The Supreme Court of Canada has granted leave to appeal in three
securities class action cases in which the defendants seek to
enforce the three-year limitation period for commencing statutory
secondary market securities class action claims in Ontario. All
three appeals are from a February 2014 decision in which the Court
of Appeal for Ontario overturned its own earlier decision that
applied the three-year limitation period.
In its February 2012 decision in Sharma v. Timminco Limited, the Court
of Appeal held that a statutory secondary market claim under the
Ontario Securities Act is statute-barred if leave of the
court to commence the action is not granted within three years from
the date of the alleged misrepresentation or failure to make timely
disclosure. The court further held that section 28 of the Class
Proceedings Act does not suspend the running of the limitation
period in favour of class members until leave to commence the
action has been obtained.
In its February 2014 decision involving the three
cases now appealed to the Supreme Court, the Court of Appeal held
that its earlier decision in Timminco was incorrect. The
Court of Appeal held that a secondary market securities class
action is "commenced" when the statement of claim is
filed — not when leave of the court is granted — and
that filing the statement of claim "asserts" the
statutory cause of action for the purposes of suspending the
three-year limitation period.
The three cases that are now under appeal to the Supreme Court
engage the three-year limitation period in different ways. In Green v.
Canadian Imperial Bank of Commerce, the limitation period
expired after the plaintiffs brought their motion for leave and
certification, but before the motion was argued. The
Timminco decision was released in the midst of the motion
hearing, and led the motions judge to dismiss the statutory
component of the action as statute-barred. In Silver v.
IMAX, the limitation period expired after the hearing of
the plaintiffs' motion for leave and certification, but before
the motion was decided. The motions judge held that she had
jurisdiction to grant the plaintiffs leave to proceed
retroactively. In Trustees of the Millwright Regional Council of
Ontario Pension Trust Fund v. Celestica Inc., the
limitation period expired before the plaintiffs brought their
motion for leave and certification. The motions judge held that the
limitation period applied, but that there were "special
circumstances" relieving the plaintiffs from compliance with
the limitation period.
In addition to the issues relating to the limitation period, the
Supreme Court will also hear arguments as to whether the Court of
Appeal applied the correct test in overturning its previous
decision; whether the Court of Appeal applied the correct standard
for granting leave to proceed under the Securities Act;
and whether it is appropriate to certify common law
misrepresentation claims alongside statutory secondary market
misrepresentation claims. The Supreme Court has not previously
considered the matters at issue in these appeals. However, the
Supreme Court has granted leave to appeal in Theratechnologies Inc. c. 121851 Canada
Inc., a case that deals with the leave standard under the
secondary market liability provisions of the Quebec Securities Act.
For more details on the Québec Court of Appeal decision, see
our July 2013 Blakes Bulletin: Statutory Secondary Market Misrepresentation
Claims: Quebec Court of Appeal's First Decision. The
Theratechnologies appeal is tentatively scheduled to be
heard by the Supreme Court in December 2014.
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