Class Action, Securities

Supreme Court rules on securities class action limitations

By Brian Radnoff

In Canadian Imperial Bank of Commerce v. Green, 2015 SCC 60 (Green), the Supreme Court of Canada (SCC) ruled on the limitation periods for securities class actions regarding secondary market misrepresentation, an issue that had received inconsistent treatment at the Ontario Court of Appeal.

In Green, a five judge panel of the Court of Appeal had reversed its previous decision in Sharma v. Timminco, 2012 ONCA 107 (Timminco), about how limitation periods for secondary market class actions operate. The majority of the SCC in Green overruled the Court of Appeal’s reconsideration of the issue, favouring the previous approach in Timminco.

When a class proceeding is commenced, class members have the limitation period for their cause of action suspended under the Class Proceedings Act, 1992 (Class Proceedings Act) while the certification motion is pending. This allows class members to wait and see whether the class proceeding will be approved and whether they would be better off opting out and pursuing an individual action. The issue on this appeal was at what point limitation periods are suspended for secondary market claims under Ontario’s Securities Act, given that such claims require leave under the Act before they can proceed.

The majority decision by the SCC in Green held that on both a plain reading and a purposive reading of the legislation, the limitation period was not suspended under the Class Proceedings Act until leave for the secondary market claim was granted. This interpretation was determined by the majority to strike the right balance between the two statutes and their respective purposes.

The implication is that leave to bring the secondary market claim must be obtained within two years of the claim being discovered. Merely commencing the action to obtain leave is not sufficient to suspend the limitation period under the Class Proceedings Act. As a practical matter, this would require class counsel to move relatively quickly to obtain leave, likely before a certification motion could be brought, despite the fact there would normally be significant overlap between the issues on the leave motion and those on the certification motion.

The SCC dissent in Green, on the other hand, sided with the Ontario Court of Appeal’s reconsideration of the issue, interpreting the Class Proceedings Act as suspending the limitation period at the time the claim is commenced, before leave is obtained.

The language of the Class Proceedings Act states that the limitation period is suspended “on the commencement of the class proceeding.” As is evident from the different views expressed by the panels considering the legislation, the proper interpretation was not obvious. Both the majority and the dissent in the SCC viewed their own interpretation as consistent with a plain reading of the statutes as well as their respective purposes. Given the possible interpretations, it is interesting that the SCC ultimately decided in favour of the Ontario Court of Appeal’s original interpretation in Timminco, in spite of criticism that decision attracted.

Notably, before the SCC released its decision in Green, the Ontario legislature made amendments so the limitations period under the Securities Act that governed these claims would be suspended when a notice of motion for leave is filed. This provides some relief to the representative plaintiffs and class counsel in such actions.

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