In Kaynes v. BP, P.L.C.  ONSC 5172, Justice Perell characterizes his decision about the operation of the limitation period set out in s. 138.14 of Part XXIII.1 of the Ontario Securities Act (the Act) as “the latest sequel or prequel in what has turned out to be the case law equivalent of a horror-movie franchise”.
The decision arises from a Rule 21 motion brought by BP for a ruling that the putative class members’ statutory misrepresentation claims were statute-barred under s. 138.14. The motion was brought prior to argument of the motion for leave under s. 138.8.
On November 15, 2012, the plaintiff, Kaynes, commenced a proposed class action on behalf of Canadian shareholders of BP.
Pursuant to s. 138.3 of the Act, Kaynes alleged that BP was liable for 14 secondary market misrepresentations made during the period from May 8, 2007 to April 15, 2010. Of the 14 alleged misrepresentations, 3 were made in early 2010. There was no suggestion that those three claims were statute-barred at the time of the issuance of the statement of claim. However, the remaining 11 misrepresentations were all made more than three years prior to the issuance of the claim.
Fortuitously, the plaintiff served his motion for leave on November 16, 2012, one day after the issuance of the claim. Tolling agreements entered into while forum motions were being pursued suspended the operation of the limitation period between December 22, 2012 and September 22, 2015. However, by September 2015, when those agreements terminated, it was arguable that the limitation period for the three alleged misrepresentations made in 2010 had expired. A subsequent Tolling Agreement entered into in September 2016 provided that it did not revive any claim barred by any limitation period running between September 22, 2015 and September 29, 2016.
The Alleged Misrepresentations Made More than 3 Years Prior to the Issuance of the Statement of Claim Were Statute-Barred
BP successfully argued that the 11 alleged misrepresentations made prior to 2010 were out of time because they were made more than 3 years prior to the issuance of the statement of claim.
Interpretation of s. 138.14: An Event-Triggered Limitation Period
In response, Kaynes submitted that as a public correction of a misrepresentation is a constituent element of the cause of action, the limitation period did not begin to run until BP publicly corrected its statements on April 21, 2010. On that basis, as the claim was commenced within 3 years of the correction, the limitation period had not expired.
The Court disagreed, finding that Kaynes’ argument ignored the fact that s. 138.14 is an “event-triggered” limitation period, not a “claim-based” limitation period. As such, the court could not impose a discoverability requirement. To interpret s. 138.14 in the manner suggested by BP would obliterate the legislative policy for introducing that provision and would be contrary to how that provision has been discussed, interpreted and applied by the courts.
Purpose of s. 138.3(6)
Kaynes further asserted that the limitation period had not expired because all 14 misrepresentations should be treated as a single, continuous misrepresentation pursuant to s. 138.3(6) of the Act. On that basis, the limitation period would not begin to run until the final misrepresentation.
Justice Perell also rejected that argument, stating that that interpretation of s. 138.3(6) would effectively obliterate the operation of s. 138.14 and “the clear policy of the Legislature that no action shall be commenced under s. 138.3 after three years from the first release of the misrepresentation”. Moreover, the legislative purpose in enacting s. 138.3(6) was to protect defendants from multiple liability for disclosure violations that were so interconnected to be considered a single disclosure violation, rather than to safeguard plaintiffs’ claims from the running of the limitation period. Accordingly, it was not plain and obvious that s. 138.3(6) “brought back from the dead” the 11 statute-barred misrepresentation claims made more than 3 years prior to the issuance of the statement of claim.
The Representations Made in 2010 Were Saved by the Availability of the Nunc Pro Tunc Doctrine
BP unsuccessfully argued that the Tolling Agreement foreclosed the plaintiff from relying upon the doctrine of nunc pro tunc to save the 3 alleged misrepresentation claims arising from representations made in 2010 that were arguably statute-barred by virtue of the lapse of the Tolling Agreement in 2015 and the expiry of the limitation period.
Justice Perell disagreed with the suggestion that the Tolling Agreement operated to foreclose the plaintiff from relying upon the nunc pro tunc doctrine articulated in Green v. C.I.B.C., 2015 SCC 60, the purpose of which is “to backdate the leave order to a time when viable claims were not statute-barred”. In Green, the Supreme Court of Canada determined that in certain circumstances, it was open to a court to grant leave to a plaintiff nunc pro tunc to assert Part XXIII.1 statutory misrepresentation claims that would otherwise be statute- barred, provided that the notice of motion for leave had been delivered before the limitation period had tolled.
As the plaintiff had not expressly agreed in the Tolling Agreement that he could not rely upon the nunc pro tunc doctrine, and had commenced the motion for leave before the expiry of the limitation period, he was not foreclosed from relying upon that doctrine if he succeeded in getting leave to bring the statutory claim. As such, those misrepresentation claims were not necessarily statute-barred.
The 11 alleged misrepresentation claims arising from statements made prior to 2010 were “already impotent” by the time that Kaynes commenced his proposed class action, and “could not be made fertile” by operation of s. 138.3(6).
However the 3 alleged misrepresentation claims arising from statements made in 2010 were “immunized” by the fact that Kaynes had served his notice of motion for leave in a timely fashion, thereby preserving his ability to seek to rely upon the nunc pro tunc doctrine.
In any circumstance where the doctrine of nunc pro tunc may be available, defendants would be well advised to include specific language in tolling agreements excluding its application.
The author would like to thank Joseph Palmieri, Student-At-Law, for his contribution to this article.