A new Ontario decision has raised uncertainty about the operation of the limitation period under Ontario’s statutory secondary market misrepresentation liability regime. In Silver v IMAX1, Justice van Rensburg distinguished prior decisions, including the Ontario Court of Appeal’s decision in Sharma v Timminco2, and allowed statutory secondary market claims to continue despite leave to pursue these claims not having been granted within the prescribed three-year period. The court relied on the fact that in Timminco the leave motion had been argued within the prescribed period and the court’s power to grant relief retroactively.

Prior decisions requiring leave be granted within three years

In Timminco, the Ontario Court of Appeal considered the operation of sections of Part XXIII.1 of the Ontario Securities Act (OSA) that provide that no statutory secondary market misrepresentation action can be commenced later than three years after the date on which the document containing the misrepresentation was first released and that an action cannot be commenced until a court grants leave. In this case, the plaintiff had moved for a declaration that Ontario’s class proceeding legislation suspended the limitation period upon the issuance of a statement of claim. The Court of Appeal rejected the plaintiff’s argument and interpreted the OSA to require that a court grant leave to commence an action within the prescribed three years. Leave to appeal the Court of Appeal’s decision was denied by the Supreme Court of Canada.

The Timminco decision was subsequently applied in Green v Canadian Imperial Bank of Commerce3. In that case, Justice Strathy refused to grant leave to commence a statutory secondary market claim under Part XXIII.1 on the grounds the limitation period had expired before the hearing. He would have otherwise granted leave. Strathy J. found he was bound by the Court of Appeal’s finding in Timminco, which he interpreted to suggest that it considered the limitation period to be absolute and not discretionary. He concluded it would be inconsistent with Timminco to find that a plaintiff’s request for an order nunc pro tunc4 gives the court a basis on which to revive a limitation period that has expired due to the failure to obtain leave within three years. Strathy J. further relied on Part XXIII.1 being a complete code and not open to judge-made exceptions.

IMAX judge finds court can retroactively grant leave

Following the Timminco decision, the defendants in IMAX moved for summary judgment, arguing the action should be dismissed because the three-year limitation period had expired before leave to commence an action had been granted. The leave motion had been argued within the three-year period, but the limitation period expired while the decision was under reserve.

Justice van Rensburg dismissed the defendants’ motion. She ordered that, pursuant to the court’s nunc pro tunc power, leave to commence an action under Part XXIII.1 be granted as of the date of the leave hearing. In reaching this conclusion, the judge distinguished the Green v Canadian Imperial Bank of Commerce decision, noting in that case the limitation period had expired prior to the commencement of the leave hearing, while in IMAX it expired after the completion of oral arguments. However, she went on to state she would “in any event… take a more expansive approach” to the court’s nunc pro tunc power than the judge in Green, citing a variety of decisions that have found that courts can retroactively amend orders to avoid injustice to parties.

Justice van Rensburg also interpreted the Timminco decision narrowly, finding the decision did not preclude her from retroactively granting leave because the Court of Appeal had only considered the specific issue of whether the class proceedings legislation could suspend the limitation period. She also noted the court had not considered potential remedies like the nunc pro tunc power in its decision and the plaintiff has not yet brought a motion for leave. Justice van Rensburg emphasized that the plaintiffs in IMAX had moved expeditiously to advance the motion for leave and had argued the motion within three years of the alleged misrepresentations. She noted the reasons for the delay were outside the plaintiffs’ control.

Implications for future cases uncertain

The potential conflict between IMAX and Timminco makes it almost certain the IMAX decision will be appealed. It remains to be seen whether the use of nunc pro tunc orders will be allowed for leave orders after three years from the alleged misrepresentations and, if so, under what circumstances.