SUPERIOR COURT OF JUSTICE – ONTARIO

COURT FILE NO.: 1501/10CP
DATE: 2013/03/12

RE: The Fanshawe College of Applied Arts and Technology (Plaintiff)

-and-

Sony Optiarc, Inc., Sony Optiarc America Inc., Sony corporation, Sony of Canada Ltd., Toshiba Samsung Storage Technology Corp, Toshiba Corp., Toshiba of Canada ltd., Samsung Electronics Co., Samsung Electronics Canada Inc., Hitachi-LG Data Storage Inc., Hitachi Ltd., LG Electronics Inc., LG Electronics Canada, Teac Corporation, Teac America, Inc., Teac Canada, Ltd., Koninklijke Philips Electronics N.V., Lite-On It Corporation, Philips & Lite-On Digital Solutions Corporation, Philips & Lite-On Digital Solutions USA, Inc., and Philips Electronics Ltd. (Defendants)

BEFORE: JUSTICE H. A. RADY

COUNSEL:
M. Robb and L. Visser, for the Plaintiff

D. Royal, for the Defendants Sony Optiarc, Inc., Sony Optiarc America Inc., Sony Corporation and Sony of Canada Ltd.

L. Cooper and S. Armstrong, for the Defendants Toshiba Samsung Storage Technology Corp, Toshiba Corp. and Toshiba of Canada Ltd.

S. Forbes and S. Frankel, for the Defendants LG Electronics Inc. and LG Electronics Canada

S. O’Brien, for the Defendants Koninklijke Philips Electronics N.V., Lite-On it Corporation, Philips & Lite-On Digital Solutions Corp, Philips & Lite-On Digital Solutions USA, and Philips Electronics Ltd.

J. Smithen, for the Defendant Hitachi-LG Data Storage Inc.

E. Davis, for the Defendants Panasonic Corporation, Panasonic Corporation of North America, Panasonic Canada Inc.

M. Jamal and R. Eghan, for the Defendants NEC Corporation, NEC Canada, Inc.

HEARD: January 28, 2013

ENDORSEMENT

Introduction

[1] This is a proposed class action for damages arising from an alleged price fixing conspiracy for optical disc drives (ODD) and products containing them. The plaintiff seeks leave to add eighteen new defendants. The defendants oppose the relief sought on the basis that the limitation periods have expired.

[2] There are two groups of proposed defendants:

i) Parties related to existing defendants. The related proposed defendants are: Sony Computer Entertainment America LLC, Sony Computer Entertainment Canada, Inc., Sony Electronics Inc., Toshiba Samsung Storage Technology Corp. Korea, Toshiba America Information Systems, Inc., Samsung Electronics America, Inc., Hitachi-LG Data Storage Korea, Inc., and LG Electronics USA, Inc. The parent companies for each of the related proposed defendants are currently named as defendants in the action; and

ii) New corporate families of defendants. The new proposed defendants are: NEC Corporation, NEC Canada, Inc. (collectively “NEC”), Quanta Storage, Inc., Quanta Storage America, Inc. (collectively “Quanta”), Panasonic Corporation, Panasonic Corporation of North America, Panasonic Canada, Inc. (collectively “Panasonic”), BenQ Corporation, BenQ America Corporation, and BenQ Canada Corp. (collectively “BenQ”).

[3] The proposed defendants are said to be involved in the manufacture and/or sale of ODD and/or products containing them.

Background

[4] This action was commenced on June 11, 2010. The plaintiff alleges that the defendants engaged in a conspiracy to fix prices between November 2, 2005 and January 1, 2010, contrary to the common law and to s. 45 of the Competition Act. Because many of the defendants are located internationally, service was a time consuming process and not completed until September 2011. Notice of appearances were delivered up until July 2012. No statements of defence have yet been filed, consistent with the practice that has developed in class proceedings. Statements of defence customarily await the outcome of a certification motion. Similarly, there has been no discovery, either oral or documentary.

[5] Plaintiff’s counsel deposes that the scheduling process for this motion began in July 2012 and for a variety of reasons, a hearing date was not scheduled earlier than January 2013. The motion record was not served until September. I have no concern arising from any delay in the service and scheduling of the motion.

[6] There is related litigation in the United States, British Columbia, Quebec and Manitoba. The Quebec proceeding, the first of the Canadian actions, was commenced on April 7, 2010 and names three of the proposed defendants as defendants in that action.

[7] On August 26, 2010, the U.S. class actions were consolidated into two actions: one on behalf of direct purchasers and the other on behalf of indirect purchasers. The proposed defendants who are not Canadian companies were named as defendants in one or both of the two actions.

[8] There are no criminal proceedings in Canada and none of the proposed defendants are named in the list of antitrust case filings on the U.S. Department of Justice Antitrust Division website. However, the Department of Justice announced its investigation of possible anti-competitive practices in the ODD industry in October 2009.

The Law

[9] The relevant sections of the Limitations Act are as follows:

Basic limitation period

4. Unless this Act provides otherwise, a proceeding shall not be commended in respect of a claim after the second anniversary of the day on which the claim was discovered.

Discovery

5. (1) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).

Presumption

(2) A person with a claim shall be presumed to have known of the matters referred to in clause (1)(a) on the day the act or omission on which the claim is based took place, unless the contrary is proved.

Adding party

21. (1) If a limitation period in respect of a claim against a person has expired, the claim shall not be pursued by adding the person as a party to any existing proceeding.

[10] The Competition Act provides the following limitation:

Limitation

36. (4) No action may be brought under subsection (1),

(a) in the case of an action based on conduct that is contrary to any provision of Part VI, after two years from

(i) a day on which the conduct was engaged in, or

(ii) the day on which any criminal proceedings relating thereto were finally disposed of,

whichever is the later;

[11] Rule 26.01 of the Rules of Civil Procedure provides that “on motion at any stage of an action the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment”.

[12] Rule 25.07(4) addresses the requirement to plead affirmatives defences:

In a defence, a party shall plead any matter on which the party intends to rely to defeat the claim of the opposite party and which, if not specifically pleaded, might take the opposite party by surprise or raise an issue that has not been raised in the opposite party’s pleading.

[13] There is case law that stands for the proposition that a limitation period is not a defence unless pleaded: D.S. Park Waldheim Inc. v. Epping (1995), 1995 7091 (ON SC), 24 O.R. (3d) 83 (Gen. Div.). Strong v. P. (M.M.) (2000), 2000 16831 (ON CA), 50 O.R. (3d) 70 (C.A.); leave to appeal to S.C.C. refused.

[14] The Limitation Act preserves the doctrine of discoverability, which has been defined by the Court of Appeal in Aguonie v. Galion Solid Waste Inc. (1998), 1998 954 (ON CA), 38 O.R. (3d) 161 (C.A.) in this way:

This principle provides that a cause of action arises for the purpose of a limitation period when the material facts on which it is based have been discovered, or ought to have been discovered by the plaintiff by the exercise of reasonable diligence. This principle conforms with the generally accepted definition of the term “cause of action” – the fact or facts which give a person a right to judicial redress or relief against another.

The Parties’ Positions

[15] The defendants submit that the limitation period relating to the new proposed defendants has expired and that the plaintiff has failed to lead adequate evidence to demonstrate that the proposed defendants were not identifiable earlier. As a result, it has failed to rebut the presumption that a claim is discovered on the day that the act or omission on which the claim is based took place, which the plaintiff has identified as occurring between November 1, 2005 and January 1, 2010. Accordingly, the limitation period expired on January 1, 2012.

[16] They submit that the discoverability principle has no application to the limitation under the Competition Act because it runs from one of two events that are unrelated to the plaintiff’s knowledge. In Fairview Donut Inc. v. The T.D.L. Group Corp., 2012 ONSC 1252, [2012] O.J. No. 834 (S.C.J.) Justice Strathy made this observation:

The proposition that the discoverability rule applies to s. 36(4) of the Competition Act was rejected in Garford Pty v. Dywidag at paras. 31 to 33:

I think it is clear, then, that there is no general application of the discoverability rule as alleged by the Plaintiff, that it is always a matter of statutory construction, and that 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’s knowledge or the basis of the cause of action” (Ryan, above, at paragraph 24).

From these principles, it is clear why, in Laboratoires Servier, above, Justice Snider relied upon Fehr, above, to conclude that the time period in subsection 36(4) of the Competition Act ran from a specific date that was independent of knowledge and that the discoverability principle did not apply.

For these reasons, then, I think I must conclude that the Plaintiff cannot rely upon the discoverability principle to extend the limitation period in this case. In addition, even if the discoverability principle were applied in this case, on the evidence before me it is clear that the Plaintiff’s subsection 36(4) claim would still be time-barred.

[17] The plaintiff submits that:

• a limitation defence must be pleaded;

• leave is mandatory in the absence of prejudice and the proposed defendants can plead the limitation period;

• discoverability applies;

• a pleadings motion is not the appropriate forum to resolve issues relating to limitation periods, and it relies on cases decided under Rules 20 and 21 as sources of guidance;

• there is no prejudice to the proposed defendants, and

• other courts have permitted amendments to pleadings or refused to strike a pleading on the basis of the Competition Act limitation.

Analysis

[18] I will deal first with the common law claims. The application of the discoverability principle involves findings of fact: when the plaintiffs learned they had a cause of action or when, through the exercise of reasonable diligence, they should have known: see Aguonie (supra).

[19] This raises the question of what evidentiary requirements are to be met and whether the court is obliged to make findings of fact at the pleadings stage, which is obviously very early in the proceedings.

[20] In Wong v. Adler, 2004 8228 (ON SC), [2004] O.J. No. 1575, aff’d 2004 73251 (ON SCDC), 76 O.R. (3d) 237 (Div. Ct.) Master Dash set out a useful guide to the approach to be taken:

(i) [T]he motions court must examine the evidentiary record before it to determine if there is an issue of fact or of credibility on the discoverability allegation, which is a constituent element of the claim.

(ii) If the court determines that there is such issue, the defendant should be added with leave to plead a limitations defence.

(iii) If there is no such issue, as for example where the evidence before the motions court clearly indicates that the name of the tortfeasor and the essential facts that make up the cause of action against such tortfeasor, were actually known to the plaintiff or her solicitor more than two years before the motion to amend, the motion should be refused.

(iv) If the issue is due diligence rather than actual knowledge, this is much more likely to involve issues of credibility requiring a trial or summary judgment motion, provided of course that the plaintiff gives a reasonable explanation on proper evidence as to why such information was not obtainable with due diligence. That is not to say that such motion could never be denied if the evidence is clear and uncontradicted that the plaintiff could have obtained the requisite information with due diligence such that there is no issue of fact or credibility.

[21] In Wakelin v. Gourley (2005), 2005 23123 (ON SC), 76 O.R. (3d) 272 (S.C.J.) Master Dash referred to his decision in Wong v. Adler and observed that “it will be rare that the applicability of the discoverability principle based on due diligence will be determined on a motion to add a party.” As to the amount of evidence required by a plaintiff on such a motion, Master Dash noted as follows:

The question is how much evidence must the plaintiff put in at the pleadings amendment stage to establish that the proposed defendants could not have been identified with due diligence within the limitation period? The short answer is: not very much. As stated by the Court of Appeal in Zapfe: In most cases, one would expect to find, as part of a solicitor’s affidavit, a list of the attempts made by the solicitor to obtain information to substantiate the assertion that the party was reasonably “diligent” and to provide “an explanation for why she was unable to determine the facts”.

[22] In my view, it is not necessary at the pleadings stage to make findings of fact respecting discoverability but rather it is necessary to be satisfied that a triable issue exists.

[23] I agree with counsel for the defendants that the material offered by the plaintiff is “thin” and really does not detail what steps were taken to identify the potential defendants. I have reviewed Ms. McGladdery Dent’s affidavits sworn November 20, 2012, January 16, 2013 and January 18, 2013. She deposes in her first affidavit that since the action was started “class counsel has continued its investigations”. She then detailed certain computer searches that she undertook in July and September 2012 to confirm that the new proposed defendants were involved in the ODD product market.

[24] Her second affidavit primarily addresses the scheduling of the motion. She also comments that Siskinds’ practice is to periodically check PACER (an electronic service that permits users to obtain information about American litigation). There is no information as to when the firm checked PACER in respect of the related American litigation. She also notes that a related class action was commenced in British Columbia on September 27, 2010 and many of the proposed defendants were named in that litigation. She does not address when the firm became aware of the B.C. action or if that is when it learned the identity of the new proposed defendants.

[25] Her last affidavit speaks to the American proceedings but I see no reference to discoverability (except perhaps inferentially).

[26] As a result, the material is deficient in identifying the attempts made to “substantiate the assertion that the party was reasonably diligent...” to borrow the words of Master Dash. However, I am not comfortable refusing an amendment at this stage of the proceeding and on the basis of what I consider to be a defective record.

[27] In my opinion, the fairest procedure is to permit the plaintiff to file additional material to address the shortcomings that have been identified. It may be that such material will satisfy the defendants of the plaintiff’s diligence such that the amendment could proceed on consent. If not, the parties can arrange for a further hearing.

[28] There is considerable attractiveness to the defendants’ argument respecting the limitation having expired under the Competition Act but I have decided that it is premature to rule that it has at the pleadings amendment stage. Justice Strathy’s reasoning in the Fairview Donut case is persuasive but I note that the motion that he was considering was for certification. It is fair to assume that the plaintiff’s claim was well developed and investigated by that time. The motion before the Federal Court in Garford Pty. Ltd. (to which Strathy J. referred) was for summary judgment when again the record would be well developed and the parties expected “to put their best foot forward”.

[29] The Robinnson Motorcyle Ltd. v. Fred Deeley Imports Ltd. decision of Master Pope reported as [2009] O.J. No. 401 is distinguishable given the long procedural history to the action, with documentary exchange and examinations for discovery in the Competition Act proceeding. This is significant because presumably the plaintiff by then would have understood when the alleged conspiracy occurred.

[30] In this case, the investigation is ongoing and given that conspiracies are by their nature secret, it is conceivable that the alleged conspiracy occurred at times other than currently pleaded.

[31] Therefore, the motion is adjourned. In the meantime, I will receive brief written submissions on costs from the defendants within two weeks and the plaintiff one week thereafter.

Justice H.A. Rady
Justice H. A. Rady

Date: March 12, 2013