Canada: Celestica Securities Class Action Saved From A Limitation Period Defence By Application Of The "Special Circumstances" Doctrine

Last Updated: October 30 2012
Article by Ellen Snow

In a decision released on October 15, 2012 in the Trustees of the Millwright Regional Council of Ontario Pension Trust Fund v. Celestica Inc. securities class action, Justice Perell held that the "special circumstances" doctrine can be applied by courts to extend the limitation period contained in section 138.14 of Ontario's Securities Act (the "OSA" or the "Act") which requires that a secondary market purchaser misrepresentation action under Part XXIII.1 of the OSA must be commenced within three (3) years of the alleged misrepresentation.  In reaching this conclusion, Justice Perell has taken a broader view than previous rulings of the courts' jurisdiction to relieve against the strict application of a limitation contained in the OSA.

In Celestica, the Plaintiffs allege that Celestica Inc. and two of its former officers made misrepresentations about Celestica's restructuring of its operation in the period from January 27, 2005 through to January 30, 2007.   The Defendants brought a Rule 21 motion before Justice Perell seeking to strike out significant portions of the Plaintiffs' Fresh as Amended Statement of Claim on the basis that, amongst other things, the Plaintiffs' had not obtained leave to proceed with their action under section 138.8 of the OSA before the expiry of the three-year limitation period set out in the Act.  The Defendants relied on the Court of Appeal's decision in Sharma v. Timminco Limited, another proposed securities class action, which found that the limitation in 138.14 of the OSA was not suspended by section 28 of the Class Proceedings Act, 1992 (the "CPA") unless and until a proposed representative plaintiff obtains leave to bring the class proceeding and then commences the action under section 138.3 of the OSA.  The Defendants argued that it was plain and obvious that the limitation period had expired and the Plaintiffs' claim could not proceed and that the courts had no discretion to extend the running of the limitation period by making orders nunc pro tunc (meaning "now for then").

Justice Perell held that, given the Court of Appeal's ruling in Timminco, it was clear that the limitation period in section 138.14 of the OSA had not been suspended by virtue of section 28 of the CPA and accordingly the Plaintiffs' claim was time-barred.  However, the Court disagreed with the Defendants' submissions that it had no discretion to relieve against the operation of the statutory limitation period.  Rather, after a review of the case law and the provisions of Ontario's Limitations Act, 2002, Justice Perell held that the common law doctrine of "special circumstances", which operates to extend a limitation period where the interests of justice so require, applied to section 138.14.  The Court held that the doctrine was "principled, limited and narrow" in nature and would not operate if a defendant is prejudiced apart from the prejudice involved in having to defend an action on its merits.  Justice Perell concluded that, if the Plaintiffs were ultimately granted leave to proceed with their claim under section 138.8 of the OSA, this would be an appropriate case in which to apply the special circumstances doctrine given that the Defendants had been aware of the claims since 2007 and had been actively defending similar claims brought against them in the United States since that same time.

In the result, Justice Perell dismissed the balance of the Defendants' motion to strike the claim, although he did strike out certain common law causes of action for failure to plead the requisite elements of the torts, but granted the Plaintiffs leave to amend their claims with respect to those claims.

In finding that the special circumstances doctrine could be applied to section 138.14, Justice Perell's decision stands in stark contrast to the decision of Justice Strathy in Green v. Canadian Imperial Bank of Commerce.  In that case, Justice Strathy concluded, based on his review of the cases and the provisions of the Limitations Act, 2002 that the special circumstances doctrine was not available within the framework of section 138.14 of the OSA.

Accordingly, given these conflicting lower court decisions, it is unclear whether the special circumstances doctrine may be applied to extend the limitation period set out in section 138.14 of the OSA.  Appellate intervention may prove to be necessary in order to resolve this debate in the courts.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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