On February 3, 2014 in its decision in Green v Canadian Imperial Bank of Commerce2014 ONCA 90, the Ontario Court of Appeal revisited its controversial decision in Sharma v Timminco2012 ONCA 107 [Timminco], in which the Court ruled that class actions asserting statutory claims for secondary market liability under Part XXIII.1 of the Ontario Securities Act (the “Act”) are statute-barred if leave to commence such an action is not obtained within the specified three-year limitation period in the Act. In Timminco, the Court had also found that s. 28 of the Ontario Class Proceedings Act, 1992 (the “CPA”) did not operate to suspend the running of that three-year limitation period until leave was obtained.

The decision in Timminco had drastic implications for securities class action plaintiffs, and in particular for three different class proceedings then before the courts: Green v Canadian Imperial Bank of Commerce2012 ONSC 3637 [Green]Silver v IMAX Corp.[2009] OJ No 5573 (Sup Ct J) [Silver]Trustees of the Millwright Regional Council of Ontario Pension Trust Fund v Celestica Inc.2012 ONSC 6083 [Trustees of the Millwright]. Each of the actions made claims both in common law negligent misrepresentation and under the Act, and each of the representative plaintiffs had issued and served their respective statements of claim within the three-year limitation period, but had not obtained leave.

The parties in Green were in the middle of their motions for certification and leave when Timminco was released. Justice Strathy explained that he would have granted leave and certified the action, but for the decision in Timminco. Certification was denied.

In Silver, Justice van Rensburg had already granted leave even though the limitation period had expired. Following the decision in Timminco, the defendants brought a motion for summary judgment dismissing the action as time-barred. Justice van Rensburg dismissed that motion and concluded that leave had been granted to apply nunc pro tunc.

Finally, in Trustees of the Millwright, Justice Perell granted the plaintiffs leave under the Act despite the expiry of the limitation period by applying the doctrine of “special circumstances.”

In Green, the Court of Appeal heard appeals from all three proceedings together and Justice Feldman, writing for the Court, concluded, at paragraph 6, that:

The Timminco court’s interpretation of the term “asserted” in s. 28 of the CPA was a viable one based on the arguments made and the record before it in that case. However, when the consequence of the interpretation, which leaves class members without the normal s. 28 protection from the passage of the limitation period, is assessed in light of the purpose and intent of the new statutory claim, we have concluded that the interpretation given is not correct and the decision of the court should be overturned.

The Court first considered whether it had erred in Timminco, and then assessed the effect of the decision. Justice Feldman noted a number of problems with requiring representative plaintiffs to both move for and obtain leave to commence an action under Part XXIII.1 of the Act within the three-year limitation period, including late discovery of the alleged misrepresentation, delaying procedural steps initiated by defendants, and court availability. Justice Feldman explained that these concerns would operate such that “a plaintiff cannot unilaterally control whether its claim is brought within the applicable limitation period” (para 27).

The Court next reviewed Timminco in the context of the CPA and the Act, explaining that under the CPA, “the commencement of the class action occurs when the claim is issued. It is at that time, and not when the claim is certified, that the limitation period is suspended for all class members” (para 33).

The Court then considered whether leave was a prerequisite to “asserting” the statutory claim. Justice Feldman relied on the definitions of “assert” set out by the ONCA in Timminco, and determined that they encompassed simply pleading the claim. She explained that even if the word “assert” was found to be ambiguous, “because it is contained in a provision that gives the benefit of the suspension of a limitation period to class members, the ambiguity should be resolved in favour of those entitled to that benefit” (para 47).

Based on its analysis, the Court found that Timminco was wrongly decided. Applying the approach to reconsidering prior decisions taken by the Court in David Polowin Real Estate Ltd. v Dominion of Canada General Insurance Co. 2005 CanLII 21093 (CA), Justice Feldman set out four reasons why Timminco should be overturned. First and foremost, she noted that a main benefit of a class proceeding is the suspension of the limitation period for all class members, and with Timminco, this benefit had been removed. Secondly, the decision would result in investors losing the ability to bring a class action, as they would not have control of its timing. Thirdly, the decision was not consistent with other Canadian legislation, and the Ontario government had suggested that it would take legislative steps to undo the result in Timminco. Finally, Her Honour explained that the decision was very recent, and so overturning it would not cause drastic changes to the law.

For all these reasons, the Court overturned Timminco and held, at paragraph 78, that:

when a representative plaintiff in a class action brought within the Securities Act s. 138.14 limitation period, also pleads a cause of action based on s. 138.3 of the Securities Act, together with the facts that found that claim, and further pleads the intent to seek leave to commence an action under the Securities Act, then that claim has been “asserted” for the purpose of s. 28 of the CPA, and the limitation period is thereby suspended for all class members.

As a result, the Court held that none of the statutory claims for secondary market misrepresentation in the three actions under appeal were statute-barred.

This case represents a profound shift in the landscape of securities class actions in Ontario, and one which will be greeted with disappointment by defendants who greeted the ruling in Timminco as a welcome and uncommon swing of the pendulum in their favour.