A recent decision of the Ontario Court of Appeal in Sharma v. Timminco Limited (Timminco) suggests that a plaintiff and/or class members in a class action must comply with time-limited leave, notice and other pre-conditions to litigation and cannot rely on the suspension of limitation periods under section 28 of the Ontario Class Proceedings Act, 1992 (the CPA) to avoid these requirements. As a result, the decision may give defendants in class proceedings potential defences where plaintiffs and/or class members in class actions fail to comply with such pre-conditions before asserting statutory causes of action under, among other statutes, the Securities Act, the Arthur Wishart Act (Franchise Disclosure), 2000 (the Wishart Act) and the Consumer Protection Act. The decision may also have implications for class actions against the Crown due to the notice requirements under the Proceedings Against the Crown Act.
II. SUSPENSION OF LIMITATION PERIODS UNDER SECTION 28 OF THE CPA
Subsection 28(1) of the CPA 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 limitation period resumes running when the class member opts out, the class proceeding is decertified or analogous events that do not dispose of the class proceeding on the merits occur.
As the Ontario Court of Appeal noted in Coulson v.Citigroup Global Markets Canada Inc., which was released on the same day as Timminco, “the purpose of s. 28 of the Class Proceedings Act, 1992 is to protect class members from the operation of limitation periods until it has been determined whether class members may obtain access to justice through membership in a class proceeding as an alternative to obtaining access to justice by pursuing individual actions.”
III. The Timminco Decision
Timminco is a proposed securities class action alleging misrepresentations that adversely affected the value of shares of Timminco Limited in the secondary market. In addition to pleading negligence and negligent misrepresentation in the statement of claim, the proposed class representative also pleaded that he would seek leave, as required by the Ontario Securities Act, to assert the statutory cause of action for misrepresentation found in section 138.3 of Part XXIII.1 of the Securities Act. Under the Securities Act, leave to assert a section 138.3 statutory misrepresentation claim must be obtained within three years of the alleged misrepresentation to meet the limitation period imposed under the Act.
By February 2011, nearly three years had passed since the alleged misrepresentation, but the plaintiff had not yet obtained leave. The plaintiff successfully sought an order declaring that the three-year limitation period imposed on a section 138.3 claim was suspended by section 28 of the CPA. The defendants appealed to the Ontario Court of Appeal.
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