Supreme Court says no, plaintiffs don’t need to control when they commence actions

In Canadian Imperial Bank of Commerce v. Green, the Supreme Court rejected a basic principle of limitations law: the plaintiff must always be in control of when it commences a proceeding.

This appeal concerned the interaction of the limitation period in section 138 of the Ontario Securities Act and section 28 of the Class Proceedings Act, which suspends the limitation period applicable to all the causes of action asserted in a class proceeding.

Section 138.3 creates a cause of action for misrepresentations regarding shares trading in the secondary market. A plaintiff, most often a representative plaintiff in a class proceeding, can only commence a section 138.3 claim with leave, and has three years from the date of the misrepresentation to obtain leave and do so.  In Sharma v. Timminco, the Court of Appeal held that a claim for damages under section 138.3 is statute-barred if the plaintiff does not obtain leave to commence it within the limitation period, and that section 28 of the Class Proceedings Act did not operate in respect of a 138.3 claim until leave is obtained.

The Timminco decision was problematic. Its effect was to require representative plaintiffs to move for and obtain leave to commence a section 138.3 claim within three years, but the plaintiffs could not control the timeliness. Obtaining leave within three years was challenging, if not impossible.  Even if a plaintiff brought the motion in good time, the defendant could initiate procedural steps resulting in delay, and court availability could affect the timing of the hearing and the rendering of the decision.  In the context of limitations jurisprudence, this was both novel and perverse: plaintiffs did not control whether they commenced their action in time.

In this action, the Court of Appeal reversed itelf and set aside Timminco’s interpretation of the Class Proceedings Act, holding instead that when a representative plaintiff brings a section 138.3 claim within the limitation period, pleads section 138.3 together with the facts that found the claim, and pleads an intent to seek leave to commence, the claim has been “asserted” for the purposes of the Class Proceedings Act, and the limitation period is thereby suspended for all class members.

Subsequently, the legislature amended the Securities Act so that the limitation period is suspended on the filing of a motion for leave.   However, the issue remained live for actions commenced before the amendments, and so the Supreme Court heard the appeal.  In a lengthy decision from a fractured court, it overturned the Court of Appeal’s decision.

From a limitations perspective, the noteworthy aspect of the decision is the court’s willingness to accept that a plaintiff will not in all circumstances retain control of bringing its action in time.  This was a foremost concern for the Court of Appeal.

Justice Côté stated that requiring the plaintiff to have unilateral control over whether a claim is brought in time is misplaced, and fails to acknowledge that “modern limitation periods” balance the rights of the plaintiffs and the defendants:

[79]                          The Court of Appeal wrote that the effect of Timminco, namely that a plaintiff does not unilaterally control whether his or her claim is brought within the limitation period (because of the starting point of the limitation period or because of delays caused by the defendant or the court), was “foreign to the concept of a limitation provision” (para. 27). In my view, the Court of Appeal failed to appreciate not only that modern limitation periods flow from an exercise in balancing the rights of plaintiffs and defendants, but also that the legislature undertook that balancing exercise in designing the limitation period in question. Section 138.14 OSA does not have an internal suspension mechanism, and the limitation period begins to run regardless of knowledge on the plaintiff’s part, be it on when a document containing a misrepresentation is released, when an oral statement containing a misrepresentation is made, or when there is a failure to make timely disclosure. The scheme is exacting and even harsh, but it is structured in this manner to balance the interests of plaintiffs, defendants and long-term shareholders.

This reasoning is hard to understand.  The very nature of limitation periods requires a balancing of plaintiff and defendant rights, and the courts engaged with this balance frequently under the pre-modern legislation (that is, the former Limitations Act).  See for example the Supreme Court decision in Peixeiro v. Haberman (1997): “Whatever interest a defendant may have in the universal application of a limitation period must be balanced against the concerns of fairness to the plaintiff who was unaware that his injuries met the conditions precedent to commencing an action”.

 In any event, this balance between plaintiff and defendant rights is normally a matter of the length of a limitation period—allow the plaintiff sufficient time to commence her claim, but not so much time that the defendant will suffer prejudice. Here it seems that the balance means taking some control over the running of time and handing it the defendant.  Perversely, this gives the defendant an incentive to delay the commencement of the claim (in this case, by delaying the application for leave).

It seems Justice Côté understood the perversion, because he dismisses it:

[81]                          Like Goudge J.A in Timminco, I am unwilling to rely upon an isolated purpose of limitation periods, taken out of context, in order to give priority to one stakeholder over others, particularly where the legislature was so clearly alive to these considerations in making the choices it made generally for Part XXIII.1 OSA, and more specifically for s. 138.14.

His solution to potential injustice is a nunc pro tunc order.  An order granting leave to proceed with an action is available nunc pro tunc where leave is sought prior to the expiry of the limitation period.

[85]                          The courts have inherent jurisdiction to issue orders nunc pro tunc. In common parlance, it would simply be said that a court has the power to backdate its orders. This power is implied by rule 59.01 of the Rules of Civil Procedure: “An order is effective from the date on which it is made, unless it provides otherwise”.

 

[90]                          In fact, beyond cases involving the death of a party or a slip, the courts have identified the following non-exhaustive factors in determining whether to exercise their inherent jurisdiction to grant such an order: (1) the opposing party will not be prejudiced by the order; (2) the order would have been granted had it been sought at the appropriate time, such that the timing of the order is merely an irregularity; (3) the irregularity is not intentional; (4) the order will effectively achieve the relief sought or cure the irregularity; (5) the delay has been caused by an act of the court; and (6) the order would facilitate access to [citations omitted[. None of these factors is determinative.

 

[93]                          Thus, subject to the equitable factors mentioned above, an order granting leave to proceed with an action can theoretically be made nunc pro tunc where leave is sought prior to the expiry of the limitation period. One very important caveat, identified by Strathy J., is that a court should not exercise its inherent jurisdiction where this would undermine the purpose of the limitation period or the legislation at issue.

 

[94]                          This is because, as with all common law doctrines and rules, the inherent jurisdiction to grant nunc pro tuncorders is circumscribed by legislative intent. Given the long pedigree of the doctrine and of rule 59.01, to which I have referred, it has been held that the legislature is presumed to have contemplated the possibility of a nunc pro tunc order:McKenna, at para. 27; Parker, at pp. 286-87; New Alger Mines, at pp. 570‑71. However, nunc pro tunc orders will not be available if they are precluded by either the language or the purpose of a statute. None of the other equitable factors listed above, including the delay being caused by an act of the court, can be relied on to effectively circumvent or defeat the express will of the legislature.

The practical reality is that there are very few circumstances in which plaintiff won’t be fully in control of when it commences its action.  Nevertheless, the court’s willingness to depart from this basic, common sense limitations principle on rather dubious grounds is troubling.

You may find the decision helpful for its high-level summaries of the doctrine of special circumstances (paras. 112-113) and the purpose of limitation periods (paras. 57-58).

Alberta: Be wary of the ultimate limitation period

The Court of Appeal’s decision in W.P. v. Alberta is a reminder of the finality of Alberta’s ultimate limitation period. It runs from of date of injury even when the claimant is unaware of the injury or incapable of discovering it. It pauses only in narrow circumstances.  It’s harsh.

The appellants were formerly resident students at the Alberta School for the Deaf. They alleged physical, sexual, and emotional abuse by their teachers, staff, and other students. They alleged that the abuse occurred at varying times between the early 1960s until 1991.

When the appellants applied for certification of the action as a class proceeding, Alberta cross-applied for summary judgment. Alberta submitted that the appellants commenced their action after the expiry of the ultimate limitation period in section 3(1)(b) of the Limitations Act (which I don’t quote here because it’s very long, but the link takes you right to it). The chambers judge agreed and dismissed the action.

Section (3)(1)(b) provides that if a claimant doesn’t seek a remedial order within ten years after the claim arose, the defendant is entitled to immunity from liability in respect of the claim. Time begins to run from the date of the negligent or wrongful act.  Because time runs from a fixed date, the discoverability principle doesn’t apply:

[29]           […] the ultimate limitation period tolls without regard to when the alleged harm occurred, or when the fact of its occurrence was discovered or even discoverable. Rather, it begins to run merely upon the occurrence of the breach of the duty – in this case, upon the occurrence of the alleged abuse. This is not only the plain effect of the statutory language, but was its anticipated and intended effect: Limitations, Alberta Law Reform Institute Report No 2007 ABCA 347 (CanLII), 55, December 1989 at 70-71, 425 AR 123

The act does provide for the suspension of the ultimate limitation period in two circumstances. Section 4 of the act suspends time while the defendant fraudulently conceals the occurrence of the injury:

4(1)  The operation of the limitation period provided by section 3(1)(b) is suspended during any period of time that the defendant fraudulently conceals the fact that the injury for which a remedial order is sought has occurred.

(2)  Under this section, the claimant has the burden of proving that the operation of the limitation period provided by section 3(1)(b) was suspended

Section 5 suspends time when the claimant is a “person under disability”, which, pursuant to the definition in section 1(h) is either a represented adult as defined in the Adult Guardianship and Trusteeship Act, a person for whom a certificate of incapacity is in effect under the Public Trustee Act, or an adult who is unable to make reasonable judgments in respect of the claim:

5(1)  The operation of the limitation periods provided by this Act is suspended during any period of time that the claimant is a person under disability.

(2)  The claimant has the burden of proving that the operation of the limitation periods provided by this Act was suspended under this section.

The appellants relied on both sections 4 and 5. They argued that the teachers and staff of the school concealed the injuries by instructing students to tell no one about the abuse and by providing inadequate education so that the students couldn’t communicate it.

The Court of Appeal laid out the three part test for establishing fraudulent concealment:

[34] […] to demonstrate fraudulent concealment, as alleged here, which suspends the running of the ultimate limitation period, the appellants must show (1) that Alberta (or its agents or servants) perpetrated some kind of fraud; (2) that the fraud concealed the fact of their injury; and (3) that the appellants each exercised reasonable diligence to discover the fraud.

The Court of Appeal found that the appellants couldn’t satisfy the test. Though the injuries caused by abuse of children often manifest slowly and imperceptibility so that “only the passage of time and maturity allows the victim to realize the magnitude of the harms suffered, and their cause”, this has no bearing on whether the injuries have been concealed.   The appellants had no evidence that they were laboring under a misapprehension of the fact of having suffered an injury:

[36] […] While they might not have known until later that they could sue, that is not the same thing as having the fact of the wrongful conduct and its effects deliberately concealed from them. Nor does being told at the time not to discuss the abuse support an allegation of fraudulent concealment of the fact of the injury. While the evidence here strongly suggests that each of the appellants were aware of the wrongfulness of the alleged acts well before the expiry of the ultimate limitation period, we need not decide that here. It suffices to conclude that the issue of fraudulent concealment is insufficiently meritorious to require a trial.

The Court of Appeal also rejected the appellants’ reliance on section 5:

The appellants do not say that they were represented adults under the Adult Guardianship and Trusteeship Act or persons subject to a certificate of incapacity under the Public Trustee Act. And, while each of them has encountered difficulties in life, they do not show how such difficulties rendered them unable to make reasonable judgments in respect of their claims. Even the facts alleged by EP with respect to her time spent in psychiatric hospital care, which might form part of an account of a disability which suspends the operation of the ultimate limitation period, is on its own insufficient to show that the issue has merit. We are not told, for example, what that care entailed, when she was in that care, or for how long.

The Court of Appeal concluded its analysis with a warning about the high bar for invoking sections 4 or 5:

It is difficult – and [the Legislature] intended that it be difficult – for plaintiffs to persuade a court that the ultimate limitation period should not run for a period of time. It will be a rare case where deliberate concealment of the fact of an injury, or a condition which disables a claimant from making reasonable judgments, can be established within the meaning of sections 4 and 5 of the Act.

I also note the Court of Appeal’s warning that a class proceeding has no special status that allows it to survive where it would otherwise be statute-barred:

[21]           Simply put, a class proceeding is just one procedural mode of advancing a claim. The mere fact that a claim is advanced by way of a class proceeding does not endow it with special status allowing it to survive where the same claim would otherwise be doomed. More particularly, it remains subject to all the tools furnished by Part 7 of the Rules of Court for resolving claims without a full trial, including summary judgment […].

 

[22]           The foregoing applies with equal force where the summary judgment application is based upon the expiry of a limitation period relative to the claim of a proposed representative plaintiff. Where a proposed representative plaintiff’s claim is shown to be time-barred, there is no good reason for permitting the issue of certification to continue consuming judicial and litigants’ resources. Indeed, there is good reason for not doing so, since the representative plaintiff must be a member of the class. Allowing a representative plaintiff’s clearly time-barred claim to proceed further would defy the Legislature’s intent that the class proceeding be brought only by someone with a personal stake in the outcome [internal citations omitted].