In the recent case of Jackson v. Cooper, 2024 ABCA 272, the Alberta Court of Appeal addressed the issues related to the application of pre-judgment interest under the Judgment Interest Act, providing clarity for insurers for implications related to sums awarded to plaintiffs.

Background of the Case

The dispute in Jackson v. Cooper arose from a motor vehicle accident that occurred in 2015.  The trial, which took place in September 2022, was limited to the question of damages as the defendants admitted liability.  Prior to the trial, the Insurance Act was amended by the Insurance (Enhancing Driver Affordability and Care) Amendment Act in 2020, whereby s. 585.2(2) was introduced. This section modified the rate of prejudgment interest applicable to non-pecuniary damages in motor vehicle accident claims (the “Amendment”).

Previously, the rate was 4% per annum pursuant to section 4(1) of the Judgment Interest Act.  The Amendment changed the rate to align with the annual rates prescribed in the Judgment Interest Regulation, which were the same rates used for pecuniary damages.

Trial Decision

The trial decision broke the pre-judgment interest issue into five parts for analysis: (1) correct terminology; (2) whether pre-judgment interest is procedural or substantive; (3) whether it is a vested right; (4) whether the Amendments were for the protection of the public; and (5) whether the applicable presumptions are displaced by an interpretation of the provision itself.

Terminology

Citing Épiciers Unis Métro-Richelieu Inc, division Éconogros v Collin, 2004 SCC 59, [2004] 3 SCR 257 [Épiciers Unis], the trial judge set out the following definitions regarding whether legislation is retroactive, retrospective, or immediate:

1. Immediate: legislation is immediate if it applies to any facts that arise after it comes into force, including any factual situation that starts before the legislation comes into force and continues after that date.
2. Retroactive: if a fact situation occurred entirely before the legislation was enacted, then the legislation would need to be retroactive to apply.
3. Retrospective: retrospective legislation applies to legal effects that occur after the legislation comes into force, even if the underlying facts occurred prior to the legislation.

Procedural vs. Substantive

It is generally accepted that a substantive provision attracts the prescription against retroactivity whereas a procedural provision is presumes to apply retroactively [Jackson v. Cooper, 2022 ABKB 609 (CanLii), para. 179].

The trial judge concluded that pre-judgment interest is a substantive right, relying on Somers v Fournier (2002), 2002 CanLII 45001 (ON CA), 60 OR (3d) 225 (CA), and stating that “modern theories of pre-judgment interest see it as compensatory rather than punitive, since it compensates the Plaintiff for the delay from when the right to damages arose to the date the judgment is awarded […] [making it] different from costs awards, which are entirely in the discretion of the Court and do not relate to the substance of an action.” [at para. 182].

Vested Rights

For a right to be vested, it must meet two criteria:

• the individual’s legal (juridical) situation must be tangible and concrete rather than general and abstract; and
• this legal situation must have been sufficiently constituted at the time of the new statute’s commencement.

The trial judge agreed with the Defendants’ argument that pre-judgment interest is not a vested right, relying on Cobb v Long, 2017 ONCA 717, stating that pre-judgment interest does not vest until there is a determination made by the trial judge.  Notably, the trial judge included a caveat, stating that a right does not need to be vested to invoke the presumption against retroactivity.

Insurance Act

Section 585.2(2) reads as follows:

Notwithstanding section 4(1) of the Judgment Interest Act, interest in respect of damages for non-pecuniary loss in an action for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile must be calculated in accordance with section 4(2) of that Act in the same manner as interest awarded on pecuniary damages.

The trial judge concluded that “there is nothing in the language of this provision that suggests it should be applied retroactively.”

Conclusion

The trial judge granted this portion of the Plaintiff’s claim stating the presumption against retroactivity has not been displaced, granting 4% from the date of the motor vehicle accident to the coming into force of the Amendment on December 9, 2020, and thereafter pre-judgment interest in accordance with s. 4(2) of the Judgment Interest Act.

Key Issue on Appeal

The key issue on appeal was whether the trial judge erred in applying the new (lower) rate of prejudgment interest only after the Amendment came into force on December 9, 2020, rather than over the entire period of which prejudgment interest was calculated.

The Defendants argued the following:

1. any presumptions that might apply are defeated by the trial judge’s finding that the right to prejudgment interest is not vested until judgment;
2. the trial judge erred in finding that prejudgment interest was a substantive, not a procedural right;
3. prejudgment interest is not triggered until the judgment is awarded, and therefore the presumptions against retroactivity and retrospectivity do not apply – the Amendment has immediate application once judgment is awarded and applies to the entire period for which prejudgment interest is calculated; and/or
4. any presumptions are rebutted by a contextual analysis which demonstrates that the legislature intended that the Amendment apply to the entire period of the calculation.

Court of Appeal’s Decision

The Court of Appeal dismissed the Defendants’ appeal.

Vested Rights

The Court of Appeal disagreed with the Appellants regarding vested rights, stating “the fact that the respondent has no vested right in any particular rate of prejudgment interest at the time the Amendment came into force does not mean other presumptions of statutory interpretation to not apply.

Procedural vs. Substantive

Outlining the distinction between procedural and substantive rights, the Court of Appeal quoted from R v Chouhan, 2021 SCC 26, at para. 92: “procedural amendments depend on litigation to become operable: they alter the method by which a litigant conducts an action or establishes a defence or asserts a right. Conversely, substantive amendments operate independently of litigation: they may have direct implications on an individual’s legal jeopardy by attaching new consequences to past acts or by changing the substantive content of a defence; they may change the content or existence of a right, defence, or cause of action; and they can render previously neutral conduct criminal.”

The Court of Appeal agreed with the trial judge, that the Amendment is not purely procedural and affects a substantive right, and the presumption against retrospective application is engaged, meaning “the Amendment is presumed to have prospective, not retrospective, effect.”

Trigger Date

The Appellants argued that the judgment itself is the final fact in the series of events, which triggers the legal effect of applying pre-judgment interest.  The majority of the Court of Appeal disagreed “that s. 2(1) of the Judgment Interest Act should be understood as specifying that a judgment is a distinct factual pre-requisite”, concluding that the actual effect of the section “is that a judgment for payment of money is to include prejudgment interest (at para. 31).  Further, that “the fundamental facts required to trigger the default prejudgment interest rate […] are the facts that entitled the respondent to non-pecuniary damages – the motor vehicle accident and the injuries sustained therein – plus the passage of time without the appellants making payment…” (at para. 32).

Grosse, J.A., disagreed, stating in her dissent, that the automobile accident and resulting injuries are not the events that bring about the operation of the pre-judgment interest provision in question. She goes on to state “which pre-judgment interest is compensatory […], it does not per se compensate a plaintiff for injuries arising from the tortious conduct of the defendant.  Rather, it compensates the plaintiff for the otherwise diminished value of the damages awarded due to the passage of time…”  (at para. 44).

Contextual Analysis

The Appellants pointed to two aspects of retrospective legislative intent:

1. the Amendment was introduced as part of legislation intended to enhance insurance affordability by taking “immediate measures to stabilize auto insurance premiums”; and
2. no transitional provisions were provided for the Amendment, whereas transitional provisions were provided for the other two substantive amendments made at the same time.

The majority of the Court of Appeal concluded that neither argument was sufficient to overcome the presumption against retrospective application in this case.

Implications of the Decision

The Court of Appeal has provided clarity on the application of pre-judgment interest under the Judgment Interest Act, confirming that the new provision of the Insurance Act does not apply retroactively.  Pre-judgment interest is an important issue for insurers as it can significantly alter the sums awarded to plaintiffs.  Insurers now have clarity about how the pertinent sections apply and the outcome that would have on awards.

Jackson v Cooper also provides a critical examination of the application of legislation. Specifically, whether legislation is retroactive, retrospective, or immediate; terminology which has often been misused in previous case law, causing confusion.  Both the trial judge and the Court of Appeal point to the Supreme Court decision of Épiciers Unis as the governing authority on the definitions of these three terms.