Ontario court reduces prejudgment interest due to party's prosecuting delay

Appellate court sees no basis to grant appellant's claim for compound interest

Ontario court reduces prejudgment interest due to party's prosecuting delay

A plaintiff cannot take an inordinate amount of time to take its claim to trial, then expect the court to reward it for that delay via prejudgment interest, the Court of Appeal for Ontario has said.

The underlying dispute in Aylmer Meat Packers Inc. v. Ontario, 2022 ONCA 579 arose when officials from Ontario’s ministry of agriculture, food, and rural affairs took control of Aylmer Meat Packers Inc.’s abattoir. After 19 months, they returned control of the business, which was destroyed by that point. The owners sold the abattoir and the land where it stood to pay outstanding municipal taxes.

The trial judge dismissed the company’s claim for tort damages in negligence, trespass, and conversion. Last August, the Ontario Court of Appeal partly allowed Aylmer’s appeal and awarded damages of $3,520,000 for loss of enterprise value and the appeal’s costs fixed in the agreed amount of $25,000, inclusive of disbursements and harmonized sales tax.

First, the appellate court ruled that the ministry’s duty of care was to ensure that its regulatory actions did not unreasonably or unnecessarily harm the company’s business interests. The trial judge had no residual policy reason to refuse to impose a duty of care on the ministry, the court said.

Second, the appellate court held that the ministry breached the standard of care by occupying the plant well past any valid regulatory need. That need stopped at the end of October, the court explained.

Third, the appellate court determined that the ministry’s prolonged and unreasonable occupation of the plant was a cause-in-fact of the inability to sell it. The harm that the company suffered was not too remote to ground liability, the court added.

Aylmer Meat Packers Inc. v. Ontario, 2022 ONCA 629 tackled the issues of the trial’s costs and prejudgment interest. Aylmer, as the appellant, asked for the following:

  • Its costs of the trial of $750,000, which was the agreed amount for costs that the trial judge awarded to the respondent upon dismissing the action;
  • Prejudgment interest of $2,317,092.27, which was based on the statutory rate of 2.8 percent, compounded annually, from April 2004 until this court’s judgment date.

On the other hand, the respondent argued that the award for the trial’s costs should be reduced because the appellant did not succeed on all its claims. The respondent said the amount for prejudgment interest should not be compounded and should be lower because the appellant took 18 years to prosecute its claim.

Appellant’s claimed costs and interests should be reduced

The Ontario Court of Appeal ordered the respondent to pay the appellant $475,000, including disbursements and HST, for the trial’s costs and $600,000 for prejudgment interest.

The appellate court ruled that awarding $475,000 for the trial’s costs was fair, considering the appellant’s limited success. The court said this amount reflected the parties’ reasonable expectations, their divided success, and the agreed amount of $750,000.

The appellate court noted that the appellant pursued many different claims throughout the litigation. The appellant dropped and failed to succeed in some of these claims. It only achieved victory in its claim for damages directly attributable to the plant’s occupation, which led to the cessation of its business.

Regarding prejudgment interest, the appellate court saw no basis for awarding compound interest. In this case, the appellant complained that it could not sell the plant. This instance was unlike Enbridge Gas Distribution Inc. v. Marinaccio, 2012 ONCA 650, where the appellant wanted to continue operating its business upon the plant’s seizure. It was also not a case involving breach of trust or fiduciary duty.

Lastly, the appellate court found that reducing prejudgment interest was proper due to the appellant’s delay in prosecuting the case. The 18-year period was unexplained and manifestly unreasonable, the court said.

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