An Ontario appeal court has reconsidered a controversial decision that made securities class actions tougher to pursue, clearing the way for a proposed class action against CIBC that was dismissed on the basis of the earlier decision to now go ahead.
The Court of Appeal for Ontario handed down a decision in three class action cases that were dismissed on the basis that they are statute barred because, while the actions were brought within the applicable limitation period, a court had not granted leave to bring the action within the period.
The cases all involved claims under securities laws for secondary market misrepresentation. Each case was dismissed as statute barred based on a recent decision (Sharma v. Timminco), which held that a claim is statute-barred if leave to commence the action is not obtained within the three-year limitation period. However, that decision proved controversial and the appeals were heard to allow the court to decide whether to reconsider that decision.
The three appeals were heard together by a five judge panel, and it handed down its decision today, revising its earlier interpretation in the Timminco decision; and, allowing the appeal in a case involving CIBC, and claims that it misled investors about its exposure to collateralized debt obligations (CDOs) during the financial crisis. Those allegations have not been proven.
The court notes that the Timminco decision, which was released on February 16, 2012, “came as a great surprise to the securities class action bar”, and that effectively meant that a number of cases were statute-barred. It has also now concluded that decision was wrong in a couple of respects, in that it “undercuts the ability of investors to bring a class action within the limitation period because they do not have control of whether they can meet or toll the limitation period.”
It also finds that the Timminco decision “interprets the legislation in an unintended way and limits the access to justice that the new remedy was intended to provide.”
As a result, the court ruled that the interpretation given in the Timminco decision should be set aside. “I would hold that when a representative plaintiff in a class action brought within the Securities Act’s… limitation period, also pleads a cause of action based on the Securities Act, together with the facts that found that claim, and further pleads the intent to seek leave to commence an action under the Securities Act, then that claim has been “asserted” for the purpose of [class action legislation], and the limitation period is thereby suspended for all class members.”
The result of this conclusion, the court notes, is that none of the three cases under appeal is statute-barred. In the case against CIBC, the court allowed the appeal “to the extent that the order dismissing the class action as statute-barred would be set aside and the common issues in the common law claim relating to the conduct and intent of the defendants… would be certified.”