The Ontario Court of Appeal recently released its decision in
Sharma v Timminco Limited.1Sharma
confirms the limitation period to bring a claim under the
Ontario Securities Act2 for misrepresentations
alleged to affect the value of secondary market securities will not
be suspended merely because the action takes the form of a proposed
class proceeding. All plaintiffs wanting to assert such causes of
action must obtain leave to do so within three years of the date of
the alleged misrepresentation or they will be barred from bringing
The key statutory provisions at issue in Sharma are as
Section 138.3 of the OSA, which provides a statutory,
civil cause of action against an issuer and those acting on its
behalf for persons who acquire or dispose of the issuer's
securities in the secondary market where misrepresentations have
been made that adversely affect the value of those securities;
Section 138.8(1) of the OSA, which states that an
action under section 138.3 can only be commenced
with leave of the court;
Section 138.14 of the OSA, which provides that such an
action must be commenced within three years of the
alleged misrepresentation; and
Section 28(1) of the Class Proceedings
Act3, which provides that if a cause of action is
"asserted" in a class proceeding, the limitation period
applicable to that cause of action will be suspended in favour of a
class member on the commencement of the class proceeding.
The plaintiff in Sharma brought a putative class
proceeding alleging that certain entities and individuals made
misrepresentations that adversely affected the value of shares of
Timminco Limited in the secondary market. These representations
were alleged to have been made between March 17 and November 11,
2008. The plaintiff issued his claim on May 14, 2009, asserting the
common law causes of action negligence and negligent
misrepresentation. The statement of claim also indicated that the
plaintiff intended to assert the statutory cause of action
found under section 138.3 of the OSA but had not yet
obtained leave to do so.
By the end of February 2011, the plaintiff had not sought leave
and so was faced with a possible limitation issue under section
138.14 of the OSA.
The question on appeal was this: will section 28 of the
CPA be engaged (and will the limitation period applicable
to section 138.3 of the OSA be suspended) where a
plaintiff "mentions" in a pleading that he has an
intention to seek leave to bring a secondary market class action
pursuant to the OSA but has not yet done so?
Overturning the motion judge's decision, the Court of Appeal
found that the answer to this question is "no." In such a
case the limitation period under the OSA will not be
The unanimous 3-member panel based their decision, in part, on
the principles of statutory interpretation. On a plain reading of
the provisions at issue the Court found that merely
mentioning that a plaintiff intends to bring a cause of
action is not the same as actually asserting that cause of
action. To actually "assert" a cause of action based on
this provision of the OSA, and engage section 28 of the
CPA, a plaintiff must first obtain leave under the
The Court noted that to find otherwise would, without principled
justification, put a class plaintiff in a better position than an
individual plaintiff by allowing the class plaintiff to delay
seeking leave. Permitting such a suspension would also disregard
the legislature's intention, as found under section 138.14, to
have civil secondary market disclosure actions resolved with all
Sharma is likely the most important decision to date on
secondary market class proceedings. Following Sharma, it
is clear that plaintiffs bringing secondary market class
proceedings cannot take advantage of the suspension provisions of
the CPAunless they have obtained leave
to bring an action under section 138.3. For defendants in secondary
market class actions Sharma offers some certainty: all
plaintiffs asserting this statutory cause of action must obtain a
decision on leave within three years of the date of the impugned
1 2012 ONCA 107 ("Sharma").
2 RSO 1990 c S 5 ("OSA").
3 1992, SO 1992, c 6 ("CPA").
The foregoing provides only an overview. Readers are
cautioned against making any decisions based on this material
alone. Rather, a qualified lawyer should be consulted.
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