Court Of Appeal Agrees To Reconsider Timminco

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On February 6, 2013, the Court of Appeal for Ontario agreed to review its much discussed decision in Sharma v. Timminco Limited (2012 ONCA 107).

Background

Timminco concerned a proposed class action in which the plaintiff sought to assert a claim for secondary market misrepresentation pursuant to section 138.3 of the Ontario Securities Act, R.S.O. 1990, c. S.5 (the “OSA”), for which leave of the court is required under s. 138.8(1). Section 138.14 of the OSA provides that an action under s. 138.3 must be commenced within three years of the date of the alleged misrepresentation (or within six months following the issuance of a news release disclosed that leave has been obtained, whichever occurs first). The plaintiff had asserted in his Statement of Claim that he intended to seek leave as required by the OSA but, for various reasons, had not obtained leave by February 2011 (when the three-year limitation period was about to expire). The plaintiff thus sought and obtained an order declaring that the limitation period had been suspended by s. 28(1) of the Class Proceedings Act, 1992, S.O. 1992, c. 6 (the “CPA”), which provides that “any limitation period applicable to a cause of action asserted in a class proceeding is suspended in favour of a class member on the commencement of the class proceeding”. The defendants appealed to the Court of Appeal on the issue of whether pleading the intention to seek leave was sufficient to suspend the limitation period. The Court of Appeal overturned the initial decision, concluding that without leave having been obtained, no cause of action under s. 138.3 was being “asserted” so as to engage s. 28(1) of the CPA. As such, the cause of action for secondary market misrepresentation was not a legal right and could not be enforced. The Supreme Court of Canada declined to review the decision.

Since its release in February 2012, Timminco has attracted criticism from the plaintiffs’ bar which argues that the court’s approach has proven to be unworkable given the inherent delays in the court system, and the ability of corporate defendants to exacerbate those delays. In contrast, the defence bar has praised Timminco as providing certainty.

In the meantime, two further secondary market liability cases had come before the Court of Appeal on appeal: Green v. Canadian Imperial Bank of Commerce (2012 ONSC 3637), in which Justice Strathy reluctantly declined to certify a class action because it was time-barred by the three-year limitation period; and Silver v. IMAX (2012 ONSC 4881), in which Justice van Rensburg granted an order issuing retroactive leave under s. 138.8 of the OSA to allow the claim to proceed. IMAX is particularly interesting in that oral argument on the leave application had concluded before – and Justice van Rensburg’s decision was released after – the three-year limitation had expired. At the request of the plaintiffs in both cases, the Court stated that it would appoint a special five-judge panel to hear the two appeals and reconsider the issues raised by Timminco. The panel is set to convene in May 2013.

Commentary

Limitation periods are meant to provide certainty by representing an ultimate cut-off for potential legal proceedings. Recent legislative reforms were aimed at making Ontario’s limitation period laws even stricter by eliminating the “special circumstances” doctrine. IMAX represents a departure from this trend and a step back towards the “special circumstances” doctrine. On the other hand, Timminco seemed harsh. What, specifically, has motivated the Court of Appeal to reconsider the issue is not known. Typically, however, full panels of the Court of Appeal are convened to reconsider decisions that have sparked public debate, which has been the case here. It may be that the Court of Appeal wishes to clarify its prior ruling – for example, by promulgating a new test for these types of cases. It may also be that the Court overrules itself. Our own view is that the Court may well provide clarification as to the meaning of the word “asserted” found in s. 28(1) of the CPA; the Court may, for example, hold that the launching of a leave motion under s. 138.3 of the OSA should suffice to suspend the applicable limitation period, since that step is akin to “asserting” a claim within the meaning of s. 28(1) of the CPA. It may also hold that as long as the motion is heard before the limitation period expires, the limitation period will have been complied with.