In Pennyfeather v. Timminco (“Pennyfeather”), the Ontario Court of Appeal delivered yet another ruling concerning the interaction between the limitation period for obtaining leave to commence an action for misrepresentation in the secondary securities market under s. 138.14 of the Ontario Securities Act (the “OSA”), and s. 28 of the Class Proceedings Act (the “CPA”), which suspends a limitation period in favour of class members for a cause of action asserted in a class proceeding upon commencement of the class proceeding.
Pennyfeather was previously found to be out of time in Sharma v. Timminco, 2012 ONCA 107, a decision that spawned a wave of litigation culminating in the Supreme Court of Canada’s ruling in Canadian Imperial Bank of Commerce v. Green, 2015 SCC 60 (“Green”).
In this most recent chapter, the Court of Appeal concluded that the appellant did not meet the test for nunc pro tunc relief, bringing the Pennyfeather action to an end once again.
Pennyfeather arose out of a proposed securities class action commenced in 2009 pertaining to alleged misrepresentations made by Timminco. At the time the Pennyfeather action was commenced, many believed that the limitation period in s. 138.14 of the OSA could be frozen upon the issuance of a claim in a putative class action pursuant to s. 28 of the CPA.
In Sharma v. Timminco, the Court of Appeal delivered (its words) a “bomb shell” ruling, holding that the limitation period in s. 138.14 of the OSA was not suspended upon the issuance of a putative class action.
A wave of litigation generated by the Court of Appeal’s surprise decision in Sharma v. Timminco ultimately culminated in the Supreme Court’s ruling in (“Green”), discussed at length here.
In Green, the Supreme Court found that in certain circumstances, notwithstanding that an action would otherwise be time barred for failure to obtain leave in the time required under s. 138.14 of the OSA, an order could be granted nunc pro tunc (“now for then”) for relief against the limitation period (meaning that an order for leave could be backdated to a date prior to the expiry of the limitation period).
Following the decision in Green, the appellant, whose action was otherwise time-barred, moved for a nunc pro tunc order for leave to commence an action under the OSA.
Writing for the Court, Strathy C.J.O. upheld the decision of the motion judge and denied the appellant’s motion for nunc pro tunc relief.
The Requirement to Seek Leave Prior to the Expiry of the Limitation Period
In Green, Côté J. held that for nunc pro tunc relief to be granted, leave must be sought prior to the expiry of the limitation period, otherwise, nunc pro tunc relief would not be of any benefit, since any order could only be backdated as far back as the date from which leave was sought (the so-called “red-line rule”).
This was the source of considerable argument in the Pennyfeather appeal, as the appellants had served a motion for “conditional leave” shortly before the potential expiry of the limitation period under the OSA (apparently prompted by a realization that s. 28 of the CPA might not in fact freeze the limitation period under the OSA). This was done at the direction of the case management judge, who had denied the appellant’s request for an expedited leave motion on the eve of the expiry of the limitation period and instead advised the appellant to bring a motion for “conditional leave”.
However, when the motion was argued, the focus was on whether the limitation period in s. 138.14 of the OSA was frozen by s. 28 of the CPA, and the appellant never argued the request for conditional leave, nor did he request nunc pro tunc relief.
The motion judge found that the motion for “conditional leave” did not constitute a leave motion, and therefore, because the appellant had not sought leave before the expiry of the limitation period under s. 138.14 of the OSA, he did not meet the “red-line rule”.
In a notable departure from the decision of the motion judge, the Court noted, in obiter, that the motion for “conditional leave” could serve as an anchor for nunc pro tunc relief in the circumstances.
However, the Court found that it was unnecessary to decide this issue, as it found that the motion judge had not erred in exercising his discretion not to grant the order for nunc pro tunc relief in any event.
On a review of discretionary factors for granting nunc pro tunc relief, the Court found that the motion judge had not erred in declining to grant nunc pro tunc relief for the following reasons:
- the appellant had been “neither dilatory nor assiduous” in proceeding with the leave motion;
- the merits of the case were a “neutral” factor as the merits had never been scrutinized in a leave motion;
- the delay in bringing the leave motion was not caused by an act of the court, as it was unrealistic to expect the motion judge to schedule the leave motion on the eve of the potential expiry of the limitation period;
- although the interests of putative class members must always be considered, any duty to protect the class needs to be balanced against the interest of the defendants and the overall policy goals of the legislation; and
- the appellant had failed to show an absence of prejudice to the respondents if leave were to be granted nunc pro tunc. Although there was no specific evidence that the respondents would be prejudiced, the respondents had never abandoned their right to rely on a limitations defence, and the appellant had not demonstrated a lack of prejudice.
Although the particular circumstances of Pennyfeather are unlikely to arise in future given 2014 amendments to the OSA clarifying the limitation period for leave, the decision nonetheless sheds useful light on how the courts will apply the doctrine of nunc pro tunc post-Green.
Pennyfeather v. Timminco, 2017 ONCA 369
Date of Decision: May 8, 2017