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June 20, 2018

The Ontario Court of Appeal recently issued a significant decision in Mancinelli v. Royal Bank of Canada, 2018 ONCA 544 (C.A.), in which the Ontario Court of Appeal clarified the application of the discoverability principle to the limitation period for private actions commenced under section 36 of Canada’s Competition Act, R.S.C. 1985, c. C-34 (the “Act”) (the section of the Competition Act under which private actions and class actions for violations of the criminal offences of the Act are commenced).

In general, the limitation period for a damages claim commenced under section 36(1) of the Act for a violation of a criminal section of the Act (e.g., a price-fixing or other criminal conspiracy under section 45 of the Act) is two years from the later of: (i) the day on which the criminal conduct was engaged in or the day on which any related criminal proceedings were finally disposed of.

This case involved an appeal from a motion judge’s opinion, who had not allowed an attempt by the appellants to add Toronto Dominion Bank, Bank of Montreal and some of their affiliates as additional defendants in an ongoing class action alleging a price-fixing conspiracy to manipulate the foreign exchange market.

The appellants had argued that they only become aware of the potential involvement of TD and BMO when they had obtained a proffer from the settling defendant, UBS (which suggested that UBS had reviewed several thousand “collusive chats”, in which TD an BMO had participated).

The key issue in this case was whether the appellants’ attempt to add TD and BMO was barred by the two-year limitation period under the Ontario Limitations Act or the Act. Under the Limitations Act, the “discoverability principle” provides that an action must be brought within two years from the day on which a reasonable person with the abilities and in the circumstances of the claim ought to have known of the basis for the claim.

The motion judge in this case accepted the respondents’ position that the appellants should have discovered the claim more than two years previously. In coming to this conclusion, the judge noted a lack of evidence of steps that the appellants should have taken. These included efforts to hire a private investigator, contact potential witnesses, contact regulatory or law enforcement agencies and seeking a court order to obtain discovery.

On appeal, the Ontario Court of Appeal reversed the lower court’s decision. In its decision, the Court of Appeal began by clarifying, relying on Fanshawe College of Applied Arts and Technology v. AU Optronics Corporation, 2016 ONCA 621, 132 O.R. (3d) 81, that the discoverability principle under the Ontario Limitations Act also applies to determining the limitation period for a private civil action commenced under section 36(4)(a)(i) of the Act. In this respect, the applicability of the discoverability principle under the Act has been unsettled, with Canadian courts taking differing views as to its applicability.

The Court of Appeal also held that the lower court had imposed too high an evidentiary threshold to prove that the appellants could not reasonably have discovered the claim. In this regard, the Court held that the threshold is low and that the issue of whether the appellants acted with reasonable diligence must be considered in context. The Court also held that the appellants’ explanation must be given a “generous reading”.

Based on the facts of this case, the Court of Appeal was satisfied that the appellants’ explanation for not discovering the alleged involvement of TD and BMO in this conspiracy was reasonable. It disagreed with the lower court judge that the appellants could reasonably be expected to have discovered evidence from secret chats or there was sufficient evidence to obtain an order for discovery. The Court also emphasized that private plaintiffs do not have the same types of investigative powers as a regulator like the Competition Bureau. In summary, the Court held that there was no evidentiary basis for the motion judge’s finding that the identities of TD and BMO could have been established with reasonable diligence.

This decision makes it clear that companies that might be involved in criminal conspiracies should not necessarily be comfortable with the passage of time and the hope that competition law class actions against them will be barred on limitation period grounds. The Ontario Court of Appeal has also indicated that it will likely not be reasonable in many instances to expect a plaintiff to uncover non-public information in seeking to identify potential co-conspirators in a class action proceeding.

In summary, the Ontario Court of Appeal has, with this new decision, both clarified the application of the discoverability principle to the limitations provision of the Act and practically made it easier for competition law plaintiffs to add defendants to private actions.

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