Canadian Imperial Bank of Commerce v. Green, 2015 SCC 60

Securities — Class actions — Limitation of actions

Appeals from a judgment of the Ontario Court of Appeal (2014 ONCA 90), setting aside a decision of Strathy J. (2012 ONSC 3637), affirming a decision of van Rensburg J. (2012 ONSC 4881), and affirming a decision of Perell J. (2012 ONSC 6083).

The appeals in CIBC and IMAX are dismissed (McLachlin C.J. and Rothstein and Côté JJ. dissenting in part). The appeal in Celestica is allowed (Moldaver, Karakatsanis and Gascon JJ. dissenting).

The appeals in these three cases (CIBCIMAX and Celestica) stem from motions in class proceedings brought before different judges of the Ontario Superior Court of Justice. In each case, the respondent plaintiffs claimed damages under the common law tort of negligent misrepresentation and pleaded an intention to claim damages under the statutory cause of action in s. 138.3 of Part XXIII.1 of the OntarioSecurities Act (“OSA”) for alleged misrepresentations in respect of shares trading in the secondary market. None of the plaintiffs obtained leave to commence the statutory action, required under s. 138.8OSA, before commencing the class proceeding based on the common law cause of action. In all of the cases, the limitation period for the statutory action, if not suspended, would have run out prior to leave being obtained. In CIBC, the motion for leave was filed before the expiry of the limitation period, inIMAX, the motion for leave was filed and argued before the expiry of the limitation period, and inCelestica, the motion for leave was filed after the expiry of the limitation period.

Section 28 of the Class Proceedings Act, 1992 (“CPA”) operates to suspend the limitation period for a cause of action asserted in a class proceeding in favour of the members of a class on the commencement of the class proceeding. During the course of the class proceedings at issue in these appeals, the Ontario Court of Appeal released its decision in another matter, Sharma v. Timminco Ltd., 2012 ONCA 107, 109 O.R. (3d) 569 (“Timminco”), in which it interpreted the application of s. 28 CPA to the limitation period in s. 138.14 OSA for the first time. The panel held that s. 28 CPA did not operate to suspend the limitation period in s. 138.14 OSA until leave was obtained under s. 138.8 OSA. The motion judges considering the issue of leave to commence the statutory action in the present cases found that they were bound by Timminco. The motion judges in IMAX and Celestica applied the common law doctrines of nunc pro tunc and special circumstances to save the statutory claims in those proceedings from being statute‑barred. The motion judge in CIBC found that those doctrines were inapplicable, and that the statutory claim could not be saved.

In CIBC, in addition to the limitation period issue, the defendants challenged the threshold that must be met by a plaintiff applying for leave under s. 138.8 OSA and the plaintiffs sought certification for seven common issues relating to the common law misrepresentation claim. Despite his finding that the statutory action was statute‑barred, the motion judge interpreted s. 138.8 OSA as establishing a relatively low threshold. With respect to certification of the issues, the motion judge held that reliance, a necessary element of a common law misrepresentation claim, was not an issue that was capable of resolution on a common basis, and that a class proceeding would not be the preferable procedure for resolving a reliance‑based claim. He refused to certify all seven issues relating to the common law misrepresentation claim.

On appeal, the three cases were heard together by a five‑member panel of the Ontario Court of Appeal. The panel unanimously overruled the interpretation of Timminco, holding that s. 28 CPA operates to suspend the limitation period for all class members once the statutory cause of action is asserted in a class proceeding by a representative plaintiff, even if leave has not yet been granted under s. 138.8OSA, as long as the facts that found the action and the intent to seek leave to commence the action have been pleaded. As a result, the court concluded that in all three cases, the plaintiffs’ statutory claims for secondary market misrepresentation were not statute‑barred. With respect to the threshold to be met for leave to be granted under s. 138.8 OSA, the Court of Appeal upheld the interpretation of the motion judge in CIBC. Finally, the Court of Appeal upheld the motion judge’s decision in CIBC not to certify the issues relating to reliance and damages, but it held that five out of the seven issues proposed by the plaintiffs related to the intent and conduct of the defendant CIBC and should be certified as against that defendant in order to advance the litigation against it.

Canadian Imperial Bank of Commerce et al. v. Howard Green et al.

Held 4:3 (McLachlin C.J. and Rothstein and Côté JJ. dissenting in part): The appeals inCIBC should be dismissed. McLachlin C.J. and Rothstein, Cromwell and Côté JJ. find that the statutory action is time‑barred. McLachlin C.J. and Rothstein and Côté JJ. would allow the appeals on this issue. Cromwell J. would grant leave nunc pro tuncand dismiss the appeals. Moldaver, Karakatsanis and Gascon JJ. find that the statutory action is not time‑barred and would dismiss the appeals. On the issues of the threshold for leave and the certification of common issues, a unanimous court would dismiss the appeals.

IMAX Corporation et al. v. Marvin Neil Silver et al.

Held 4:3 (McLachlin C.J. and Rothstein and Côté JJ. dissenting in part): The appeal inIMAX should be dismissed. McLachlin C.J. and Rothstein, Cromwell and Côté JJ. find that the statutory action is time‑barred. McLachlin C.J. and Rothstein and Côté JJ. would allow the appeal with respect to the defendants who were not parties to the original statement of claim but would grant leave nunc pro tunc and dismiss the appeal with respect to the defendants who were parties to the original statement of claim. Cromwell J. would grant leave nunc pro tunc and dismiss the appeal with respect to all defendants. Moldaver, Karakatsanis and Gascon JJ. find that the statutory action is not time‑barred and would dismiss the appeal.

Celestica Inc. et al. v. Trustees of the Millwright Regional Council of Ontario Pension Trust Fund et al.

Held 4:3 (Moldaver, Karakatsanis and Gascon JJ. dissenting): The appeal in Celesticashould be allowed. McLachlin C.J. and Rothstein, Cromwell and Côté JJ. find that the statutory action is time‑barred and would allow the appeal. Moldaver, Karakatsanis and Gascon JJ. find that the statutory action is not time‑barred and would dismiss the appeal.

The issues are decided as follows:

  1. On a majority reasoning by Côté J. (and McLachlin C.J. and Rothstein and Cromwell JJ.), s. 28CPA operates to suspend the limitation period in s. 138.14 OSA applicable to a statutory cause of action under s. 138.3 OSA at the time when the action is commenced, that is, when leave is granted under s. 138.8 OSA in a class proceeding. Moldaver, Karakatsanis and Gascon JJ. (dissenting on this issue) would find that s. 28 CPA operates to suspend the limitation period in s. 138.14 OSA once the representative plaintiff properly commences a class proceeding for a common law cause of action and pleads the statutory cause of action and its constituent elements in the statement of claim.
  2. McLachlin C.J. and Rothstein, Cromwell and Côté JJ. hold that courts have the inherent jurisdiction to issue orders nunc pro tunc for leave to proceed with an action where leave is sought prior to the expiry of the limitation period. In CIBC, McLachlin C.J. and Rothstein and Côté JJ. would not exercise their discretion to grant such an order, but Cromwell J. would. In IMAX, McLachlin C.J. and Rothstein and Côté JJ. are of the view that the motion judge exercised her discretion to grant such an order correctly with respect to the defendants who were parties to the original statement of claim, but not in respect of the defendants who were not parties to any statement of claim at the time when argument on the leave application was concluded. Cromwell J. is of the view that the motion judge was correct to exercise her nunc pro tuncdiscretion in respect of all of the defendants. In Celestica, McLachlin C.J. and Rothstein, Cromwell and Côté JJ. would deny the nunc pro tunc order.
  3. McLachlin C.J. and Rothstein, Cromwell and Côté JJ. hold that the doctrine of special circumstances is of no avail to any of the plaintiffs in the three cases since neither the limitation period in s. 138.14 OSA nor the leave requirement in s. 138.8 OSA can be defeated by amending the pleadings to include a statutory claim under s. 138.3 OSA.
  4. Unanimous: the threshold that must be met by a plaintiff applying for leave under s. 138.8 OSA is that there must be a reasonable or realistic chance that the action will succeed. Moldaver, Cromwell, Karakatsanis and Gascon JJ. find that the CIBC plaintiffs have met the required threshold.
  5. Unanimous: in CIBC, the Court of Appeal did not err in holding that five of the seven common issues proposed by the plaintiffs relating to the common law misrepresentation claim should be certified.

Interaction Between s. 28 CPA and s. 138.14 OSA

Per McLachlin C.J. and Rothstein and Côté JJ. (majority opinion):

Pleading an intention to seek leave in respect of a s. 138.3 OSA claim in a class proceeding together with a common law cause of action amounts to neither the assertion of the statutory cause of action nor the commencement of a class proceeding for that statutory cause of action under s. 28 CPA. Accordingly, the limitation period at s. 138.14 OSA cannot be suspended in favour of the class members under s. 28 CPA before leave is granted under s. 138.8 OSA to commence the statutory action.

There is no ambiguity in the interaction of s. 28 CPA with Part XXIII.1 OSA. Section 28 CPA requires “a cause of action asserted” in order for the limitation period to be suspended in favour of the class members on the commencement of the class proceeding. The interpretation of the meaning of the word “assert” in s. 28 CPA proposed by the Court of Appeal in Timminco is correct. The assertion of a cause of action must be premised on the existence of a “right of action”. Given the clear wording of s. 138.3OSA, pleading a factual matrix and an intention to seek leave under s. 138.8 OSA cannot amount to the assertion of the statutory cause of action.

Section 28 CPA does not operate to suspend the limitation period applicable to a cause of action until the commencement of a class proceeding in which the cause of action is asserted. This commencement cannot occur under Part XXIII.1 OSA until leave is granted. Section 138.8(1) OSA is clear that no action may be commenced under s. 138.3 without leave of the court.

Even if there was an ambiguity in the wording of the relevant provisions — which there is not — the legislative purpose and structure of those provisions would nonetheless support this conclusion. To hold that s. 28 CPA operates to suspend a limitation period for a statutory claim under s. 138.3 OSAbefore leave is obtained would be to circumvent the carefully calibrated purposive balance struck by the limits to the statutory action provided for in Part XXIII.1 OSA and render s. 138.8 OSA ineffective.

A careful consideration of the context of limitation periods, the CPA and Part XXIII.1 OSA reveals that the Court of Appeal’s decision in the instant cases broadly undermines the legislative structures and the purposes at stake in these appeals. On the one hand, Part XXIII.1 OSA strikes a delicate balance between various market participants: the interests of potential plaintiffs and defendants and of affected long‑term shareholders have been weighed considerably and deliberately in light of a desired precise balance between deterrence and compensation. On the other hand, class actions are procedural mechanisms which can only extend the substantive rights of the representative plaintiff to the other class members: before there is a right of action or a suspension of the limitation period flowing from the operation of the statutory scheme itself, the CPA cannot be interpreted in such a way as to create either one. Part XXIII.1 OSA, the more recent legislation, creates a scheme that is intended to be comprehensive, and was crafted with the CPA in mind. The purposes associated with the CPA — judicial economy, access to the courts and behaviour modification — were each explicitly considered in developing the structure of Part XXIII.1 OSA. Policy concerns, as compelling as they are, do not override the plain meaning of the text and the intent of the Ontario legislature. This is not altered by the fact that both the CPA and Part XXIII.1 of the OSA are remedial in nature, and should thus be interpreted broadly and purposively. The end result of the legislature’s consideration was that the scheme includes a leave requirement that serves as a precondition to the commencement of an action, a limitation period and no requirement to prove reliance on the misrepresentation. The combined effect of these features is to promote efficiency and fairness for both parties.

The interpretation proposed by the Court of Appeal in these cases also significantly affects the protection provided against strike suits, which aims to screen out strike suits as early as possible in the litigation process. The preliminary leave requirement in s. 138.8 OSA was added because the usual measures under the CPA did not provide appropriate safeguards. Requiring merely that a statutory cause of action be mentioned in an existing class proceeding for the limitation period to be suspended can hardly be said to achieve the intended protection.

Per Cromwell J.:

The conclusions of Côté J. on the interpretation of the limitation and leave provisions are agreed with.

Per Moldaver, Karakatsanis and Gascon JJ. (minority opinion):

The five‑member panel of the Court of Appeal was correct to overturn that court’s earlier interpretation of the application of s. 28 CPA to the s. 138.14 OSA limitation period. As long as the statutory cause of action in Part XXIII.1 OSA is asserted in a properly commenced class proceeding, s. 28 CPA will suspend the limitation periods applicable to all causes of action asserted — including the limitation period governing the statutory claim — regardless of whether leave has been obtained under s. 138.8OSA.

This understanding of s. 28 CPA best accords with the words, scheme and purpose of the CPA, as well as the language, purpose and operation of Part XXIII.1 of the OSA. A harmonious interpretation that respects the ordinary meaning of the text of both the CPA and the OSA and the context and the purpose of the CPA, recognizing its intended application in the securities context, must be sought. As both the CPA and Part XXIII.1 of the OSA are remedial in nature, the provisions from those statutes must be interpreted broadly and purposively. Moreover, in analysing the interaction between the laws of one legislature, it must be presumed that the laws are meant to work together, both logically and teleologically, as parts of a functioning whole. The relevant provisions in the OSA were enacted after the CPA, and it is clear that Part XXIII.1 OSA was intended to operate in the context of class proceedings legislation.

Section 28 CPA is engaged upon the commencement of a class proceeding with respect to “a cause of action asserted” in the class proceeding. “Assert” has multiple dictionary meanings, and “to assert” is defined variously as “to invoke or enforce a legal right” or “make or enforce a claim to”. The Court of Appeal’s conclusion that “asserting” a cause of action in s. 28 CPA refers to “invoking the legal right” or “making the claim” is more consistent with the English and the French text of s. 28 CPA and with the context of that provision.

In order to “make the claim” or “invoke the legal right”, the representative plaintiff must plead the essential factual elements required to constitute the cause of action. Section 138.3 provides injured shareholders with four causes of action tied to misrepresentations or the failure to make timely disclosure of a material change. Leave is not one of the factual elements set out in that provision. Therefore, the leave requirement in s. 138.8 OSA is not a constituent element of the statutory cause of action set out in 138.3 OSA. Rather, obtaining leave under s. 138.8 OSA is a procedural requirement. It is necessary for the right arising from s. 138.3 to be ultimately exercised, adjudicated at trial and enforced; however, “asserting” the statutory cause of action for the purposes of s. 28 CPA does not require the representative plaintiff to first obtain leave. The statutory cause of action can therefore be asserted in a class proceeding statement of claim before leave is obtained.

Section 28 CPA suspends the running of the limitation periods upon the “commencement of the class proceeding”. “Commencement” for the purpose of this provision refers to the commencement of an intended class proceeding under the CPA prior to certification. To commence a class proceeding, the representative plaintiff must file a statement of claim. The text of s. 28 recognizes that multiple causes of action could be asserted in a single statement of claim. Section 28 does not condition the commencement of the class proceeding on the prior fulfillment of all procedural requirements in respect of every cause of action asserted in the proceeding. On a plain reading of s. 28, the limitation periods applicable to all causes of action asserted in the proceeding are suspended upon the commencement of the proceeding, regardless of whether some would require leave to proceed individually. Thus, s. 28CPA will suspend the limitation period in s. 138.14 OSA once the representative plaintiff properly commences a class proceeding for a common law cause of action and pleads the statutory cause of action and its constituent elements in the statement of claim.

Excluding the statutory cause of action in Part XXIII.1 OSA from the protection of s. 28 CPA until leave has been granted removes compliance with the limitation period from the plaintiff’s control. It would also necessarily oblige potential class members to file a multitude of individual motions for leave to commence the statutory claim, thus unnecessarily adding procedural steps and increasing costs and delays for all parties involved. Such an obligation is not required by the text of s. 28 CPA, nor by the context or purposes of the CPA. Such a result serves neither judicial economy nor access to justice. Rather, it undermines the harmonious operation of class proceedings in the securities context. An interpretation that suspends the limitation period where leave has not yet been granted under s. 138.8OSA promotes the purposes of the CPA, is harmonious with the language, purpose and operation of Part XXIII.1 of the OSA, and allows the class proceeding to remain an effective vehicle for the pursuit of Part XXIII.1 statutory claims while respecting the policy underpinnings of limitation periods.

In each of the three cases under appeal, the plaintiffs commenced class proceedings and pleaded the constituent facts of the tort of negligent misrepresentation and of the statutory cause of action in Part XXIII.1 OSA in their statements of claim. This pleading constitutes an assertion of the statutory cause of action for the purposes of s. 28 CPA. Thus, the limitation periods for the statutory claims at issue in these appeals are suspended as of the date of filing of their statements of claim and none of the claims are statute‑barred.

Remedies

Per McLachlin C.J. and Rothstein and Côté JJ.:

Nunc pro tunc and special circumstances are two separate doctrines, which need to be addressed separately. The courts have inherent jurisdiction to issue orders nunc pro tunc, that is, to backdate their orders. This power is implied by rule 59.01 of the Ontario Rules of Civil Procedure. The following non‑exhaustive factors guide the courts in determining whether to exercise their inherent jurisdiction to grant such an order: (1) the opposing party will not be prejudiced by the order; (2) the order would have been granted had it been sought at the appropriate time, such that the timing of the order is merely an irregularity; (3) the irregularity is not intentional; (4) the order will effectively achieve the relief sought or cure the irregularity; (5) the delay has been caused by an act of the court; and (6) the order would facilitate access to justice. None of these factors is determinative.

An order granting leave to proceed with an action can theoretically be made nunc pro tunc, where leave is sought prior to the expiry of the limitation period. However, a court should not exercise its inherent jurisdiction where this would undermine the purpose of the limitation period or the legislation at issue. This is because, as with all common law doctrines and rules, the inherent jurisdiction to grant nunc pro tunc orders is circumscribed by legislative intent. Nunc pro tunc orders will not be available if they are precluded by either the language or the purpose of a statute. Accordingly, the courts’ inherent jurisdiction to issue nunc pro tunc orders in relation to leave to commence claims under s. 138.3 OSAis not unlimited and should be exercised bearing in mind that the leave requirement, and its interaction with the limitation period, are central to the delicate balance struck in Part XXIII.1 OSA.

The standard of review that ordinarily applies to a judge’s discretionary decision on whether to grant an order nunc pro tunc is that of deference: if the judge has given sufficient weight to all the relevant considerations, an appellate court must defer to his or her exercise of discretion. However, if the judge’s discretion is exercised on the basis of an erroneous principle, an appellate court is entitled to intervene. In CIBC, the motion judge found that he did not have jurisdiction to make the order nunc pro tunc. It follows that he did not actually exercise any discretion, and there is therefore no decision to defer to. But, even if he had done so, his reasoning on whether the order should be granted nunc pro tunc was based on an erroneous principle. In IMAX, in exercising her discretion, the motion judge failed to address or distinguish the situation of the defendants who were not parties to the original statement of claim. Therefore, no deference applies.

In CIBC, the plaintiffs were aware of the requirement of obtaining leave but made the choice not to expedite the leave motion, proceeding on the assumption that the court had the jurisdiction to extend the limitation period and that the discretion would be exercised in their favour by granting leave nunc pro tunc. In this case, to grant a nunc pro tunc order even though the plaintiffs did absolutely nothing to prevent the expiry of the limitation period would have the effect of overriding the legislature’s intent.

In IMAX, the motion judge exercised her discretion correctly in making a nunc pro tunc order in relation to the defendants who were parties to the original statement of claim. However, as regards the other defendants, who were not defendants in any proceeding at the time when argument on the leave application was concluded, the plaintiffs, who waited more than two years after leave was granted before issuing a first statement of claim against them as defendants and provided no valid explanation for this delay, certainly cannot be said to have acted diligently. Granting relief to the plaintiffs against those defendants would undermine the strict limitation period set out in s. 138.14 OSA and the balance struck in the legislation.

In Celestica, no motion for leave was filed before the expiry of the limitation period. Accordingly, a nunc pro tunc order could not remedy that expiry. This is sufficient to deny such an order.

The doctrine of special circumstances allows a court to temper the potentially harsh and unfair effects of limitation periods by allowing a plaintiff to add a cause of action or a party to the statement of claim after the expiry of the relevant limitation period. The circumstances warranting such an amendment will not often occur. In the case of statutory actions under s. 138.3 OSA, the legislature specifically barred a plaintiff from commencing such an action without first obtaining leave of the court. Accordingly, the doctrine of special circumstances is of no avail to any of the plaintiffs in the three instant cases. Neither the limitation period in s. 138.14 OSA nor the leave requirement in s. 138.8 OSA can be defeated by amending the pleadings to include a statutory claim under s. 138.3 OSA. The doctrine, therefore, does not provide the plaintiffs with an effective remedy, since it cannot on its own overcome the leave requirement of s. 138.8 OSA.

Per Cromwell J.:

Agreement is expressed for the reasons of Côté J. in respect of the discretionary power of the courts to grant leave nunc pro tunc after the expiry of the limitation period to commence a statutory claim for secondary market misrepresentation.

In CIBC, the motion judge was ideally placed to assess and weigh all of the many considerations that are relevant to the question of whether the court’s discretion should be exercised in the plaintiffs’ favour. His assessment of those considerations and the weight to be given to them should be treated with deference on appeal. There is no error in the principles that the motion judge applied, in the factors that he considered relevant or in his assessment of the evidence. Accordingly, there is no basis to interfere with his conclusion that the nunc pro tunc discretion should be exercised in the plaintiffs’ favour.

The motion judge in IMAX was also correct to exercise her nunc pro tunc discretion. The motion judge was intimately familiar with the progress of this file with which she had been dealing over several years. There is no basis on which to interfere with her assessment of the equities of the situation or of the plaintiffs’ diligence.

The conclusions of Côté J. in Celestica are agreed with.

CIBC

Reasons for Judgment by Karakatsanis J.
Concurring Reasons by Cromwell J.
Dissenting Reasons by Côté J.

IMAX

Reasons for Judgment by Karakatsanis J.
Concurring Reasons by Cromwell J.
Dissenting Reasons by Côté J.

Celestica

Reasons for Judgment by Côté J.
Concurring Reasons by Cromwell J.
Dissenting Reasons by Karakatsanis J.

Neutral Citation:  2015 SCC 60  
Docket Number: 35807, 35811, 35813
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