**SHARMA v. TIMMINCO IS NO LONGER THE STATE OF THE LAW IN ONTARIO. SEE THE COURT OF APPEAL’S DECISION IN GREEN v. CIBC, 2014 ONCA 107 WHERE IT OVERTURNED ITS RULING INTIMMINCO. THE RESULT IN GREEN WAS THAT ALL THREE APPEALS WERE HELD NOT TO BE STATUTE-BARRED AND THUS, THE PROCEEDINGS WERE ALL ALLOWED TO PROCEED**
Section 19 of the Limitations Act, 2002 (the “Act”) provides that a limitation period set out in or under another statute that applies to a claim to which the Act applies is of no effect unless the provision establishing it is listed in the Schedule to the Act, or the provision establishing it (i) is in existence on January 1, 2004 and incorporates by reference a provision listed in the Schedule to the Act. The limitation period for secondary market claims set out in section 138.14 of Ontario’s Securities Act is such a provision as it is listed in the Schedule to the Act.
To assert a secondary market liability claim under section 138.3 of the Ontario Securities Act, leave must be obtained under section 138.8. Section 138.14 provides that a claim under section 138.3 must be commenced within three years of the alleged misrepresentation. Section 138.14 is contained in the Schedule to the Act and therefore the three year limitation period contained in section 138.14 overrides the limitation period provisions contained in the Act.
The issue in Sharma v. Timminco,2012 ONCA 107 (leave to appeal to SCC refused Aug. 2, 2012) (“Sharma”) was not whether the limitation period under the Securities Act overrode the limitation period contained in the Act, it clearly did. Rather, the issue was the effect of the suspension of limitation period provisions in the Class Proceedings Act on the limitation period contained in the Securities Act.
In Sharma, the Ontario Court of Appeal had occasion to consider the effect of section 28(1) of the Class Proceedings Act, which effectively suspends the running of a limitation period until it is determined whether a class action will proceed, on the leave requirement in section 138.8 and the limitation period for secondary market claims in section 138.14 of the Securities Act.
Under the Securities Act, leave to assert a claim under section 138.3 must be obtained within three years of the alleged misrepresentation in order to meet the limitation period under section 138.14. In Sharma, nearly three years had passed since the alleged misrepresentation, but the plaintiff had not yet obtained leave.
At first instance, the plaintiff obtained an order declaring that the three year limitation period was suspended by virtue of section 28(1) of the Class Proceedings Act and the plaintiff’s pleading that it was its intention to seek leave under 138.8 of the Securities Act. The defendants appealed.
At the Court of Appeal, the only issue was whether pleading the intention to seek leave under section 138.8 was sufficient to suspend the limitation period under section 138.14 of the Securities Act as a result of the limitation period suspension provisions in section 28(1) of the Class Proceedings Act.
The Court of Appeal concluded that pleading an intention to seek leave was not enough to suspend the limitation period for bringing an action under section 138.3, because without leave actually being granted the cause of action was not yet a legal right and could not be enforced. Thus, under Sharma, leave to assert a section 138.3 misrepresentation claim must be obtained within three years of the alleged misrepresentation as imposed by section 138.14. The consequence of failing to do so under Sharma is that the claim will be statute barred as a result of the limitation period contained in section 138.14.
The Ontario Superior Court of Justice had occasion to consider the Court of Appeal’s decision in Sharmain Green v. CIBC, 2012 ONSC 3637 (“Green“), Silver v. Imax Corp., 2012 ONSC 4881 (“Silver”) and Trustees of the Millwright Regional Council of Ontario Pension Trust Fund v. Celestica Inc., 2012 ONSC 6083 (“Celistica”). Each of these cases have had slightly different results. In an attempt to provide clarity, the Court of Appeal has taken the rare step of appointing a five member panel to hear appeals in Green and Silver. The appeal was heard in May 2013.
A brief explanation of Green, Silverand Celesticais set out below:
The Court of Appeal’s decision in Sharmawas followed in Green. In that case, Strathy J. denied the plaintiffs leave to commence a proposed class action under section 138.3 of the Securities Act. Such claims are subject to the limitation period contained in section 138.14 of Securities Act. Following Sharma, Justice Strathy held that secondary market claims under section 138.3 are statute barred on the third anniversary of the date that the alleged misrepresentation occurred. Also, following Sharma, Justice Strathy held that a cause of action under Part 138.3 cannot be asserted until leave under section 138.8 has been granted and an action commenced. As a result, if leave is not granted within three years of the alleged misrepresentation, as was the case in Green, the statutory claims are statute barred. Further, Justice Strathy concluded that he did not have discretion to extend the limitation period under the section 138.14 of the Securities Act.
Silver v. Imax Corp., 2012 ONSC 4881
Justice van Rensburg, in Silver, arrived at a different conclusion than Justice Strathy in Green. In Silver, van Rensburg J. exercised the inherent jurisdiction of the court to relieve the plaintiff from the application of the strict application of the limitation period in the Securities Act. Ultimately, van Rensburg J. granted leave nunc pro tuncbased upon the fact that the motion for leave had been argued within the three year limitation period but the decision was under reserve when the Securities Act limitation period expired. The circumstances of this case were unique, as the plaintiff had acted within the limitation period and the expiry of the limitation period was not a result of plaintiff inaction.
Trustees of the Millwright Regional Council of Ontario Pension Trust Fund v. Celestica Inc., 2012 ONSC 6083
In Celestica, Justice Perell also granted leave after the expiry of the three year limitation period in section 138.14 of the Securities Act, but did so on a slightly different basis than the Court in Silver. Justice Perell relied upon the special circumstances doctrine, a doctrine that is no longer applicable under the Limitations Act as a result of the Court of Appeal’s decision inJoseph v Paramount Canada’s Wonderland, 2008 ONCA 469.
Justice Perell explained that although the court no longer has discretion to apply the special circumstances doctrine to extend a limitation period in respect of a claim governed directly by the Act,the doctrine can still can apply to actions governed by the limitation periods of “Other Acts” included in the Schedule referred to in section 19 of the Act. With respect to section 138.14 of the Securities Act, which is listed in the Schedule to the Act, Justice Perell held that the special circumstances doctrine was available to circumvent the 3 year limitation period prescribed in section 138.14.