The Final Word (Again?) On Limitation Periods for Securities Class Actions
The Ontario Court of Appeal’s decision in Green represents yet another plaintiff-friendly class action development from the Canadian courts, this time in the context of limitation periods. Less than two years after its watershed decision in Timminco, Ontario’s highest court reversed itself and in a decision authored by Feldman J.A. re-cast the limitation period regime governing secondary market civil liability under the Ontario Securities Act. In Green v. CIBC, 2014 ONCA 90, a five-member panel of the Court overturned Sharma v. Timminco, 2012 ONCA 107 and gave class action plaintiffs the protection of s. 28 of the Ontario Class Proceedings Act (suspending limitation periods) without first requiring them to bring a leave motion under s. 138.8 of the Securities Act.
Under Green, the limitation period in s. 138.14 is now suspended for class members as soon as a proposed representative plaintiff pleads a cause of action based on s. 138.3, including the facts that found that claim, and pleads an intention to seek leave to commence an action under the Securities Act. Timminco (discussed in an earlier post) had held that a plaintiff’s claim became statute-barred if leave was not obtained within the three-year limitation period, and that the suspension provision of s. 28 of the Class Proceedings Act was not available until leave was obtained. The Manitoba Legislature enacted amendments to its securities legislation to address the impact of Timminco by stopping the limitation period once the plaintiffs have brought their leave application, and the Ontario government had signalled its intention to respond similarly depending on the outcome in these appeals.
Green involved three distinct appeals relating to proposed class actions brought under Part XXIII.1 of the Securities Act: Green v. CIBC, 2012 ONSC 3637; Silver v. IMAX, 2012 ONSC 4881; and Millwright Regional Council of Ontario Pension Trust Fund (Trustees of) v. Celestica Inc., 2012 ONSC 6083. In each appeal, the claim was issued and served within the three-year limitation period for bringing the statutory claim, but in each case, leave to commence the statutory action was not obtained within the three-year period.
In Green, the motion judge held that the plaintiffs’ cause of action was statute-barred in light of the decision in Timminco. In IMAX, the motion judge had already granted leave when Timminco was released. She ordered that the Order granting leave to commence the action applied nunc pro tunc and the action was permitted to proceed. In Celestica, the motion judge found, on the defendants’ motion to strike the Claim on the strength of the limitation period, that the doctrine of “special circumstances” applied and it was not “plain and obvious” that the plaintiffs’ claims were statute-barred.
The Court of Appeal held that Timminco was wrongly decided and that none of the three appeals were statute-barred. The main reasons underpinning the Green decision were:
- Timminco removed one of the main benefits of a class action, which is the suspension of the limitation period for all members of the class;
- Timminco undercut the ability of investors to bring a class action within the limitation period as they do not control whether they can meet or toll the limitation period; and
- The reaction of provincial legislatures and the securities bar suggested that Timminco’s interpretation led to unintended results that limited access to justice.
Green is perhaps an unsurprising development in the law given the widespread reaction to the Court of Appeal’s decision in Timminco. This is particularly true following the Ontario government’s 2013 budget announcement that it would closely monitor “current cases” and amend the Securities Act “if needed” to suspend the limitation period before leave is obtained. Though we have not seen any draft legislation, it is believed that the Ontario approach would have largely mirrored the amendments implemented in Manitoba, which suspend the operation of the limitation period once the plaintiffs bring the leave application.
It is noteworthy that the Court of Appeal, to address the hurdle created by its own earlier interpretation of the current legislation, went further in Green than the Ontario government was expected to in its anticipated amendments. The Court of Appeal’s decision stops the limitation period based on the issuance of a statement of claim, and without any other step by the plaintiffs towards obtaining leave to proceed. There is a good argument that the approach taken in Manitoba is more just, requiring plaintiffs to take some steps to advance their case for a statutory cause of action before the sweeping protection of a suspended limitation period is granted.
One or more of the defendants in the three actions may seek leave to appeal to the Supreme Court of Canada. Given that the Supreme Court refused leave in Timminco in 2012, it will be interesting to see if leave to appeal the reversal of Timminco is granted.
Green v. CIBC, 2014 ONCA 90
ONCA Docket: C55832
Date of Decision: February 3, 2014
limitation period Ontario Court of Appeal secondary market civil liability Securities Act