The Honourable Justice Paul Perell of the Ontario Superior Court of Justice has released two recent decisions in proposed secondary market securities class actions considering the Supreme Court of Canada's decision in Canadian Imperial Bank of Commerce v. Green ("Green") from December 2015 and providing guidance on the application of the doctrine of res judicata and abuse of process:

  • In Pennyfeather v. Timminco, Perell J. determined that the plaintiff did not have recourse to the nunc pro tunc doctrine to relieve against the expiry of the limitation period in section 138.14 of the Securities Act (Ontario) (the "OSA") for obtaining leave to commence an action for secondary market liability, resulting in the final dismissal of the statutory claim in the Timminco class action.

  • In Trustees of the Millwright Regional Council of Ontario Pension Trust Fund v. Celestica Inc., Perell J. determined that the plaintiff's second attempt to seek certification of common law claims for secondary market liability (after the Supreme Court of Canada dismissed the statutory claims in Green) was barred by the doctrine of res judicata, but without prejudice to the plaintiff moving pursuant to section 7 of the Class Proceedings Act, 1992 (the "CPA") to continue the proposed class action with the joinder as co-plaintiffs of those Class Members who opt into the action after a notice program to be approved by the court.

Timminco - The court dismisses the plaintiff's request for nunc pro tunc relief

In Timminco, the Ontario Court of Appeal in an unanimous decision concluded in 2012 that the three-year limitation period applicable to secondary market securities class actions brought under Part XXIII.1 of the OSA continues to run until a plaintiff obtains leave to commence the action and issues a Statement of Claim asserting the statutory cause of action. As a result of this finding, the plaintiff's motion for leave to commence an action under Part XX111.1 of the OSA was held to be statute barred.

In light of the decision in Green setting out the circumstances in which a court may grant an order on a retroactive basis nunc pro tunc ("now for then") in order to relieve against the expiry of a limitation period, the plaintiff sought to bring its leave motion seeking nunc pro tunc relief. Nunc pro tunc allows a court to backdate an order to a date before it was actually granted. Historically, nunc pro tunc orders have been used to remedy procedural issues that would cause injustice if allowed to exist.

The Supreme Court in Green held that the power to backdate orders nunc pro tunc is part of a court's inherent jurisdiction. However, such orders must have a tangible reference point in the history of a legal proceeding to which they can attach. The question in the OSA Part XX111.1 context is: can nunc pro tunc jurisdiction be used to backdate a leave order if the leave motion was not brought before the expiry of the limitation period? The Supreme Court held that it could not. A nunc pro tunc leave order in such cases would be of no use, as it would be retroactive to a date after the expiry of the limitation period.

Green therefore established a "bright-line" rule for the application of nunc pro tunc in the OSA Part XX111.1 context. The earliest date to which a nunc pro tunc leave order can be backdated is the day on which the plaintiff brought her leave motion, such that requests for nunc pro tunc orders must be denied in cases where the leave motion was brought after the expiration of the limitation period. In Timminco, the plaintiff's leave motion materials were not filed until June 13, 2011, which was outside the limitation period.

The defendants brought a motion in Timminco for a declaration that the plaintiff's request for nunc pro tunc relief was barred by the doctrine of res judicata and an abuse of process. The plaintiff brought a cross-motion for a declaration that if a leave order was granted following a hearing on the merits, then such order would be nunc pro tunc to relieve against the expiry of the limitation period.

Perell J. determined that on the applicable legal tests the request for nunc pro tunc relief was barred by issue estoppel (a branch of res judicata) and abuse of process on the basis that the plaintiff was "indeed re-litigating an issue that could and ought to have been decided already" at the motion which culminated in the 2012 decision from the Ontario Court of Appeal.

However, he further concluded that he had a residual discretion not to apply res judicata and abuse of process and he decided that it would not be "fair and in the interest of justice to preclude hearing [the plaintiff's] argument that the court's nunc pro tunc jurisdiction should be applied in the circumstances of his statutory claim."

Turning to the request for nunc pro tunc relief, Perell J. affirmed that the Supreme Court of Canada's decision in Green established a bright-line rule that an order can only be backdated as far back as the date on which the motion for leave to commence a Part XXIII.1 action is filed with the court. As the plaintiff's motion was not filed with the court until after the expiry of the applicable limitation period, a nunc pro tunc order would provide no assistance and should not be granted. Perell J. further determined that the plaintiff was not entitled to nunc pro tunc relief on the factors enumerated in Green. Justice Perell held that:

  • Plaintiff's counsel had no adequate explanation for the delay in advancing the claim;
  • It was not "clearly the case" that the defendants would not be prejudiced by the delay;
  • The defendants did not "lull or induce" the plaintiff not to pursue his claim;
  • The plaintiff was capable of pursuing his claim; and
  • It was not clear that failing to exercise nunc pro tunc jurisdiction would permit the defendants to avoid a possibly meritorious claim on purely technical grounds.

As a result, the plaintiff has no recourse for the statute bar of his proposed statutory cause of action in Timminco.

Celestica - The court leaves opening for plaintiff to certify common law claims

In Celestica, in December 2013 Perell J. heard a combined leave motion and motion for certification of both the statutory and common law claims for secondary market liability. The Court granted the motion for leave and certified the statutory claims but declined to certify the common law claims. The plaintiff did not appeal the order not to certify the common law claims.

Subsequent to that decision, Celestica (in the context of the Green appeals) appealed to the Supreme Court of Canada the decision of the Ontario Court of Appeal upholding Perell J.'s earlier decision exercising his nunc pro tunc jurisdiction and the doctrine of special circumstances to provide relief to the plaintiff against the expiry of the applicable limitation period in section 138.14 of the OSA. The Supreme Court of Canada determined that the plaintiff was not entitled to nunc pro tunc relief and that the special circumstances doctrine did not apply. Accordingly, the statutory claims were dismissed.

As a result, the plaintiff sought to bring a new motion to certify the common law claims. The defendant brought a motion to quash in reliance on the res judicata doctrine and abuse of process. The plaintiff argued that there was an unanswered question at the original certification hearing - "where there are no statutory claims and, therefore, no viable litigation alternative for claims already deemed to have a reasonable possibility of success, is a class proceeding now the preferable procedure for the Class Members' common law claims?"

Perell J. concluded that "a litigant cannot avoid an issue estoppel by atomizing the legal question before the court to find some unexamined atom." In this case, Perell J. saw no basis to exercise his discretion not to apply the res judicata doctrine.

Under s. 7 of the CPA, where the court refuses to certify a proceeding, the court may permit the proceeding to continue and so directed that such a motion be brought. No further directions in respect of such motion were provided.

Conclusions

  • The doctrine of issue estoppel is sufficiently broad to prevent the re-litigation of issues that ought to have been argued in a prior proceeding or motion.
  • The Court has a residual discretion not to apply res judicata and may do so in circumstances where it is perceived there has been a change or crystallization of the law.
  • The Supreme Court of Canada established a bright-line rule that the doctrine of nunc pro tunc cannot be used to relieve against the expiry of a limitation period prior to a motion for leave to commence an action under Part XXIII.1 of the OSA being brought.
  • Even where certification is denied and no appeal is taken by the proposed representative plaintiff, there may be an ability to preserve a proposed class action through section 7 of the CPA.