Thank you, Mr. Chairman. Bill 3 amends the Judicature Act to add provisions providing that post-judgment interest will be calculated twice a year on the basis of the Bank of Canada's "prime business rate" as at January 1st and July 1st in each year. The bill would also amend the existing provisions respecting prejudgment interest
to make them consistent with the post-judgment interest regime.
By way of background, prejudgment interest is usually awarded by the courts when giving judgment for debt or damages. Awards of prejudgment interest are intended to compensate successful plaintiffs for losses they have suffered as a result of the late payment of money owing to them. Post-judgment interest runs from the day of judgment to the day an award under the judgment is paid. It is similarly designed to compensate the plaintiff for the late payment of money owing.
The Judicature Act presently provides for prejudgment interest in the territories, as does provincial and territorial legislation across Canada. For outdated historical reasons, post-judgment interest in the two territories and the four western provinces was fixed at five per cent under the Federal Interest Act, whereas provincial legislation governed post-judgment interest in Ontario, Quebec and the Atlantic provinces.
This was naturally a source of some irritation to the western jurisdictions, and in February 1992, Parliament enacted the Miscellaneous Statute Law Amendment Act, 1991, which provided for the repeal of the provisions of the Interest Act (Canada) that fixed the rate of post-judgment interest for the western provinces and the two territories. These provisions are to be repealed in respect of each jurisdiction as the jurisdiction brings into force its own legislation governing post-judgment interest. The Interest Act provisions continue to apply in the Northwest Territories, pending enactment of the amendments to the Judicature Act.
Bill 3 amends the Judicature Act to fix the prejudgment and post-judgment interest rate at the "prime business rate" published by the Bank of Canada in the Bank of Canada Review, as prevailing on January 1st for the first six months of the year, and as prevailing on July 1st for the second six months of the year. This approach is intended to strike a balance that would see the rate of prejudgment and post-judgment interest respond to significant shifts in interest rates, while providing for relative administrative convenience by fixing the rate for six-month periods.
This represents a change from the static mechanism presently provided for in the Judicature Act for the setting of the prejudgment interest rate applicable in an action. Subject to being varied at the discretion of a judge, the rate is now fixed at the "prime rate" for the month preceding the month on which the action is commenced, and does not vary as interest rates change. This can work to the considerable disadvantage of the defendant if the action is initiated at a time of high interest rates that subsequently decline, or to the disadvantage of the plaintiff if there is an opposite trend.
The draft amendments deviate as little as possible from the existing provisions set out in section 55 of the Judicature Act, and similar provisions are found in provincial legislation across Canada. Other than the provisions establishing the new system for fixing the prejudgment interest rate, and a specific provision relating to the calculation of interest on special damages, the provisions respecting prejudgment interest rates remain unchanged, except for some minor non-substantive adjustments in wording and organization. The term "prime
rate," for instance, has been changed to "prime business rate," which is the term now used in the Bank of Canada Review.
The proposed amendments contain transitional provisions specifying how the bill will apply to pre-existing causes of action, actions and judgments. These transitional provisions will ensure that the amendments contained in the bill would apply to all causes of action and actions and to all unsatisfied judgments as of the day the amendments come into force, but not before that day. This mechanism avoids retroactive changes to the amounts accruing in an action or owing under a judgment, and ensures that all actions and judgments will bear interest at the same rate as of the day the amendments come into force.
Mr. Chairman, I would be pleased to try answer any questions the committee may have.