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Appeal court clarifies limitation periods

|Written By Yamri Taddese

The Ontario Court of Appeal clarified the issue of limitation periods in two recent rulings affecting both class action and family law matters.

The Court of Appeal ruling in Huxtable v. McConnell will affect many different practice areas, say Bryan Smith and Lindsey Love-Forester. Photo: Laura Pedersen

On Feb. 3, plaintiff-side class action lawyers breathed a collective sigh of relief after the court overturned Sharma v. Timminco Ltd., a 2012 landmark ruling that imposed a three-year deadline for filing a class action claim under the Securities Act and successfully obtaining leave to begin a statutory action.

The three-year limitation period was a difficult one to meet, according to lawyers who say the Court of Appeal’s latest decision on the matter is a huge victory for investors and access to justice in Ontario. In effect, the ruling means class action lawyers need only issue a claim within the three-year window and they can toll the limitation period while they seek leave to launch a statutory action.

The latest ruling in Green v. Canadian Imperial Bank of Commerce considered three separate class proceedings dealing with alleged misrepresentations in the secondary market. In all cases, the limitation period ran out before leave to proceed with the action was granted.

“This is an overwhelming victory for Ontario’s investors,” says Daniel Bach, a class actions lawyer at Siskinds LLP.

“The Court of Appeal has very clearly said these claims are going to go under the established test and adopted a realistic approach for how the limitation period will work.”

Just days before its ruling in Green, the court clarified the Limitations Act as it applies to constructive trusts in family law cases. In McConnell v. Huxtable, the appeal court decided to apply the catch-all two-year limitation period to bring constructive trust claims against a common law spouse. But if the unjust enrichment claim relates to the profits of real property, a more lenient 10-year timeline applies.

The finding overturned part of a lower court ruling that found there was a legislative gap when it came to an applicable statute of limitations for unjust enrichment claims in family law.

Lawyers say both rulings will have a significant impact. When the Court of Appeal handed down Timminco in 2012, many lawyers described it as a “thunderbolt” that would render many claims statue-barred.

According to appeal court Justice Kathryn Feldman, who wrote the decision on the court’s behalf, Timminco’s deadline is impractical for cases involving complex and time-consuming discovery phases. And once a motion for leave begins, the parties have limited control on the timing of the hearing.

“For the above reasons, I would set aside the interpretation given to s. 28 of the [Class Proceedings Act] in Timminco,” she wrote.

“I would hold that when a representative plaintiff in a class action brought within the Securities Act s. 138.14 limitation period, also pleads a cause of action based on s. 138.3 of 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 s. 28 of the [Class Proceedings Act], and the limitation period is thereby suspended for all class members.”

The ruling “ensures that securities class proceedings remain in tune with their original purposes,” says Joel Rochon, class action counsel and founding partner of Rochon Genova LLP.

“In the case of CIBC, in particular, it will now be possible for everyday investors to hold corporations accountable for misrepresentations and failures to disclose,” he adds.

Family lawyer Bill Rogers, who represented the respondent in the McConnell appeal, says he would have been happier if the appeal court had rejected the two-year limitation period for all constructive trust claims in family law but notes it’s good the court has clarified when the clock starts ticking.

The Superior Court’s ruling suggested it was difficult to know when a claim is “discovered” in family law cases.

“Does that knowledge reasonably or actually arise when the couple are no longer getting along? When one of them thinks of separating? When one of them tries to raise the issue of the title to a particular piece of property?” asked Justice Craig Perkins.

In response, the appeal court said that for the purpose of the law, the claim isn’t discovered “until the parties have either divorced or there are reasonable grounds to believe that the relationship has been dissolved.”

Lerners LLP’s Bryan Smith and Lindsey Love-Forester, who represented the appellant, say the case is a significant one that will have an impact on several areas of law.

“Firstly, the Court of Appeal was clear that although Huxtable v. McConnell is a family law case, the issue of whether the Real Property Limitations Act applies to a claim for a constructive trust will be the same whether the equitable claim for an interest in land arises out of a domestic relationship or a purely business transaction,” the lawyers said in a joint statement.

“Secondly, the Court of Appeal held that unless a specific statutory exemption applies, the Limitations Act 2002 applies to claims for equitable relief, including a claim based on unjust enrichment. This would apply equally to equitable claims in the commercial context as well as in estate law.”

Toronto family lawyer Philip Epstein agrees the decision is an “extremely important” one for the family law bar. If parties decide to mediate a constructive trust case, they should remember to toll the limitation period until the mediation is over, he says.

“It’s extremely important that lawyers do that. . . . They could run out the limitation period while waiting for mediation.”

For more, see "Judge sets 10-year limitation period for constructive trust claims."

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