Saturday, August 9, 2014

Supreme Court to hear Green v. CIBC: - Sub Prime

August 7, 2014
"The Supreme Court of Canada announced today that it will hear appeals in a trilogy of Ontario securities class action cases: Green v. CIBC, Silver v. IMAX and Celestica v. Millwright Regional Council of Ontario Pension Trust Fund."
See "Sub Prime" for documents

Decision Gives Defendants to Securities Class Actions Cause for Optimism.

By Mark Gelowitz, Robert Carson ... Osler

A recent decision of the Ontario Superior Court of Justice addresses important aspects of Ontario’s secondary market liability regime. In Green v. Canadian Imperial Bank of Commerce, 2012 ONSC 3637, Justice George Strathy denied the plaintiffs leave to commence a proposed class action under Part XXIII.1 of the Ontario Securities Act on the basis that the limitation period had expired. Justice Strathy also rejected the plaintiffs’ request to certify common law claims for negligent misrepresentation. Both aspects of the CIBC decision are discouraging for prospective plaintiffs. While the Canadian jurisprudence considering the tests for leave and certification in securities misrepresentation cases continues to evolve, CIBC suggests that a more restrictive approach is developing.
The plaintiffs, who were shareholders of CIBC, alleged that during a period from May 31, 2007 to February 28, 2008, CIBC and four of its senior officers misrepresented and/or failed to disclose CIBC’s exposure to the US residential mortgage market, including its exposure to subprime mortgages. They further allege that the “true state” of CIBC’s exposure was not revealed until early 2008, at which point the value of CIBC’s shares fell. The plaintiffs commenced statutory claims under Part XXIII.1, as well as common law misrepresentation claims. The plaintiffs sought leave under section 138.3 of the Securities Act to commence an action in respect of the statutory claims and certification of a class action including both the statutory and common law claims.

Justice Strathy explained that, if not for the passage of the limitation period, he would have granted the plaintiffs leave to commence an action under Part XXIII.1. He noted that this was the first Ontario decision in which the “rubber may really hit the road” in the application of the leave test, and conducted a lengthy obiter dicta analysis into whether the action had a ‘reasonable possibility of success’ – the second requirement for leave in section 138.8(1). Justice Strathy also explained that, if not for the expiry of the limitation period, he would have certified the statutory misrepresentation claims.

Posted Date: February 24, 2014
"In a stunning reversal, a five-judge panel of the Ontario Court of Appeal reversed its decision in Sharma v. Timminco Ltd. where it just recently held that the three-year limitation period for bringing a statutory claim for misrepresentation in respect of shares trading in the secondary market could not be suspended until a court had granted leave to commence the claim.

In revisiting and overruling its own decision in Green v. Canadian Imperial Bank of Commerce, the Court of Appeal recognized the draconian effects of a faulty interpretation of this limitation period provision, and restored the careful balance intended by the framers of the Ontario Securities Act.

The purpose of the Securities Act is to protect investors from unfair, improper, or fraudulent practices and to foster fairness, efficiency, and confidence in capital markets. A strict application of Timminco has caused undue prejudice to plaintiffs and retards these aims. The Court of Appeal’s decision in Timminco arose from a vacuum in which the court failed to consider any of the consequences that flowed from its decision.

Directly faced with the consequences of Timminco, the Court of Appeal reversed itself, and set aside its previous interpretation given to the suspension of the limitation period associated with claims made for misrepresentations in respect of shares trading in the secondary market. In so doing, it struck the correct balance between prejudice to plaintiffs, the rights of the defendants, the public interest, and the goals of the act.