{"id":630,"date":"2017-10-04T17:21:35","date_gmt":"2017-10-04T21:21:35","guid":{"rendered":"http:\/\/limitations.ca\/?p=630"},"modified":"2017-10-04T17:22:26","modified_gmt":"2017-10-04T21:22:26","slug":"ontario-justice-perell-on-the-horror-of-s-138-of-the-securities-act","status":"publish","type":"post","link":"http:\/\/limitations.ca\/?p=630","title":{"rendered":"Ontario: Justice Perell on the horror of s. 138 of the Securities Act"},"content":{"rendered":"

Kaynes v. BP, P.L.C. <\/em><\/a>considers the application of the limitation periods set out in s. 138.14 of Part XXIII.1 of the Ontario Securities Act<\/em><\/a>.\u00a0 As Justice Perell described it, the case is “the latest sequel or prequel in what has turned out to be the case law equivalent of a horror-movie franchise”:<\/p>\n

[7]\u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0\u00a0The franchise began with: (I)\u00a0Sharma v. Timminco L<\/i>td.<\/i>,\u00a02011 ONSC 2040<\/span>,\u00a02012 ONCA 107 (CanLII)<\/span><\/a><\/span>, which was followed by the equally terrifying: (II)\u00a0Green v. C<\/i>.I<\/i>.B<\/i>.C<\/i>.,\u00a0<\/i>2012 ONSC 3637<\/span>\u00a0(CanLII)<\/a>,\u00a02014 ONCA 90<\/span>,\u00a02015 SCC 60<\/span><\/span>; (III)\u00a0Silver v.<\/i>IMAX Corp.<\/i>,\u00a02012 ONSC 4881<\/span>\u00a0(CanLII)<\/a>,\u00a0<\/span>20<\/span>14 ONCA 90, 2015 SCC 60<\/span>; (IV)\u00a0Trustees of the Millwright Regional Council v. Celestica Inc.,<\/i>2012 ONSC 6083<\/span>\u00a0(CanLII)<\/a>,\u00a0<\/span>2014 ONCA 90<\/span>, 2015 SCC; and (V)\u00a0Pennyfeather v. Timminco Ltd.<\/i>,\u00a02016 ONSC 3124<\/span>,\u00a02017 ONCA 369 (CanLII)<\/span><\/a><\/span>.<\/p><\/blockquote>\n

The plaintiff ventured a novel argument to “attempt to ward off the monster by relying on\u00a0s. 138.3(6)<\/a>\u00a0(multiple misrepresentations) of the\u00a0Act<\/em>.”\u00a0 He argued that the constituent elements of the cause of action in s. 128.3 did not crystallize until a public correction of the misrepresentation occurred.\u00a0 Justice Perell had none of it:<\/p>\n

[33]\u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0\u00a0Unlike the general limitation periods found in the\u00a0Limitations Act, 2002<\/a><\/em>, S.O. 2002, \u00a0\u00a0 \u00a0\u00a0 c. 24, Sched. B,\u00a0<\/em>s. 138.14 of the Ontario\u00a0Securities Act<\/a><\/em>\u00a0is an event-triggered limitation period. Under s. 138.14, the statutory cause of action does not have to exist, and if it does exist, it does not have to have been discovered to trigger the running of the limitation period. The Ontario\u00a0Securities Act<\/a><\/em>\u00a0plainly states that no action for a misrepresentation shall be commenced later than three years after the date on which the misrepresentation was made.<\/p>\n

[34]\u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0There is a difference between event-triggered and cause-of-action or claim-based limitation provisions. When the legislature specifies that the commencement of a statutory limitation period is linked to an event and not to the accrual of a cause of action, the court cannot impose a discoverability requirement. In\u00a0Ryan v. Moore<\/em>,\u00a02005 SCC 38\u00a0(CanLII)<\/a>\u00a0at para. 24, the Supreme Court stated:<\/p>\n

    \n
  1. [T]he [discoverability] rule is \u2018generally\u2019 applicable where the commencement of the limitation period is related by the legislation to the arising or accrual of the cause of action. The law does not permit resort to the judge-made discoverability rule when the limitation period is explicitly linked by the governing legislation to a fixed event unrelated to the injured party\u2019s knowledge or the basis of the cause of action.<\/li>\n<\/ol>\n

    [35]\u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0Unlike other general and special limitation periods, the limitation period found in\u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0 \u00a0 \u00a0s. 138.14 continues to run even after the notice of action or statement of claim is issued. This feature of s. 138.14 is the source of the horror movie franchise of cases beginning with\u00a0Sharma v. Timminco L<\/em>td.<\/em>,\u00a0supra<\/em>.<\/p>\n

    [36]\u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0The legal narrative of those cases is that:<\/p>\n

      \n
    1. \u00a0\u00a0In\u00a0Sharma v. Timminco L<\/em>td.,\u00a0<\/em>the Ontario Court of Appeal held that the limitation period found in s. 138.14 of the Ontario\u00a0Securities Act<\/a>\u00a0<\/em>did not stop running until the court granted leave to pursue the\u00a0s. 138.3<\/a>\u00a0claim.<\/li>\n
    2. \u00a0\u00a0But in\u00a0Green v. C<\/em>.I<\/em>.B<\/em>.C<\/em>.,<\/em>\u00a0Silver v.<\/em>\u00a0IMAX Corp.<\/em>\u00a0and\u00a0Trustees of the Millwright Regional Council v. Celestica Inc.<\/em>,\u00a0<\/em>a five-member panel of the Court of Appeal overturned\u00a0Sharma v. Timminco\u00a0<\/em>and held that\u00a0s. 28<\/a>\u00a0of the\u00a0Class Proceedings Act, 1992<\/a><\/em>\u00a0suspended the running of the limitation period with the issuance of the notice of action or statement of claim.<\/li>\n
    3. \u00a0\u00a0However, on further appeal, the Court of Appeal was reversed, and in\u00a0Green v. C.I.B.C.<\/em>, the Supreme Court of Canada restored\u00a0Sharma v. Timminco,\u00a0<\/em>but the Court held that pursuant to the\u00a0nunc pro tunc\u00a0<\/em>doctrine, the running of the statutory limitation period could, in effect, be suspended if the notice of motion for leave under s. 138.8 was delivered before the limitation period had tolled.<\/li>\n<\/ol>\n

      [37]\u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0It may be parenthetically noted that in 2014, s. 138.14 of the Ontario\u00a0Securities Act<\/a>\u00a0<\/em>was amended to add\u00a0s. 138.14 (2)<\/a>, which provides that the limitation period is automatically suspended when the notice of motion for leave under\u00a0s. 138.8<\/a>\u00a0is filed with the court. The amendment to\u00a0s. 138.14<\/a>\u00a0is not retroactive, and the Supreme Court of Canada in\u00a0Green v. C.I.B.C.\u00a0<\/em>did not rely on it in formulating its rule about how the running of the limitation period could be suspended.<\/p>\n

      [38]\u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0Notwithstanding the line of authorities that have discussed the operation of s. 183.14 of the Ontario\u00a0Securities Act<\/a><\/em>, Mr. Kaynes argues that the constituent elements of the statutory cause of action found in\u00a0s. 138.3<\/a>\u00a0did not crystallize until there was a public correction, which is a constituent element of the claim, and that this did not occur until, at the earliest, April 21, 2010, and therefore, the three-year limitation period could not have begun to run until April 21, 2010. Based on this argument, Mr. Kaynes asserts that since he commenced his action within three years of April 21, 2010, none of the 14 misrepresentation claims were untimely.<\/p>\n

      [39]\u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0With respect, this argument ignores the plain language of s. 138.14, transmutes to the point of mutation an event-driven limitation period into a discoverability-claim-driven limitation period, obliterates the legislative policy for introducing a limitation period into Part XXIII.1 of the Ontario\u00a0Securities Act<\/a><\/em>, and is contrary to how\u00a0s. 138.14<\/a>\u00a0has been discussed, interpreted, and applied in numerous cases including the\u00a0Sharma v. Timminco\u00a0<\/em>line of cases. In\u00a0Green v. CIBC<\/em>,\u00a0supra\u00a0<\/em>at paras. 66, 180 the Supreme Court noted that the statutory limitation period was designed to run without regard for the plaintiff\u2019s knowledge of the facts giving rise to the cause of action.<\/p>\n

      [40]\u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0It is plain and obvious that the action based on the 11 misrepresentations is statute-barred.<\/p>\n

      [41]\u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0Mr. Kaynes, however, attempts to save the 11 statute-barred claims by relying on\u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0 \u00a0 \u00a0s. 138.3(6) of the Ontario\u00a0Securities Act<\/a><\/em>. He submits that all the misrepresentations are a continuous misrepresentation that began on May 8, 2007 and continued until May 24, 2010, and, therefore, he argues that the limitation period for all of the misrepresentations started to to run on May 24, 2010, making his November 15, 2012 Statement of Claim timely for all claims, subject to leave being obtained under Part XXIII.1 of the\u00a0Act<\/em>.<\/p>\n

      [42]\u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0Mr. Kaynes\u2019 argument about how s. 138.3(6) operates fails for three reasons.<\/p>\n

      [43]\u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0First, Mr. Kaynes interpretation of s. 138.3(6) offends the principles of statutory interpretation that a statute should be interpreted coherently, harmoniously, and without internal contradictions.<\/p>\n

      [44]\u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0To interpret a statute, the court should look at the\u00a0Act<\/em>\u00a0as a whole and attempt to find an interpretation that is in harmony with the entire legislative scheme, including the regulations and forms:\u00a0Verdun v. Toronto-Dominion Bank<\/em>,\u00a01996 CanLII 186 (SCC)<\/a>,\u00a0[1996] 3 S.C.R. 550\u00a0at p. 559;\u00a0Mavi v. Canada (Attorney General)<\/em>\u00a0(2009),\u00a02009 ONCA 794 (CanLII)<\/a>,\u00a098 O.R. (3d) 1 (C.A.)\u00a0at paras. 92-96. In interpreting a statute, it is presumed that the constituent elements of a legislative scheme are meant to work together logically and teleologically, each contributing to the achievement of the legislator’s goal without contradictions or inconsistencies among the constituent elements:\u00a0Peel (Police) v. Ontario (Special Investigations Unit),<\/em>\u00a02012 ONCA 536\u00a0(CanLII)<\/a>at paras. 26, 60;\u00a0R. v. Morgentaler<\/em>,\u00a01975 CanLII 8 (SCC)<\/a>,\u00a0[1976] 1 S.C.R. 616\u00a0at p. 676.<\/p>\n

      [45]\u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0In\u00a0Green<\/em>\u00a0v. C.I.B.C.<\/em>,\u00a0supra\u00a0<\/em>at para. 55, Justice C\u00f4t\u00e9 rejected interpretations of the statutory scheme of Part XXIII.1 of the Ontario\u00a0Securities Act<\/a><\/em>that undermine the\u00a0s. 138.14<\/a>\u00a0limitation period; she stated:<\/p>\n

      Even if we were to assume that there is an ambiguity in the wording of the relevant provisions \u2014 which there is not \u2014 the legislative purpose and structure of those provisions would nonetheless support my conclusion. In other words, \u201cthe scheme of the Act, the object of the Act, and the intention of Parliament\u201d are consistent with the ordinary and grammatical meaning of the words, which is another reason not to depart from that meaning [\u2026] To hold that s. 28\u00a0CPA<\/em>\u00a0operates to suspend a limitation period for a statutory claim under s. 138.3\u00a0OSA<\/em>\u00a0before leave is obtained would be to circumvent the carefully calibrated purposive balance struck by the limits to the statutory action provided for in Part XXIII.1\u00a0OSA<\/em>. Such an interpretation would render s. 138.8\u00a0OSA<\/em>\u00a0ineffective, since the suspension of the limitation period, although not permanent, could nevertheless delay the decision on the merits of leave for several months or even for years, as the cases at bar demonstrate.<\/p>\n

      [46]\u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0As demonstrated by the case at bar, Mr. Kaynes\u2019 interpretation and argument about the application of s. 138.3(6) of the Ontario\u00a0Securities Act<\/a><\/em>essentially obliterates the operation of\u00a0s. 138.14<\/a>\u00a0and the clear policy of the Legislature that no action shall be commenced under \u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0 \u00a0s. 138.3<\/a>\u00a0after three years from the first release of the misrepresentation. As demonstrated by the case at bar, Mr. Kaynes\u2019 action is brought based on misrepresentations that, at the commencement of the action in 2012, were over five years old.<\/p>\n

      [47]\u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0Second, Mr. Kaynes\u2019 interpretation is contrary to the scheme of Part XXIII.1 of the Ontario\u00a0Securities Act<\/a><\/em>, which carefully calibrates the regulation of the securities marketplace balancing a myriad of factors including the rights of plaintiffs and defendants and the reality that where damages are awarded against a corporation, it is their innocent long-term shareholders who ultimately pay the price for corporate misconduct. As Justice C\u00f4t\u00e9 noted in\u00a0Green v. C.I.B.C.<\/em>,\u00a0supra\u00a0<\/em>at para. 69:<\/p>\n

        \n
      1. Part XXIII.1 [of the] OSA strikes a delicate balance between various market participants. The interests of potential plaintiffs and defendants and of affected long-term shareholders have been weighed conscientiously and deliberately in light of a desired precise balance between deterrence and compensation. The legislative history reveals a long, meticulous development of this balance, one that found expression in all the limits built into the scheme.<\/li>\n<\/ol>\n

        [48]\u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0Third, Mr. Kaynes\u2019 interpretation of s. 138.3(6) of the Ontario\u00a0Securities Act<\/a>\u00a0<\/em>is contrary to the legislative history that explains the Legislature\u2019s purpose for including\u00a0s. 138.3<\/a>\u00a0as part of the legislative scheme. The legislative history reveals that\u00a0s. 138.3(6)<\/a>\u00a0was added based on a suggestion from the Ontario Securities Commission in response to a Request for Comments. The Commission suggested that\u00a0s. 138.3(6)<\/a>\u00a0would enable the court to deem repeated common misrepresentations to be a single misrepresentation and thus prevent multiple liability for disclosure violations that were so interconnected to be considered a single disclosure violation. In other words,\u00a0s. 138.3(6)<\/a>\u00a0was designed to protect defendants and the provision was not intended to affect the limitation provisions of the Ontario\u00a0Securities Act<\/a>.<\/em><\/p>\n

        [49]\u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0I conclude that it is plain and obvious that s. 138.3(6) does not bring back from the dead the 11 statute-barred misrepresentation claims.\u00a0\u00a0<\/em><\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

        Kaynes v. BP, P.L.C. considers the application of the limitation periods set out in s. 138.14 of Part XXIII.1 of the Ontario Securities Act.\u00a0 As Justice Perell described it, the case is “the latest sequel or prequel in what has turned out to be the case law equivalent of a horror-movie franchise”: [7]\u00a0\u00a0 \u00a0\u00a0 \u00a0\u00a0 … Continue reading Ontario: Justice Perell on the horror of s. 138 of the Securities Act<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[182,375],"class_list":["post-630","post","type-post","status-publish","format-standard","hentry","category-ontario","tag-ontario-securities-act-s-138","tag-the-case-law-equivalent-of-a-horror-movie-franchise"],"_links":{"self":[{"href":"http:\/\/limitations.ca\/index.php?rest_route=\/wp\/v2\/posts\/630","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/limitations.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/limitations.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/limitations.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/limitations.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=630"}],"version-history":[{"count":2,"href":"http:\/\/limitations.ca\/index.php?rest_route=\/wp\/v2\/posts\/630\/revisions"}],"predecessor-version":[{"id":632,"href":"http:\/\/limitations.ca\/index.php?rest_route=\/wp\/v2\/posts\/630\/revisions\/632"}],"wp:attachment":[{"href":"http:\/\/limitations.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=630"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/limitations.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=630"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/limitations.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=630"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}