Audit, Compliance and Risk Blog

Ontario Class Actions To Proceed Despite Previous Time Limits

Posted by Ron Davis on Wed, May 28, 2014 an unusual five judge ruling, the Ontario Court of Appeal reconsidered its decision in Sharma v. Timminco (2012 ONCA 107). This case held that a failure to obtain leave to commence an action under the secondary market liability provisions of the Ontario Securities Act (s.138.3) within the three year limitation period provided in the Securities Act was fatal to the action, despite provisions of the Ontario Class Proceedings Act (CPA s. 28) that provide for a suspension of limitation periods for claims asserted in a class proceeding (Green v. Canadian Imperial Bank of Commerce, 2014 ONCA 90).

The court held that the standard justifying the reconsideration of one of its own rulings was that the advantages of overturning a previous decision must outweigh the disadvantages of correcting an error in a previous judgment. In deciding whether or not there was an error in the Timminco decision, the court noted that the only issue in that decision was the meaning of s. 28 of the CPA that suspended the running of a limitation period for “a cause of action asserted in a class proceeding” when the class proceeding was commenced. Since the class proceeding in all of the Securities Law s. 138.3 cases had already commenced when the three years had elapsed, the issue before the court was what was required to “assert” such a cause of action.

In Timminco, the court had held that since leave was required to commence the Securities Act action, it could only be asserted in a class proceeding after the leave was granted. In Green, the court noted that the effect was to require plaintiffs to obtain leave and commence a Securities Act proceeding within three years of the misrepresentation. The court noted this requirement might prove difficult or impossible due to a number of factors beyond the plaintiff’s control. First, the limitation period does not have a discoverability trigger; rather, the period begins to run when the misrepresentation is made, whether or not it is discovered by the plaintiff. Second, the motion for leave is not within the control of the plaintiff, and factors such as the timing of the hearing, the length or the time taken to render judgment may push the matter beyond the time limit.

The court then noted the history of CPA s. 28, which was designed to protect the members of a class proceeding from running the limitation by linking the suspension of the limitation period to the commencement of the claim by a representative plaintiff and avoiding having to require all of the individuals in a class to file a claim in order to protect against the limitation period. The court noted that two provisions were added to the Securities Act provisions for a statutory claim for misrepresentation to deter meritless “strike suits.” These were the requirement for court-approval of any settlement and leave from the court to commence an action.

The court then considered the meaning of “assert” in CPA s. 28 and determined that the preferable meaning was to make a claim or invoke a legal right, instead of enforce a legal right, as preferred by the court in Timminco. The court held that by pleading the statutory claim under s. 138.3 of the Securities Act, a plaintiff is making a claim or invoking a legal right, and thus asserting it under CPA s. 28.

In determining whether or not this was a proper case to correct the error in Timminco, the court held that it had removed the protection provided by CPA s. 28 for individuals seeking the statutory remedy for misrepresentation, thus undermining the goals of the Securities Act provisions – “to facilitate access to justice for investors and to deter corporate misconduct” (Green, para. 64). As well, the court also noted the factors discussed above that remove the timing of the leave being granted from the plaintiff’s control. Accordingly, the court held that the assertion of the statutory right under the Securities Act in the class proceeding pleadings is sufficient to “assert” the cause of action and suspend the running of the limitation period for class members.

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About the Author

Ronald Davis is an associate professor of law at the Faculty of Law, University of British Columbia. He obtained his Bachelor of Laws degree from the Faculty of Law, University of Toronto in 1990, graduating as that year’s silver medalist. He was called to the Ontario Bar and practiced law in Toronto for 10 years before returning to graduate studies at the University of Toronto. He was awarded a Social Sciences and Humanities Doctoral Fellowship in support of his graduate research and he obtained his Doctor of Juridical Science degree in 2004 at the University of Toronto. While pursuing graduate work at the University of Toronto, he co-authored Director and Officer Liability in Corporate Insolvency, which was published in 2002.

Ronald joined the Faculty of Law at UBC in 2003 and teaches corporate law, law and economics, trust law and pension law. He has published articles on pension law, corporate governance and insolvency law and has presented a number of papers on these topics both nationally and internationally.


photo credit: vaXzine via photopin cc

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