Court of Appeal for Ontario

Date: 2018-04-05 Docket: C64363

Judges: Hourigan, Pardu and Huscroft JJ.A.

Between

Peter Kaynes Plaintiff (Appellant)

and

BP, P.L.C. Defendant (Respondent)

Counsel

For the Appellant: Bonnie Roberts Jones and Andrew Morganti

For the Respondent: Laura K. Fric, Kevin O'Brien and Karin Sachar

Heard: April 3, 2018

On appeal from: The judgment of Justice Paul Perell of the Superior Court of Justice, dated September 1, 2017.

Reasons for Decision

Introduction

[1] This appeal turns upon a consideration of the interaction between the limitation period found in s. 138.14 of the Securities Act, R.S.O. 1990, c. S.5 (the "Act"), and s. 138.3(6) of the Act, which provides that multiple misrepresentations may be considered, at the discretion of the court, to constitute a single misrepresentation.

[2] The appellant, a putative representative plaintiff in a class proceeding against the respondent BP, P.L.C. ("BP"), sued on fourteen alleged misrepresentations. Eleven of the misrepresentations were made more than three years before the action was commenced. He argued below that the claims based on those misrepresentations should not be ruled statute-barred on a r. 21.01(1)(a) motion because it is within the discretion of the judge hearing the leave application to treat them as a single misrepresentation.

[3] The motion judge rejected that argument. He ruled that the claims based on the eleven misrepresentations were statute-barred pursuant to s.138.14. Further, he found that the statutory discretion to treat multiple misrepresentations as a single misrepresentation did not impact the limitation period analysis.

[4] On appeal, the appellant advances the same statutory interpretation arguments made below and submits that the motion judge erred in law in his analysis. At the conclusion of the appellant's counsel's submissions we dismissed the appeal with reasons to follow. These are those reasons.

Background Facts

[5] This proceeding has a lengthy and complex history. For present purposes, the following brief factual summary will suffice.

[6] The appellant alleges that he acquired shares of BP's securities on January 28, 2008, April 29, 2008, and August 12, 2008, after reviewing BP's core documents that contained an alleged misrepresentation about BP's operating management system and its ability to respond to an oil spill in the Gulf of Mexico. Deepwater Horizon, an oil rig operated by BP in the Gulf of Mexico, exploded on April 20, 2010 causing massive environmental damage. The disaster negatively impacted the value of BP's securities.

[7] The appellant seeks to bring a class action on behalf of all Canadian residents who acquired BP equity securities during the period May 9, 2007 to April 23, 2010. The proposed class action is based solely on the statutory cause of action for secondary market misrepresentation provided for in s. 138.3 of Part XXIII.1 of the Act.

[8] The action was commenced on November 15, 2012 in Ontario. The next day, the appellant served his motion record seeking leave to proceed with his action. There followed a motion challenging the jurisdiction of the Ontario courts. This court eventually stayed the proceeding. An action was then commenced in Texas but the U.S. Federal Court dismissed it. The stay was eventually lifted by order of this court.

[9] The order that is the subject of this appeal is from a motion brought by BP under r. 21.01(1)(a) for a declaration that the appellant's claim is statute-barred pursuant to s. 138.14 of the Act.

Motion Judge's Decision

[10] The motion judge found that it was plain and obvious that eleven of the misrepresentation claims that were based on documents released between May 8, 2007 and February 26, 2010 were statute–barred. He further found that claims based on documents released between February 27, 2010 and April 23, 2010 were not statute–barred, as it was not plain and obvious that the class members will be denied leave nunc pro tunc to assert those claims.

[11] The motion judge rejected the appellant's submission that all of the misrepresentations should be treated as a single misrepresentation for purposes of calculating when the limitation period should begin to run. He found that such an interpretation would negative the policy choice made by the legislature in enacting the limitation period, would conflict with the scheme of the Act, and would be contrary to the legislative history of the Act because the provision regarding multiple misrepresentations was enacted to limit liability not expand it.

[12] The sole issue on this appeal is whether the motion judge was correct in dismissing the claims based on documents released between May 8, 2007 and February 26, 2010.

Analysis

[13] The appellant submits that this case was not appropriate for determination as a Rule 21 motion. We disagree. In a case such as this where the parties agree that there are no material facts in dispute, it is an efficient use of court resources to determine limitations defences on a Rule 21 motion.

[14] The limitation period in s. 138.14 reads as follows:

138.14 (1) No action shall be commenced under section 138.3,

(a) in the case of misrepresentation in a document, later than the earlier of,

(i) three years after the date on which the document containing the misrepresentation was first released, and

(ii) six months after the issuance of a news release disclosing that leave has been granted to commence an action under section 138.3 or under comparable legislation in the other provinces or territories in Canada in respect of the same misrepresentation;

(b) in the case of a misrepresentation in a public oral statement, later than the earlier of,

(i) three years after the date on which the public oral statement containing the misrepresentation was made, and

(ii) six months after the issuance of a news release disclosing that leave has been granted to commence an action under section 138.3 or under comparable legislation in another province or territory of Canada in respect of the same misrepresentation; and

[15] This is an event triggered limitation period, which commences on the making of the oral statement or the release of the impugned document. It is designed to run without regard to the plaintiff's knowledge of the facts giving rise to the cause of action: Canadian Imperial Bank of Commerce v. Green, 2015 SCC 60, at paras. 66 and 180. The motion judge correctly found that for the eleven alleged misrepresentations made more than three years before the issuance of the appellant's statement of claim the limitation period had expired.

[16] The appellant's primary submission on appeal is that s. 138.3(6) of the Act operates to extend the limitation period in the case of multiple misrepresentations. That subsection provides as follows:

(6) In an action under this section,

(a) multiple misrepresentations having common subject matter or content may, in the discretion of the court, be treated as a single misrepresentation; and

(b) multiple instances of failure to make timely disclosure of a material change or material changes concerning common subject matter may, in the discretion of the court, be treated as a single failure to make timely disclosure. 2002, c. 22, s. 185 ; 2004, c. 31, Sched. 34, s.12(7).

[17] The appellant argues that treating the alleged misrepresentations as a single misrepresentation would have the effect of extending the three-year limitation period for claims arising from the eleven out-of-time statements. In our view, the motion judge did not err in rejecting this argument. We reach this conclusion for the following reasons.

[18] First, there is nothing in the language of s. 138.3(6) that suggests that it is intended to modify the clear event triggered limitation period provided in s. 138.14.

[19] Second, the appellant submits that the motion judge erred in failing to take into consideration the "twin goals of investor protection and the deterrence of corporate misconduct" in his interpretation of the Act. That view of the policy objectives of the Act is too narrow. As Cote J. noted in CIBC, at para. 69, the policy considerations are more nuanced, "Part XXIII.1 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."

[20] Part of the balance struck by the three year event driven limitation period was to protect subsequent shareholders from claims based on alleged misrepresentations made to previous shareholders.

[21] Third, we agree with the motion judge's conclusion that the legislative history of s. 138.3(6) demonstrates that it was enacted as a consequence of an Ontario Securities Commission response to a Request for Comments. It is plain from that submission that the section was designed to protect issuers from multiple rights of action or multiple liability for essentially the same misrepresentation repeated on a number of occasions.

[22] Finally, we note that even if the appellant is correct and s. 138.3(6) was intended to modify the limitation period analysis, it is arguable that in the case of multiple misrepresentations treated as a single misrepresentation the limitation period would run from the date the misrepresentation was first made. Subsection 138.14 mandates that the running of the limitation period commences when the document is first released. Applied literally in this case, the result would be that the limitation period for all fourteen misrepresentations commenced in 2007 and the claims based on all of the documents would be statute-barred.

Disposition

[23] The appeal is dismissed. Costs of the appeal are payable by the appellant to the respondent in the agreed upon all-inclusive amount of $20,000.

"C.W. Hourigan J.A."

"G. Pardu J.A."

"Grant Huscroft J.A."