This morning, the Supreme Court of Canada issued its much anticipated decisions in CIBC v. Green (“CIBC”), IMAX v. Silver (“IMAX”), and Celestica v. Millwright Regional Council of Ontario Pension Trust Fund (“Celestica”), dismissing the appeals in CIBC and IMAX, in part, and allowing the appeal in Celestica.  Accordingly, only the cases against CIBC and IMAX will proceed.

The Supreme Court combined each of the three decisions into a single ruling, reflecting the similarities between the three underlying cases.  Each of the three cases involved class action suits for secondary market misrepresentations, each of the three cases saw the plaintiffs plead both common law and statutory causes of action, and each of the three cases required the court to resolve competing interpretations of two pieces of Ontario legislation: s. 138.14 of the Ontario Securities Act (the “OSA”) and s. 28 of the Class Proceedings Act (the “CPA”).

The Supreme Court resolved the confusion stemming from the competing interpretations of the OSA and CPA in respect of limitation periods and provided guidance with respect to the use of the doctrines of nunc pro tunc and special circumstances to remedy the expiry of limitations.  Importantly, the Supreme Court also provided guidance with respect to the threshold test for leave and confirmed the availability of certain types of common law claims in securities class actions.

Practical Implications

The practical implications of the limitation period aspects of today’s Supreme Court decision for pending and future securities class actions in Ontario are limited given the statutory amendment referred to below which renders the specific issue considered in these appeals moot.  That said, parties in a wide range of cases may be guided by the court’s application of the nunc pro tunc and special circumstances doctrines. 

Beyond the limitation period issues, the decision has important implications for other pending and future actions seeking leave in Ontario.  It is now clear that plaintiffs intending to seek leave under s. 138.8 of the OSA will be required to meet the threshold for leave established by the Supreme Court in the Quebec case, Theratechnologies.  The court also left the door open to the continued inclusion of common law claims in these circumstances.  However, the decision does not address the far more difficult questions that such claims give rise to, including how and whether reliance can be established on a class-wide basis.

Leave Test and Common Law Claims

As noted above, it is the Supreme Court’s decision regarding the leave test and the availability of common law claims with respect to the CIBC case that has important implications for other pending and future actions.  

The Supreme Court first addressed the defendants’ challenge to the threshold that must be met by a plaintiff applying for leave under s. 138.8 of the OSA.  138.8(1)(b) stipulates that the court must be satisfied that “there is a reasonable possibility that the action will be resolved at trial in favour of the plaintiff.”

In rendering its decision on this issue, the Supreme Court looked to Theratechnologies Inc., v. 121851 Canada Inc.,[1] in which the court recently interpreted s. 225.4 of Quebec’s Securities Act (the “QSA”).  There, the court stated that for an action to have a “reasonable possibility” of success, there must be a “reasonable or realistic chance that [an action] will succeed” and claimants must “offer both a plausible analysis of the applicable legislative provisions, and some credible evidence in support of the claim”.   Commenting that there is no difference between the language of s. 138.8 of the OSA and s. 225.4 of the QSA, the Supreme Court held that the threshold test articulated in Theratechnologies applies to the OSA as well.

The Supreme Court next addressed the defendants’ argument that none of the seven issues relating to the plaintiff’s common law misrepresentation claim should be certified and that the common law misrepresentation claim itself fails the preferability analysis required under s. 5(1)(d) of the CPA.  The Supreme Court rejected this argument, noting that s. 138.13 of the OSA provides that the statutory right of action is “in addition to” other rights, and that the preferability analysis under the CPA pertains to procedure, not substantive causes of action.

Interplay Between the OSA and CPA

Much of today’s decision focused on the resolution of competing interpretations of the OSA and CPA

Each of the plaintiffs commenced class proceedings under Section 138.3 of the OSA, which permits claims for secondary market misrepresentation.  Such claims may be commenced only with leave of the court as per s. 138.8, and only if brought within three years after the date of the alleged misrepresentations, or six months after the issuance of a news release disclosing that leave has been granted, as stipulated by s. 138.14.  Section 28 of the CPA, meanwhile, suspends a limitation for “a cause of action asserted in a class proceeding” for members of a class “on the commencement of the class proceeding.”

Reading the two acts in concert resulted in confusion over the meaning of the word “asserted” in the CPA, and whether a statutory claim for secondary market misrepresentation could be considered “asserted” even before a court granted leave to do so.  Although the Ontario legislature has since amended s. 138.14 of the OSA to suspend the limitation period on the date a notice of motion for leave under section s 138.8 of the OSA is filed, thus clearing up the confusion, this amendment came too late to affect the instant cases.

In deciding the instant cases, the Ontario Court of Appeal determined that a representative plaintiff who merely pleads an intention to seek leave as per s. 138.3 of the OSA within the limitation period has met the requirements of the CPA and will not be statute-barred.  This decision, however, was contrary to a 2012 ruling by the Ontario Court of Appeal in Sharma v. Timminco Limited.

Today, the Supreme Court rejected the more recent interpretation.  It found that the OSA is clear that “[u]nless leave is granted, a statutory action may not be commenced. . . .” and subsequently ruled that “the limitation period cannot be suspended in favour of the class members under s. 28 CPA before leave is granted.”  Barring the further considerations discussed below, this ruling would have concluded all three proceedings as statute-barred.

Nunc Pro Tunc

The Supreme Court thereafter discussed nunc pro tunc, a doctrine which permits a court to, in essence, backdate its rulings, to determine whether it could remedy the limitations expiry.  The Supreme Court commented that courts have been willing to grant nunc pro tunc orders where leave is sought within the limitation period but not obtained until after the period expires, although cautioned that such orders should not be given where they would undermine the purpose of the limitation period or the legislation at issue. 

Although split on the merits of applying nunc pro tunc to the instant cases, particularly with respect to CIBC, the Supreme Court ultimately decided in favour of the CIBC and IMAX plaintiffs.  The Supreme Court limited its decision with respect to IMAX to only the defendants who were parties to the original statement of claim.  Further, the Supreme Court noted that because no motion for leave was filed before the expiry of the limitation in Celestica, a nunc pro tunc order could not provide a remedy.

Special Circumstances

The Supreme Court concluded its limitations analysis by addressing the doctrine of special circumstances, which allows a court to adjust any unjust effects of limitation periods by allowing a plaintiff to add a cause of action or a party to the statement of claim after expiry.  The Supreme Court ruled that the doctrine was of no avail to any of the plaintiffs since it could not overcome the leave requirement of s. 138.8 of the OSA.