In May of 2009, Sharma initiated a proposed class action
alleging that misrepresentations were made that adversely affected
the value of shares of Timminco Limited in the secondary market.
Under the Ontario Securities Act, leave of the Court was required
to assert such a claim, which needed to be commenced within three
years of the date the alleged misrepresentation was made. The
statement of claim indicated an intention to seek leave, but by the
end of February 2011, the plaintiff had not yet brought a motion to
Facing expiration of the Securities Act limitation period, the
plaintiffs brought a motion for a declaration that section 28(1) of
the Class Proceedings Act, which suspends limitation periods while
a class proceeding is ongoing, suspended the limitation period in
the Securities Act. The plaintiffs' motion was granted at first
instance, and the defendants appealed.
The Ontario Court of Appeal held that pleading an intention to
seek leave to assert a claim was not enough to trigger the
application of the Class Proceedings Act so as to suspend the
limitation period in the Ontario Securities Act.
The Court commented that the Class Proceedings Act applies only
to class actions and would not be available for plaintiffs suing in
their individual capacity. As such, accepting the plaintiffs'
interpretation of the Class Proceedings Act would confer a benefit
on class members in a class proceeding unavailable to individual
litigants, which could not have been the intention of the
legislature when drafting the Class Proceedings Act.
The Court also considered the public policy objectives of the
Ontario Securities Act and remarked that "[s]ection 138.14 was
clearly designed to ensure that secondary market claims be
proceeded with dispatch. That requires the necessary leave motion
to be brought expeditiously."
Finally, the Court clarified that s 28(1) of the Class
Proceedings Act could apply to claims pursuant to section 138.3 of
the Ontario Securities Act, but only where leave to commence the
action has first been granted.
The Court of Appeal in Sharma v. Timminco confirmed that
plaintiffs pursuing claims for statutory misrepresentation on the
secondary market must complete the leave motion, obtain leave, and
issue a claim within three years of the alleged misrepresentation.
This decision recognizes the legislative intent of the Securities
Act, which was to protect public companies and their shareholders
from unmeritorious claims and undue delay in advancing secondary
market class actions. Plaintiffs who lag in pursuing their claims
take the risk that their claims will be statute barred.
This is the first Canadian decision to address this issue
directly and represents a rare procedural blow to class action
plaintiffs. However, as an application for leave to appeal this
ruling to the Supreme Court of Canada was filed on April 16, 2012,
the Court of Appeal decision may not be the final word on this
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