Decided May 5, 2014
“Entitlement to compounded interest depends on evidence that the parties knew or should have known that an award of damages would attract compound interest.”
Ontario Superior Court of Justice
The Plaintiff, Colautti Construction Ltd, recovered a judgment of approximately $500,000, and then sought pre and post-judgment interest compounded at a rate of 10 percent per annum. This rate was chosen because it reflected the cost of borrowing from the Plaintiff’s bank. The judge, by virtue of s. 130 of the Courts of Justice Act, R.S.O., 1990, c.C.43, acknowledged that the courts have the discretion to depart from the statutory provisions regarding interest as set out in s.128 and s.129 of the Act, however, was not satisfied that the evidence established that a rate of 10% per annum reflected what its borrowing rate was over the relevant time period. It was also noted that there was no provision in any of the signed contracts forming the basis for a specified rate of interest on overdue accounts. Justice McNamara stated that “an award of compounded pre and post-judgment interest will generally be limited to breach of contract cases where there is evidence that the parties agreed, knew, or should have known, that the money which is the subject of the dispute would bear compound interest as damages. Furthermore, the court also did not feel that, having regard to the factors listed in s. 130(2) of the Act, either party had made out a case for a departure from the interest rate of 4.8%, which he said was “entirely just and reasonable in the overall circumstances of this case.”
Submitted by: David A. Bertschi, a founding partner at Bertschi Orth Solicitors & Barristers LLP, a Canadian Insurance and Commercial Litigation Boutique in Ottawa, Ontario, Canada.