FCA Narrows the Limitation Period Defence in Civil Competition Act Claims

Introduction

The Federal Court of Appeal has ruled that the "ongoing effects" of a conspiracy do not extend the applicable limitation period for the purposes of a civil action brought under section 36(1) of the Competition Act for a criminal conspiracy contrary to section 45(1). The Court of Appeal's affirmation of the lower Court's decision also suggests that the "ongoing damage" caused by the conspiracy does not extend the limitations period either. Instead, the limitations period starts at the latest when the plaintiff first becomes aware of the acts constituting the breach of the Act, and possibly even earlier, as soon as the conclusion of the relevant conspiracy agreement occurs.

 

The Decision

A civil action pursuant to s. 36(1) of the Competition Act was started by Garford Property Ltd. ("Garford"), an Australian cablebolt manufacturer. Garford argued that the Defendant, Dywidag Systems International, Canada, Ltd. ("Dywidag"), engaged in prohibited conduct contrary to s. 45(1) - as it stood prior to the 2010 amendments to the Competition Act - by entering into a series of purchase agreements with other players in the cablebolt market.

Dywidag brought a motion for summary judgment, asserting a limitations defence. In particular, Dywidag argued that the action was time-barred under s. 36(4) of the Competition Act, because the series of transactions alleged to have constituted the offense concluded more than two years prior to the commencement of the suit.

Garford argued that the violation continued beyond the date on which it became aware of the conduct. As support for that, it sought to rely on the "continuing effects" doctrine to avoid the application of the relevant limitation period. The continuing effects doctrine posits that the limitation period does not commence to run until all effects of the impugned conduct cease. The Federal Court rejected this doctrine insofar as it relates to a civil claim under s. 36(1) of the Competition Act based on breach of s. 45(1):

"The authorities suggest that a continuing offence requires a succession or repetition of separate offences of the same character or kind.

As the authorities show, the continuing effects of a conspiracy, agreement or arrangement are not what are actionable under subsection 36(1) for the Competition Act. The limitation period in subsection 36(4) is based upon "conduct" i.e. the conspiracy or agreement in this case  -  and not upon its effects." (paras. 41-42)

The Plaintiff also sought to avoid the application of the limitation period based on the "continuing damage" doctrine, by arguing that it continued to suffer damage as a result of the Defendant's conduct. However, Russell J. rejected the argument, stating that "no authority" was provided for it.

The Federal Court of Appeal upheld the motions judge's reasoning with respect to the continuing effects doctrine in relation to s. 45(1) offences. Layden-Stevenson J.A., writing for the Court, distinguished earlier cases in which the doctrine had been applied to s. 36(1) claims founded on breaches of other provisions of the Competition Act (e.g., the resale price maintenance, refusal to supply and discrimination prohibitions), and stated:

"In this case, as the trial judge explained, the alleged offence under section 45 was complete at the time of the conclusion of the purchase agreements. Ongoing effects do not extend the time period established in subsection 36(4). Garford's position is tantamount to saying that the conduct prohibited by section 45 is only an agreement which, in fact, injured the market. That is not the law. At the relevant time the offence was complete upon the finalization of an agreement that, if carried into effect, would unduly limit competition." (para. 19)

Additionally, although not expressly addressed by Layden-Stevenson J.A., the Court of Appeal also appeared to affirm the motion judge's reasoning with respect to the continuing damage doctrine, stating that it was in "substantial agreement" with those portions of Russell J.'s ruling in which the doctrine was rejected (para. 17).

Finally, Layden-Stevenson J.A. also dealt with the plaintiff's contention that the s. 36(4) limitation period was extended by virtue of the "discoverability" doctrine, so that it did not being running until the time when the breach of s. 45(1) was discovered by the plaintiff. She held that the discoverability doctrine was not engaged on the facts. Cryptically, however, Layden-Stevenson J.A. also noted that she was "assuming without deciding", that the discoverability doctrine was legally available. This aspect of her reasons is significant, since Russell J. below had found that the discoverability doctrine does not apply to claims under s. 36(1). In view of Layden-Stevenson J.A.'s refusal to disturb that ruling, there is good reason to believe that s. 36(1) is not subject to the discoverability doctrine at all.

Potential Significance

The significance of the appeal lies in its pronouncement that the "continuing effects" doctrine does not apply to the statutory limitation period found in section 36(4) of the Competition Act where a civil claim under s. 36(1) relates to an offence under s. 45(1), at least as it stood prior to the 2010 amendments to the Competition Act. Instead, plaintiffs must bring such actions as soon as they become aware of the conduct alleged to constitute a breach of the Act, or risk summary dismissal. Unless the defendants engage in repeated offences, no ongoing conduct occurs for the purposes of the limitations section of the Act. The Court of Appeal's decision, when read together with the lower court ruling, also suggests that the "continuing damage" doctrine also does not apply to s. 36(1) claims premised on breaches of s. 45(1), and opens the door to the argument that the s. 36(4) limitation period cannot be extended on the basis of the discoverability principle.

Additionally, although Garford was only an individual claim, it is likely to have particular significance for competition class actionsSuch class actions are routinely based upon claims under s. 36(1) for the violation of s. 45(1) of the Competition Act. In this respect, Garford may be viewed as a competition law correlate to the recent decision of the Ontario Court of Appeal in Timminco, which placed a clear time limit upon class action claims for secondary market misrepresentations under Part XXIII.1 of the Ontario Securities Act. The Timminco decision was addressed in a recent post by our colleague Sarah Shody.

Case Information

Garford Pty Ltd. v. Dywidag Systems International, Canada, Ltd., et al, 2012 FCA 48

FCA Court File No.: A-421-10

Date of Decision: February 13, 2012

class action Competition Act continuing damage contrine continuing effects doctrine discoverability doctrine Federal Court of Appeal summary judgment motion

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