Law Times

Law Times • April 15, 2013 Page 9 FOCUS Appeal court to consider limitation periods Five-member panel convened to address confusion over Securities Act cases BY Julius Melnitzer For Law Times T he Ontario Court of Appeal has decided to convene a five-member panel to reconsider the legal issues arising from the narrow interpretation given in Sharma v. Timminco Ltd. to the statutory limitation period for secondary-market misrepresentation actions found in the Ontario Securities Act. The court ruled that plaintiffs in such actions, who must obtain leave to commence their suits, must do so within three years of the date of the impugned misrepresentation. Following Timminco's release in early 2012, some defence lawyers called it the most important decision in secondary-market class action jurisprudence. The decision overturned Superior Court Justice Paul Perell's finding that s. 28 of the Class Proceedings Act, which suspends limitation periods applicable to class actions "on the commencement of the class proceeding," began to run from the time the plaintiffs announced their intention to seek leave in their statement of claim. That's precisely what the Timminco plaintiffs did. Subsequently, the Supreme Court of Canada denied leave to appeal in Timminco. What followed, however, were conflicting decisions from various Superior Court judges as to the scope of the relief, if any, available to plaintiffs who had missed the threeyear limitation as interpreted by the Court of Appeal. In Green v. Canadian Imperial Bank of Commerce, Justice George Strathy held that the court had no discretion to extend the limitation period following its expiry. He refused to apply the common law doctrine of "special circumstances" to secondary-market cases. The doctrine extends limitation periods where the interests of justice so require and there's no prejudice to defendants apart from having to defend the actions. Strathy did state, however, that he would have extended the limitation period on the facts had he found that the doctrine was applicable. But in Silver v. Imax, Justice Katherine van Rensburg did grant relief. She concluded that the court had discretion to grant leave to proceed with a class action nunc pro tunc so as to situate the granting of leave within the limitation period. Subsequently, in Trustees of the Millwright Regional Council of Ontario Pension Trust Fund v. Celestica Inc., Perell — in direct opposition to Strathy — also found discretion to extend relief from the limitation period existed but applied the common law doctrine of "special circumstances" in support of that ruling. He found the extension didn't prejudice the defendants because they had been aware of the claims since 2007 and had been defending parallel actions in the United States since then. The upshot is that the rulings in Silver and Celestica significantly diluted the hard-line approach taken by the Court of Appeal in Timminco, a situation that created serious problems for plaintiffs who only discovered a misrepresentation well into the three-year period and then had to encounter the vagaries of a notoriously slow litigation process abetted by defendants well aware of the advantages of delaying the hearing of the leave application. "If relief is not available when courts do not have adequate resources to deal with leave applications expeditiously, defendants will have an extraordinary economic incentive to delay the proceedings," says Siskinds LLP's Dimitri Lascaris, a plaintiff-side class actions lawyer. Indeed, as Perell saw it, the legislature "did not intend to sacrifice access to justice on the altar of expeditiousness." He noted that the idea behind the special circumstances doctrine was to "ameliorate the rigours of an absolute limitation period in appropriate circumstances." But Larry Lowenstein of Osler Hoskin & Harcourt LLP's Toronto office, who represents defendants in class action cases, doesn't regard Celestica as opening the floodgates. "Justice Perell recognized that the special circumstances doctrine is principled and narrow," he says. "It comes down to an inquiry as to whether the plaintiffs, by initiating the litigation within the limitation period albeit not obtaining leave within that period, have put the defendants on proper notice to avoid prejudice." Kirk Baert, who represents plaintiffs in class actions at Koskie Minsky LLP in Toronto, says the debate over extending the limitation period was inevitable. "It shows that the original rulings that the three-year limitation continued to run until leave was actually obtained made no sense," he says. "So now we have to deal with a whole new area of law that makes complicated proceedings even more unnecessarily complicated." But Alan D'Silva of Stikeman Elliott LLP, who represented Timminco, maintains the Court of Appeal dealt with the matter correctly. "The Court of Appeal determined that to hold otherwise would be unfair because it would extend the limitation period for class plaintiffs beyond the period allowed to individual plaintiffs or shareholders," he says. "The court also recognized that this interpretation was consistent with the legislative purpose of ensuring that secondarymarket claims proceeded with dispatch so they are not held over the heads of the company and other potential defendants." Some defence counsel also relish the idea that Timminco could have implications well beyond secondary-market class actions. "The decision will have profound implications for many types of class actions," says Jennifer Dolman, a franchise law partner at Oslers. "There are other statutes with preconditions to litigation, such as the requirement to give notice or obtain leave, and Timminco is certainly open to the broader interpretation that the Class Proceedings Act does not suspend time limits for satisfying the preconditions that are found in these particular statutes." By way of example, Dolman cites Ontario's Arthur Wishart Act that governs franchise agreements. The legislation requires a party who asks the court to rescind a franchise agreement to give notice within certain time limits. "As in Timminco, where the court ruled that the right to sue did not arise until leave was obtained, courts have ruled that the The debate over extensions 'shows that the original rulings that the three-year limitation continued to run until leave was actually obtained made no sense,' says Kirk Baert. right to seek rescission in a franchise case does not arise unless notice was given in a timely fashion," says Dolman. Ontario's Consumer Protection Act has a similar notice provision for consumers who want to rescind their contracts. So does the Proceedings Against the Crown Act that requires citizens who want to sue the government to give notice before starting their lawsuits. "Timminco has emphasized that time-limited preconditions to suing apply to class actions," says Dolman. Many of the issues arising from Timminco may be clearer after the parties argue Green and Silver before the five-member panel of the Court of Appeal in May 2013 (the court won't hear Celestica at the same time). Indeed, although the central issue before the court is whether relief from the limitation period is available at all and, if so, in what circumstances, it appears the plaintiffs will ask the Court of Appeal to go further and reconsider its own decision in Timminco. "What is apparent is that Timminco is creating difficulties for Superior Court judges who have to apply it," says Brian Radnoff of Lerners LLP's Toronto office. "At the least, the Court of Appeal has to look at the original decision and determine whether it merits a reconsideration." But Radnoff is skeptical that the court will overrule itself. See Timminco, page 10 TRUST you're putting your reputation on the line. It's all about trust well placed. DESMOND DIXON | DAVID NEILL | ALAN FARRER Since 1936 Thomson, Rogers has built a strong, trusting, and collegial relationship with hundreds of lawyers across the province. As a law firm specializing in civil litigation, we have a record of accomplishment second to none. With a group of 30 litigators and a support staff of over 100 people, we have the resources to achieve the best possible result for your client. Moreover, we are exceptionally fair when it comes to referral fees. We welcome the chance to speak or meet with you about any potential referral. We look forward to creating a solid relationship with you that will benefit the clients we serve. YOUR ADVANTAGE, in and out of the courtroom. TF: 1.888.223.0448 T: 416.868.3100 W: www.thomsonrogers.com www.lawtimesnews.com ThomsonRogers_LT_Apr16_12.indd 1 12-04-11 9:29 AM

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