Shareholders who launch class actions against companies that they believe misrepresent financial results got a bit of good news on Wednesday when the Ontario Court of Appeal agreed to revisit a controversial ruling that imposed a strict deadline on this kind of lawsuit.
In a surprise move, the court said it would appoint a five-judge panel to reconsider its decision last year in the Timminco Ltd. case that imposed a three-year time limit for plaintiffs to win the special leave required from a judge for this type of case to proceed.
The Timminco ruling, which the Supreme Court of Canada declined to review, caused an outcry from the lawyers who fight cases on behalf of shareholders. The lawyers argued that the three-year limit was unworkable, given the inherent delays in the court system, the complexities of these cases and the ability of corporate defendants to drag things out. They warned that dozens of cases launched by shareholders now before the courts were threatened with extinction.
The Appeal Court had been set to hear two appeals in major shareholder lawsuits together on Wednesday.
In one, a lower-court judge issued a retroactive order to keep a case against Imax Corp. alive even though the plaintiffs had missed the three-year deadline.
In the other, a judge reluctantly tossed out a potential multibillion-dollar lawsuit against Canadian Imperial Bank of Commerce that contains allegations that the bank misled shareholders by playing down its exposure to the U.S. subprime mortgage market in 2007.
Dimitri Lascaris, a lawyer with Siskinds LLP who acts for the shareholders in the Imax case, said the regular three-judge panel set to hear the two cases announced that it agreed with the plaintiffs' request to appoint a special five-judge panel. The panel will convene in May and will hear both appeals, as well as revisit the issues raised by the Timminco ruling.
The Appeal Court could overturn or uphold the three-year deadline, or it could decide on a number of other issues, such as whether lower-court judges should have the discretion to waive the time limit retroactively.
"We have the opportunity to restore a regime that was fair to all litigants," Mr. Lascaris said.
Bay Street defence lawyers who work on these cases welcomed last year's Timminco ruling. They said Ontario's legislation governing shareholder lawsuits was designed with a three-year limit in order to keep legal fights from hanging over companies for long periods of time.