Compound Interest Allowed For Wrongful Detention Of Monies Or Trust Property

Generally successful plaintiffs are not entitled to compound interest.  They are limited to simple interest under the Courts of Justice Act.  That said, where there has been a wrongful withholding of money or property case law permits an award of compound interest: see, for example, EdperBascan v. 177373 Canada (2001), 53 O.R. (3d) 331. 

Today’s decision in Waxman v. Waxman, 2008 ONCA 426 restates the principle relating to compounding and gives the legal justification for the principle.  The Court holds:

[5]               In cases of wrongfully misappropriated trust property, it is open to the court to presume that the injured party is entitled to receive compound interest.  See, for example, Bank of America Canada v. Mutual Trust Co., [2002] 2 S.C.R. 601, Air Canada v. Ontario (Liquor Control Board), [1997] 2 S.C.R. 581 and Brock v. Cole (1983), 142 D.L.R. (3d) 461 (Ont. C.A.). 

[6]               Various justifications have been offered for the presumption.  Two such justifications are that the court may presume that the injured party would have made the most beneficial use of the funds possible, and that the wrongdoer enjoyed the most beneficial use of the funds.  Regardless of which of those two rationales is employed, there was evidence in the present case to justify the exercise of discretion.  There was evidence that Morris Waxman, the injured party, placed his money in banks and received compound interest thereon.  There was also evidence that many of the bonuses and dividends paid to the appellants, the wrongdoers, were put into highly profitable mutual fund limited partnerships. 

[7]               In any event, had the appellants wished to displace the presumption, they were obliged to adduce evidence to rebut it.  As the party in possession of the funds they were in the best position to adduce such evidence, if it existed.  However, no such evidence was led.