The Supreme Court of Canada announced today that it will hear a group of appeals concerning the statutory limitation period applicable to securities class actions for secondary market misrepresentations brought under Part XXIII.1 of the Ontario Securities Act. The appeal ofGreen v. CIBC in particular may also have important implications (i) for determining the threshold for granting leave to proceed with a statutory claim for secondary market misrepresentations and (ii) for the certifiability of common law misrepresentation claims.

Limitation Period under the Securities Act

Part XXIII.1 of the Securities Act establishes a statutory cause of action for misrepresentations affecting the price of securities on the secondary market. It also requires a plaintiff to obtain leave to proceed with such a statutory claim within three years of the date that the alleged misrepresentation is made. If a plaintiff does not obtain leave and commence its action within three years, the claim will be statute-barred under section 138.14.

Decision of the Court of Appeal in Green v. CIBCSilver v. Imaxand Celestica

Earlier this year, a specially convened five-judge panel of the Court of Appeal found its prior decision in Sharma v. Timminco was incorrect, and instead held that the limitation period for class action claims will be suspended once a plaintiff:

  1. Pleads a cause of action based on section 138.3 of the Securities Act; and
  2. Pleads the intent to seek leave.

With respect to Green v. CIBC, the Court of Appeal also:

  • Considered the merits test for obtaining leave to bring a claim under Part XXIII.1 of the OntarioSecurities Act, holding that the test for leave is higher than a “mere” possibility of success: it requires a “reasonable” possibility of success; and
  • Confirmed that neither the ‘fraud on the market doctrine’ nor the ‘efficient market theory’ can supplant the need to prove individual reliance in common law misrepresentation claims. As a result, the issue of reliance could not be certified as a common issue.

The SCC’s Decision to Grant Leave to Appeal

The SCC previously refused leave to appeal the Court of Appeal’s decision in Sharma v. Timminco, but seems to have determined that the time is now ripe to weigh in on the statutory limitation period issue. Should the SCC overturn the Court of Appeal’s most recent decision, plaintiff’s counsel may no longer be able to wait until certification to seek leave to pursue these statutory claims.