ONTARIO – ONCA provides guidance as to the exercise of discretion under s. 130 of the Courts of Justice Act relating to pre-judgment at a higher rate and compounded.

CASE #015E
MDS Inc. v. Factory Mutual Insurance Company
2021 ONCA 594 September 3, 2021
Feldman, Harvison Young and Thorburn JJ.A.

We are summarizing this case because it discusses issues that frequently arise in commercial litigation but are less often the subject of judicial comment relating to the rate of pre-judgment interest and the availability of compound interest under s, 130 of the Courts of Justice Act.

Of interest to arbitration counsel, s. 57 of the Arbitration Act, 1991 provides that ss. 127 to 130 (pre-judgment and post-judgment interest) of the Courts of Justice Act apply to an arbitration, with necessary modifications. There are no cited cases under s.57.

The appeal concerned whether the insurer appellant was required to provide coverage for losses arising from an unplanned shutdown of the AECL Nuclear Research Universal reactor in Chalk River, Ontario on May 14, 2009. In length reasons, ONCA held that the motions judge erred and held that the insurer as no duty to provide coverage.

Pre-Judgment Interest and Compounding

In paras. 98-105, Thorburn J.A. provides guidance about the exercise of the court’s discretion under s. 130 of the Courts of Justice Act. The following points are made:

1. Relying on the factors in s.130, the Court may award a higher rate of interest if Court considers it just to do so;
2. Even if there is no provision for compound interest in the agreement between the parties, or in the present case, in the insurance policy, the Court may compensate the plaintiff for its “documented cost of borrowing”, where the plaintiff is seeking indemnity for losses.
3. A court of equity has the power to award compound interest whenever there is wrongful detention of money that ought to have been paid and which the company uses in its business, on the theory that it is reasonable to assume that the wrongdoer made the most beneficial use of the money and is accountable for the profits. [ 103]
4. Where a court awards damages, the defendant should not profit from its use of the funds it withheld from the defendants.