The consequences of recent jurisprudence on secondary market class action limitation periods have recently manifested themselves in an unusual way in Pennyfeather v Timminco Limited ("Pennyfeather").1 Pennyfeather is a class action for alleged misrepresentations affecting the value of shares of Timminco Limited (the "Timminco Action"). The Timminco Action was subject to the ruling in Sharma v Timminco ("Sharma"),2 in which the Ontario Court of Appeal held limitation periods in secondary market misrepresentation class actions were not suspended by section 28 of the Class Proceedings Act, 1992 ("CPA")3 until leave is granted under the Securities Act.4 As a result of Sharma, the Timminco Action was statute-barred. After some criticism, the Court of Appeal overruled Sharma only to be reversed by the Supreme Court of Canada in Green v CIBC ("Green").5 The SCC majority confirmed that the Securities Act limitation periods were not suspended until leave was granted, though an order nunc pro tunc could be available in some situations to alleviate limitation period restrictions.
Green led the defendants to move for declarations to terminate the Timminco Action. In response, Pennyfeather argued for nunc pro tunc relief. The doctrine of nunc pro tunc permits some courts, through their inherent jurisdiction, to effectively backdate orders that they issue. In a secondary market class action, it is the order granting leave under the Securities Act that would be made nunc pro tunc. However, the SCC majority cautioned such an order should only be permitted if the leave application is brought before the limitation period could bar the claim. This has come to be called the "red-line rule".
The defendants in the Timminco Action opposed any order nunc pro tunc on the basis of the red-line rule and also argued res judicata, issue estoppel and abuse of process. Justice Perell ultimately decided to consider the nunc pro tunc issue. Consequently, Pennyfeather is one of the first reported decisions since the release of Green to consider if a nunc pro tunc order granting leave should be made. Justice Perell ruled that he would not backdate any order in the case as the plaintiff did not apply for leave before the expiry of the limitation period in accordance with the red-line rule.
Footnotes
1 2016 ONSC 3124
2 2012 ONCA 107
3 SO 1992, c 6
4 RSO 1990, c S.5
5 2015 SCC 60
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