In a recent ruling the Ontario Superior Court of Justice held that the discoverability principle applies to the limitation period imposed by Section 36(4)(a) of the Competition Act.(1) The ruling was made in Fanshawe College v AU Optronics Corporation, a proposed class proceeding related to allegations of price fixing in the market for liquid crystal display (LCD) panels and products.(2)
The action concerned an allegation of price fixing in the LCD marketplace between January 1 1998 and December 11 2006. The action was commenced in July 2009.(3)
Two of the defendants moved for summary judgment dismissing the action on the basis it was statute barred – more than two years had elapsed between December 11 2006, when the alleged unlawful conduct ended, and July 2009, when the action was commenced.
In support of their position, the moving parties relied, among other arguments, on prior law stating that the principle of discoverability cannot be used to extend the limitation period set out in Section 36(4) of the Competition Act.(4) Unlike the Limitations Act 2002,(5) which provides that its limitation periods are subject to discoverability, Section 36(4) sets out a two-year limitation period without any reference to discoverability.
Prior law holding no discoverability
The position taken by the moving parties – that the limitation period set out in Section 36(4) of the Competition Act should not be subject to discoverability – was accepted by Justice Snider of the Federal Court in Laboratoires Servier v Apotex Inc, who held that since "the statutory limitation period in s. 36(4) expressly runs from a specific date independent of knowledge, the discoverability principle cannot apply".(6) These reasons were cited favourably by Justice Russell of the Federal Court in Garford Pty Ltd v Dywidag Systems International, Canada Ltd, who also declined to apply the judge-made discoverability rule to extend the statutory limitation period under Section 36(4).(7)
Servier and Garford have recently been followed and applied in various provincial superior and appellate courts, including the Alberta Court of Appeal,(8) the British Columbia Supreme Court(9) and the Ontario Superior Court.(10) In Fairview Donut Inc v The TDL Group Corp, a proposed price-fixing class action before the Ontario Superior Court of Justice, Justice Strathy cited the reasons in Garford as rejecting the argument that discoverability applied to Section 36(4) of the Competition Act.(11) He went on to find that the Competition Act claims in that case were statute barred and allowed the defendants' motion for summary judgment.(12)
In dismissing the defendants' motion for summary judgment in Fanshawe, the court departed from prior jurisprudence and held that the principle of discoverability does apply to the limitation period set out in Section 36(4) of the Competition Act. It reasoned that because conspirators can be expected to conceal their conduct, affected individuals may not find out about those conspiracies until more than two years after the conduct has ended.(13)
As such, if discoverability does not apply to the Section 36(4) limitation period, individuals may see their rights of action expire before they learn about possible harm.(14) The court found it implausible that Parliament intended to create such an "illusory" right of action and thus held that Section 36(4) is subject to discoverability.(15)
Fanshawe creates uncertainty for plaintiffs and defendants to Section 36 claims as it departs from prior decisions in Ontario, Alberta, British Columbia and the Federal Court, which held that discoverability does not apply to Section 36(4). The court's reasoning may or may not be adopted by those other courts, and it remains to be seen whether it will be followed or upheld in Ontario.
The ruling is significant as the limitation period set out in Section 36(4) applies not only to price-fixing claims, but also to the private right of action under Section 36 of the Competition Act based on any breach of Part VI of the Competition Act, including bid rigging,(16) false or misleading advertising(17) and pyramid selling.(18)
D Michael Brown
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