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New Court of Appeal Decision on PJI Rate

By Brian Sunohara

For many years, the default prejudgment interest (“PJI”) rate in Ontario for non-pecuniary damages in personal injury cases was 5%. When this rate was introduced, market interest rates were actually much higher than 5%.

In auto cases, the default 5% PJI rate changed in 2015 to account for lower market interest rates. The Insurance Act was amended to make the PJI rate the same for non-pecuniary damages and pecuniary damages.

This has meant that defendants are paying a lower PJI rate on non-pecuniary damages in almost all auto cases since the bank rate (on which the PJI rate is based) has been low in recent years (e.g., 0.8% to 1% in 2017, 1.3% to 1.8% in 2018, and currently 2%). In fact, the bank rate has not been above 5% since 2001.

Last week, the Court of Appeal released a decision which has a similar effect on the PJI rate in non-auto cases.

In MacLeod v. Marshall, 2019 ONCA 842, the trial judge awarded the plaintiff PJI at 5% on general and aggravated damages in a case involving sexual abuse. The Court of Appeal held that this was not correct in law.

The Court of Appeal stated that the trial judge erred by placing no weight or insufficient weight on the consideration of market interest rates, as required by section 130 of the Courts of Justice Act.

Since market interest rates were low during the time period when PJI was payable, the Court of Appeal varied the PJI rate from 5% to 1.3%.

Parties and their counsel should keep this case in mind when evaluating claims, negotiating settlements, and making submissions to the court on PJI.

Unless you have a claim that dates back to 2001, the PJI rate in all cases should be much lower than 5%.