Raising Limitations Issues Before the Close of Pleadings: Further Guidance from the Court of Appeal

It is well established that discoverability issues should rarely, if ever, be decided on a motion under Rule 21.01(1)(a) unless pleadings are closed and the relevant facts are undisputed.

This proposition previously resulted in uncertainty for defendants of proposed securities class actions who believe they are faced with a statute-barred claim, but are not required to deliver a statement of defence until the plaintiff obtains leave to assert their statutory claim under the Securities Act.[i] In those circumstances, are defendants precluded from commencing a motion to strike a claim as statute-barred under the Limitations Act[ii] prior to filing a statement of defence?

A recent unanimous decision of the Ontario Court of Appeal in Kaynes v. BP p.l.c.[iii] (“Kaynes”) confirms that the answer to this question is “no”, so long as the facts regarding the discovery of the claim are undisputed.

This decision provides welcome guidance to the class actions bar, as it confirms the circumstances in which an early-stage Rule 21 motion to challenge a statute-barred claim may be appropriate, and clarifies when a claim for fraudulent misrepresentation is discoverable under the Limitations Act. 

BACKGROUND

The Proposed Class Proceeding in Canada

On April 20, 2010, there was an explosion on the Deepwater Horizon oil rig, operated by U.K. petroleum company BP p.l.c. (“BP”), in the Gulf of Mexico.

The plaintiff, a Canadian resident who had purchased BP shares over the New York Stock Exchange, alleged that BP misrepresented the safety of its drilling operations in the Gulf of Mexico in its securities filings, which had the effect of artificially inflating its share price. The plaintiff alleged that immediately following the Deepwater Horizon explosion, BP publicly corrected these misrepresentations, leading to a significant drop in BP’s share price.

The plaintiff has been attempting to advance a proposed class action against BP in Canada since 2012, but has faced numerous procedural and jurisdictional roadblocks over the years, leading to multiple amendments to the pleadings. The following developments are particularly important:

• In June 2017, the plaintiff delivered a second fresh as amended statement of claim (the “2017 Amendment”), which limited the action to statutory misrepresentation claims solely based on the Securities Act. It also added, for the first time, allegations that BP knew that its misrepresentations were false when it made them.
• In September 2017, the Superior Court declared most of the misrepresentation claims to be statute-barred.[iv] This decision reduced the proposed class period from 1,080 days to 55 days, and as a result, the plaintiff was no longer a putative class member.
• Accordingly, in September 2019, the plaintiff delivered another amended statement of claim (the “2019 Amendment”), which for the first time expressly advanced a cause of action for fraudulent misrepresentation. The 2019 Amendment repeats the alleged misrepresentations set out in the plaintiff’s earlier claims, but further pleads that some of the misrepresentations were made by BP with “knowledge of the falsities contained therein or with a reckless disregard to learning the accuracy of the representation”.[v] It also included an appendix with particulars of the alleged fraudulent misrepresentations.