactively. But when it's substantive, it's only prospective unless the legisla- tion backdates it. "I like the reasoning in El- Khodr. It goes through a much more thorough analysis," says Gluckstein. "The other result is totally unjust by giving the in- surance companies a windfall. But the law is in f lux. Right now, there's no certainty how this is going to end up." Gluckstein also feels the leg- islative change is a terrible de- velopment. "It's another part of their rights being stripped away," he says, referring to those who buy insurance. While the Court of Appeal will consider the issue, he expects that until then, the incentive to settle cases has evaporated and many will end up going to trial. LT FOCUS THE MOST COMPLETE DIRECTORY OF ONTARIO LAWYERS, LAW FIRMS, JUDGES NEW EDITION Perfectbound Published December each year On subscription $80 One time purchase $83 L88804-764 Multiple copy discounts available Plus applicable taxes and shipping & handling. 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Untitled-4 1 2015-10-15 1:05 PM E. V. Litigation & Financial Services Inc. Elaine G. Vegotsky, CMA, CFE, CFI Assisting you in Litigation & Forensic Accounting, Financial Investigations x a F r o e n o h p e l e T 0 0 9 e t i u S 0 7 3 1 - 0 3 9 ) 6 1 4 ( , t s a E e u n e v A d r a p p e h S 5 4 Willowdale, Ontario M2N 5W9 (905) 731-5812 evlitigation@rogers.com E. V. Litigation & Financial Services Inc. Elaine G. Vegotsky, CMA, CFE, CFI Assisting you in Litigation & Forensic Accounting, Financial Investigations x a F r o e n o h p e l e T 0 0 9 e t i u S 0 7 3 1 - 0 3 9 ) 6 1 4 ( , t s a E e u n e v A d r a p p e h S 5 4 evlitigation@rogers.com Toronto, Ontario M2N 5W9 (905) 731-5812 CFA, CPA, Vlit_LT_Mar10_14.indd 1 14-03-04 10:18 AM P 'Right now, there's no certainty how this is going to end up,' says Charles Gluckstein. Keep up-to-date on the latest judicial developments by reading Law Times' CaseLaw on pages 14 - 15 Court Disaster Don't

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