Ontario: the interaction of representation orders and the Limitations Act

 

Can a party obtain a r. 12.08 representation order after the expiry of the limitation period? No, held the Court of Appeal in United Food and Commercial Workers Canada, Local 175, Region 6 v. Quality Meat Packers Holdings Limited.

If you’re unfamiliar with the rule, the court’s summary is helpful:

(i)           Rule 12.08

[27]      Rule 12.08 states:

Where numerous persons are members of an unincorporated association or trade union and a proceeding under the Class Proceedings Act, 1992 would be an unduly expensive or inconvenient means for determining their claims, one or more of them may be authorized by the court to bring a proceeding on behalf of or for the benefit of all.

[28]      There is little reported case law dealing with the application of Rule 12.08. Indeed, the parties did not point to any cases that directly deal with the issue here, namely, whether a representation order can be obtained under Rule 12.08 following the expiry of a limitation period.

[29]      However, there are several points worth mentioning about Rule 12.08.

[30]      First, Rule 12.08 falls under Rule 12, which is entitled “Class Proceedings and Other Representative Proceedings”.

[31]      Second, it is engaged where a person or persons seek to bring a claim on behalf of or for the benefit of all members of an unincorporated association or trade union. The rule addresses the problems facing unincorporated associations and trade unions seeking to sue in their own names.

[32]      Third, Rule 12.08 is meant to provide for a less costly and more convenient procedure than the Class Proceedings Act, 1992, S.O. 1992, c. 6 (“CPA). Indeed, in determining whether to authorize a representative action under Rule 12.08, the court will take a similar approach to that taken in determining whether a class action should be certified under the CPA: see Ginter v. Gardon (2001), 2001 CanLII 28052 (ON SC), 53 O.R. (3d) 489 (S.C.), at para. 14; Ottawa (City) Police Assn. v. Ottawa (City) Police Services Board2014 ONSC 1584 (CanLII), 55 C.P.C. (7th) 183, at para. 38 (Div. Ct.).

[33]      Fourth, the rule is discretionary. One or more members of an unincorporated association or trade union “may be authorized by the court” to bring a proceeding on behalf of or for the benefit of all. Thus, unless and until authorization is granted, no representative proceeding may be brought.

[34]      Fifth, the rule is silent on the question of limitation periods.

The plaintiff argued that under the Limitations Act, the representative plaintiff need only have commenced a proceeding within two years of discovery, a representation motion is not a proceeding, and anyway the court can make a representation order nunc pro tunc. The court rejected these arguments:

[46]      First, under Rule 12.08, authorization is required “to bring a proceeding on behalf of or for the benefit of all” members of a trade union or unincorporated association. As I noted earlier, under s. 4 of the Limitations Act, “a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.” Reading Rule 12.08 harmoniously with s. 4, the limitation period does not stop running for the claims of class members until a proceeding has been brought on their behalf and that does not happen unless and until court authorization has been granted under Rule 12.08.

[47]      Second, Caetano is effectively arguing that Rule 12.08 suspends the limitation period – that once a proposed representative commences a proposed representative proceeding, the limitation period is suspended on behalf of all members of the trade union or unincorporated association. That, as explained above, is the situation under the CPA where s. 28 expressly suspends any limitation period applicable to a cause of action asserted in favour of class members on the commencement of a proceeding. In contrast, Rule 12.08 is silent on the question of limitation periods and does not purport to extend, suspend or otherwise vary any limitation period applicable to claims asserted in favour of class members.

[48]      Third, the Supreme Court’s decision in Green supports the view that, without a tolling provision, any limitation period applicable to the claims advanced on behalf of class members continues to run until the court authorizes the claims to be brought by the representative plaintiff: Green, paras. 74, 174-175.

[49]      Finally, I would reject the argument that a nunc pro tunc order would be available in the circumstances of this case where leave was not sought prior to the expiry of the limitation period: see Green, at paras. 94-111.

[50]      I recognize that a representative action under Rule 12.08 is meant to provide a less onerous and less expensive alternative to bringing a class action and yet a proposed representative plaintiff may feel it is necessary to proceed under the CPA instead of Rule 12.08 to avoid any limitations problems even if it would be more expensive and less convenient to do so. My interpretation, therefore, may seem to be at odds with concerns about expense and convenience. However, as Côté J. observed in Green, at para. 75, “policy concerns, as compelling as they are, do not override the plain meaning of the text and the intent of the Ontario legislature.”

The court then considered another rather esoteric limitations issue: can the court make a representation order under r. 10.01 in respect of claims that are statute-barred? The answer: no.

Rule 10.01, for those who need a refresher, provides

[56]      Rule 10.01 provides as follows:

In a proceeding concerning,

(a) the interpretation of a deed, will, contract or other instrument, or the interpretation of a statute, order in council, regulation or municipal by-law or resolution;

(b) the determination of a question arising in the administration of an estate or trust;

(c) the approval of a sale, purchase, settlement or other transaction;

(d) the approval of an arrangement under the Variation of Trusts Act;

(e) the administration of the estate of a deceased person; or

(f) any other matter where it appears necessary or desirable to make an order under this subrule,

a judge may by order appoint one or more persons to represent any person or class of persons who are unborn or unascertained or who have a present, future, contingent or unascertained interest in or may be affected by the proceeding and who cannot be readily ascertained, found or served.

The plaintiff argued that the because r. 10.01 representation orders are brought within an already commenced proceeding, if a representation order does not seek to add new parties, the Limitations Act does not bar the order.  However, the court found that it seeks to add new claims, which engages the Limitations Act:

[61]      While the Abreus do not seek to add parties to their action, the question is whether they can assert claims, through the device of a representation order, on behalf of persons who are not plaintiffs in the proceeding, after the limitation period in respect of such claims has already expired. The Abreus’ statement of claim seeks termination pay under the ESA and wrongful dismissal damages, as well as common employer and other declarations, and aggravated and punitive damages for themselves. It purports to assert claims for monetary amounts for approximately 125 other non-unionized former employees of the Defendants, relying on Rule 10.

[64]      This court, however, has repeatedly held that parties cannot circumvent the Limitations Act by amending their pleadings to add additional claims: see Frohlick v. Pinkerton Canada Ltd(2008), 2008 ONCA 3 (CanLII)88 O.R. (3d) 401Dee Ferraro Ltd. v. Pellizzari2012 ONCA 55 (CanLII)346 D.L.R. (4th) 6241100997 Ontario Limited v. North Elgin Centre Inc.2016 ONCA 848(CanLII)409 D.L.R. (4th) 382. The addition of new statute-barred claims by way of an amendment to a statement of claim is conceptually no different than issuing a new and separate statement of claim that advances a statute-barred claim: Frohlick, at para. 24. An amendment will be statute-barred if, after the expiry of the limitation period, it seeks to advance “a fundamentally different claim based on facts not originally pleaded”: North Elgin Centre, at para. 23.

 

Ontario: the Divisional Court on the nunc pro tunc doctrine

The Divisional Court has confirmed that the entitlement to an order granting leave nunc pro tunc to commence a derivative action under s. 26 of the Business Corporations Act requires bringing the leave motion within the limitation period.

In 1186708 Ontario Inc. v. Gerstein, the appellants appealed from the order dismissing their motion as statute-barred arguing that the Supreme Court decision in Green (which set out the principles of the nunc pro tunc doctrine) applies only to leave applications under the Securities Act and not under other statutes.

The Divisional Court disagreed.  There was no basis not to apply the Court’s analysis in Green regarding the Securities Act to the Business Corporations Act (and probably any other statute). 

Ontario: the ultimate limitation period can define members of a class action

In a class action, the ultimate limitation period can define the class members.

In Amyotrophic Lateral Sclerosis Society of Essex v. Windsor, the defendants appealed the certification of two class actions claiming that charitable lottery licensing and administration fees they collected are direct taxes and ultra vires because the revenues far exceed the costs of administration.  Their primary objection was to the temporal scope of the of the class, which included charities that had paid fees since 1990.  They argued that the class reached too far back in time.

The defendants proposed to limit the claims to those that were commenced within the presumptive limitation period.  The plaintiffs complained that truncating the class in this way presupposed that claims outside the period were time-barred, which is a conclusion that turns on a discoverability analysis.  It’s settled law that where the resolution of a limitation issue depends on a factual inquiry, the Court shouldn’t determine the issue on a certification motion.

However, without a temporal limit the claims would reach back to 1969/1970 when Ontario first introduced the licencing regime for charitable gaming.  The parties agreed that such a class definition would make the proceeding unmanageable.

Justice Strathy resolved the issue by using the Limitation Act‘s section 15 ultimate limitation period to define a sub-class for those persons whose claims are presumptively time-barred but within the ultimate limitation period:

[43]      In my view, the temporal boundary of the class can be defined in a rational way by reference to the ultimate limitation period in s. 15(2) of the Limitations Act, 2002. That provides, “No proceeding shall be commenced in respect of any claim after the 15th anniversary of the day on which the act or omission on which the claim is based took place.” This would result in a class definition encompassing persons who paid fees from and after October 24, 1993.

 

[44]      Although s. 15(4) of the Limitations Act, 2002 provides an exception to the ultimate limitation period in the case of wilful concealment, drawing the class boundary at the ultimate limitation period is not arbitrary because it separates claims that require proof of wilful concealment from those that do not.

 

[45]      As I will explain, concerns with respect to manageability can be addressed by the creation of a subclass, by stating common issues for the subclasses and by appropriate case management. I will discuss the subclass issue next.

 

(b)         Subclasses

 

[46]      The court has the authority to certify a subclass of class members who have claims or defences not shared by all class members: CPA, s. 5(2). Subclasses are appropriate when there are common issues applicable to the class as a whole and other issues that are applicable to some, but not all class members: Caputo v. Imperial Tobacco Ltd. (2004), 2004 CanLII 24753 (ON SC), 44 C.P.C. (5th) 350 (Ont. S.C.), at para. 45.

 

[47]      Here, issues of liability and damages are common to all class members. However, the claims of class members with presumptively time-barred claims raise common issues of fact and law not shared by those with timely claims. They should form a subclass. I would therefore certify a subclass of persons who paid fees between October 24, 1993 and October 23, 2002 and between January 1, 2004 and October 23, 2006. These are the payments made within the “ultimate limitation period” in s. 15 of the Limitations Act, 2002, but not within the basic limitation period and not preserved by the transition rules of the statute.

Nova Scotia: It’s abusive to file a claim merely to toll a limitation period

It’s an abuse of process to file a statement of claim to toll a limitation period where there’s no intention to proceed with the claim.

In BCE Inc. v. Gillis, the same firm filed nine virtually identical national class actions brought on behalf of the same plaintiff.  The firm’s correspondence to a prothonotary indicated that it intended to pursue national certification in Saskatchewan.  The defendant moved to stay the claim commenced in Nova Scotia on the basis that, among things, the plaintiff had no intention of proceeding there.  The Nova Scotia Court of Appeal held that tolling the limitation period alone could not justify the Nova Scotia action:

[75]        Dr. Gillis submits that filing the statement of claim in Nova Scotia allowed the limitation period to toll.  I do not accept that it is appropriate to file an action for the sole purpose of tolling a limitation if there is no intention to prosecute the case.  I again refer to the MLG correspondence to the prothonotary.

[76]        It is not unusual for courts to see statements of claim filed to meet the limitation periods pending ongoing investigation or settlement efforts. Those cases are distinct from this case where there never was any intention to proceed. It is an abuse of process to file a claim for the sole purpose of tolling the limitation period absent any intention to proceed.

Ontario: Discoverability applies to the Competition Act

In Fanshaw College v. AU Optronics, Justice Grace held that the limitation period applicable to Competition Act claims is subject to discoverability. The opportunity for a successful limitation defence in a competition class action is now much diminished. An appeal from this decision will be no surprise.

The action centres on LCD products. Fanshaw College alleges that the defendants unlawfully conspired to fix or artificially inflate the price of LCD products they purchased. The defendants moved for summary judgment on the basis that section 36(4) of the Competition Act bars the statutory claim and the expiry of the limitation period bars the conspiracy claim.

Section 36(4) imposes a two-year limitation period on claims for recovery of damages under the Act:

 (4) No action may be brought under subsection (1),

(a) in the case of an action based on conduct that is contrary to any provision of Part VI, after two years from

(i) a day on which the conduct was engaged in, or

(ii) the day on which any criminal proceedings relating thereto were finally disposed of,

whichever is the later […]

The defendants argued that the section 36(4) is not subject to discoverability. A line of jurisprudence originating from the Federal Court supported this position. Discoverability would not apply because the limitation period is linked to a fixed event unrelated to the claimant’s knowledge—”the day on which the conduct was engaged in”. Justice Grace rejected this rationale:

[117]     It seems obvious that participants in a price-fixing scheme would attempt to conceal their activities. It is impossible to say categorically when those affected will learn or have the means of learning of the offending conduct. It will depend on the circumstances of each case.

[118]     Unless the discoverability principle applies, strict application of s. 36(4)(a) might well result in a claim being statute-barred before a person affected could possibly have known of the illegal activity. The right of action would only be resurrected if criminal proceedings – initiated by the state – ensued. As a matter of construction it does not seem possible that Parliament intended the right of action to be illusory. I am not satisfied that the rights conferred by s. 36(1) should be restricted in the fashion AU and Hannstar advocate.

Though sound, this reasoning has problematic implications. If it’s impossible to say that in all circumstances an affected person will learn of the illegal activity within two years of the date it was engaged in, the equivalent is true of other limitation periods that commence on fixed dates. Section 38(3) of the Trustee Act is an example. This limitation period commences on the death of the plaintiff or defendant, and death being a fixed event, it’s not subject to discoverability. Nevertheless, there are surely circumstances where the limitation period will expire before a person affected could have known of the death that triggered it.

The two limitations periods are perhaps distinguishable. The Competition Act resurrects a right of action in the event of a criminal proceeding. There is a greater likelihood of concealment regarding a price-fixing agreement than a death. Neither distinction is especially compelling. Should there be an appeal, it will be interesting to see how the Court of Appeal addresses this issue.

The other noteworthy aspect of the limitations defence was the defendants’ argument that the plaintiff through its reasonable diligence ought to have discovered the conspiracy claim as a result of the media’s coverage of the probe into the LCD industry and the commencement of proceeding:

 [65]     It is acknowledged that there was extensive media coverage concerning probes into the LCD industry starting in December 2006.

[66]     Several articles were published in Ontario. On December 13, 2006, the Globe reported that European and U.S. regulators had announced an ongoing investigation of “a possible cartel involving makers of liquid crystal display monitors” and of “the possibility of anti-competitive practices in the LCD industry.”

[67]     On the same day the Star reported that “[l]iquid crystal display makers in Japan, Taiwan and South Korea are facing probes by trade watchdogs as a widening price-fixing investigation” in the LCD industry. Falling share prices of various companies were reported, including L.G. Philips and Samsung. The Star noted that LCDs were “the displays used in flat-panel televisions and personal computers.”

[68]     Mr. Smith acknowledged that Fanshawe was a Globe and Star subscriber at the time. At paragraph 6 of his affidavit, Mr. Smith deposed that:

To my knowledge, no member of Fanshawe brought the articles to the attention of Fanshawe’s Board of Directors or senior management.

[69]     In cross-examination, Mr. Smith agreed that from 2006 to 2009 he did not speak with board members or senior managers about articles concerning the LCD industry except those he described as “direct report”. No other details were requested or given.

[70]     The December 13, 2006 edition of the Citizen included a report concerning the LCD industry. It also noted that “AU Optronics plans to co-operate with the Justice Department and Japan’s antitrust regulator”. AU Optronics was one of several companies involved in the LCD industry mentioned in an article appearing on the Canadian Press Newswire that day.

[71]     A day earlier, a class proceeding had been commenced in the United States. AU Optronics, AU Optronics Corporation America and Hannstar were included in the long list of defendants.[18]

[72]     The B.C. action was commenced on March 6, 2007.

[73]     The First Ontario action followed on May 2, 2007. Michael Harris was named as the representative plaintiff. Siskinds has acted throughout. On the same day that law firm posted a notice on www.classaction.ca bearing the heading “Liquid Crystal Display”. The notice said in part:

This class action alleges that the Defendants unlawfully conspired to fix, increase, and/or maintain prices at which LCD or products containing LCD were sold in Canada.

The plaintiff alleges that from at least January 1, 1998 through to the present, the defendants and their senior executives participated in illegal and secretive meetings and made agreements relating to price targets, specific price increases, market share divisions and production capacity for LCD.

LCD is a thin, flat display device made of numbers of pixels arrayed in front of a light source or reflector. LCD is used in television screens, computer monitors (both desktop and notebook), mobile phones, personal digital assistants, digital cameras and other devices.

[74]     A link to the statement of claim was provided as were contact details for those seeking more information. AU and Hannstar were mentioned but not named as defendants.

[75]     On May 23, 2007, the Star reported that LCD market participant LG Philips “is one target of an investigation into anticompetitive practices in the industry by U.S. and Asian regulators.”

[76]     A class proceeding was commenced in the Province of Quebec the following month.[19]

[77]     All of these facts pre-date July 20, 2007. The moving parties submit that they support the conclusion that Fanshawe ought to have discovered the claim more than two years before it was commenced. Alternatively, AU and Hannstar maintain that Fanshawe has failed to prove that it acted with due diligence in determining if it had a cause of action.

Justice Grace disagreed. He couldn’t conclude on the evidence that the plaintiff ought to have known the section 5(1)(a) facts based on media reports. Nor did the commencement of the class action necessarily crystalise the plaintiff’s discovery of the claim. The commencement of a class action does not fix all members of the putative class with knowledge of the cause of action (in contrast to a conventional action, the commencement of which means that the plaintiff has discovered the claim even if the plaintiff lacks knowledge of the section 5(1)(a) facts):

 [79]       Fanshawe is a large educational institution. It might well be appropriate to conclude that a reasonable person in its position would have read and fully digested the reports appearing in Canadian publications. However, on the evidence introduced so far, it is a distant and unwarranted stretch to conclude Fanshawe ought to have known of any of the items listed in s. 5(1)(a), let alone all four of them as the subsection requires.

[80]     According to the press, a price-fixing investigation was underway involving a component used in flat-panel televisions and personal computers. No conclusions had been reached, even on a tentative basis. The possible implications were unaddressed beyond declining prices of the shares of some of the participants in the LCD industry. None of the defendants in this action were mentioned in the two publications to which Fanshawe subscribed; the Globe and the Star. The Citizen mentioned AU Optronics but Fanshawe was not a subscriber. In any event, that article simply indicated that AU planned to cooperate in the investigation.

[81]     Class proceedings were commenced in various jurisdictions including Ontario. A short notice was posted by Siskinds on one website concerning the First Ontario action. There was no evidence that anyone from Fanshawe accessed the website or saw the notice.

[82]     Nothing else was done that I recollect seeing or hearing about. There were no press releases. There were no media reports of any of the proposed class proceedings. Notices do not appear to have been created, let alone disseminated.

[83]     Hannstar noted that Mr. Harris, initially the representative plaintiff in the First Ontario action, was a consumer. In its factum Hannstar submitted that:

It defies logic to suggest that a large academic institution like Fanshawe was less capable of ascertaining the facts giving rise to the claim than individual consumers.

[84]     I disagree. I have no knowledge of Mr. Harris. I do not know how he came to be a representative plaintiff. Did he approach Siskinds? Mr. Smith deposed that Siskinds approached Fanshawe. Was Mr. Harris in the same position? I simply do not know. It is not self-evident to me that a high level of sophistication necessarily leads to greater knowledge about a particular topic. It would be folly to equate Fanshawe and Mr. Harris simply because Fanshawe is a large academic institution and Mr. Harris is an individual.

[…]

[92]     I do not understand why commencement of an action would fix all members of the putative class with knowledge of the cause of action. As noted, aside from one short notice on a website created by Siskinds, the proceeding was not publicized.

[93]     In Lipson v. Cassels Brock & Blackwell LLP (2013), 2013 ONCA 165 (CanLII), 114 O.R. (3d) 481 (C.A.) at para. 84, the Court of Appeal noted that the commencement of a limitation period “may be an issue that must be determined individually for each class member, depending on what individual class members were told and when.”

[94]       Determining that the commencement of a proposed class proceeding serves as the last possible day for the commencement of a limitation period would be arbitrary. It would not be based on the evidence in this case. It would be a legal fiction. A procedural vehicle would be converted into something more.[21] I decline the invitation to be its creator.

[95]     At this stage I am not satisfied that Fanshawe knew or ought to have known of the elements set forth in s. 5(1)(a) of the Limitations Act. I simply cannot make dispositive findings based on the evidence before me.