Ontario prejudgment interest, explained

What prejudgment interest is

Prejudgment interest is interest that a court adds to a money judgment to compensate the successful party for the time between when the cause of action arose and when the judgment is entered. In Ontario, the ordinary rule is set out in section 128 of the Courts of Justice Act.

When it starts and stops

Prejudgment interest generally runs from the date the cause of action arose (for example, the date of the accident, the date of breach of contract, or the date of loss) up to the date of the order. Different rules can apply to non-pecuniary damages in personal injury cases and to specific statutory claims - check the section 128 wording that applies to your claim.

Which rate applies

The default rate is the bank rate at the end of the first day of the last month of the quarter preceding the quarter in which the proceeding was commenced, plus or minus adjustments set out in the Act. Ontario publishes a quarterly table so you do not have to work this out from first principles. Confirm the rate for the quarter your proceeding was commenced, not the quarter of the loss.

How the calculation works

Section 127 provides for simple interest - not compound. The calculation is principal × rate × (days ÷ 365), using the actual number of calendar days. Leap years produce 366 days, which is slightly more than a full non-leap year.

When the ordinary rule can be displaced

A different rate or period can apply where the parties have agreed one, where a statute prescribes one, or where the court orders otherwise under section 130 in the interests of justice. If a written contract between the parties sets an interest rate for the underlying debt, that rate - not the statutory rate - usually governs prejudgment interest on that debt.