Canada: Ontario Court Finds Discoverability Rule Applies To Competition Act Claims

In a recent ruling, the Ontario Superior Court of Justice held that the discoverability principle applies to the limitation period imposed by section 36(4)(a) of the Competition Act.¹

The ruling was made in Fanshawe College v AU Optronics Corporation et al., a proposed class proceeding related to allegations of price-fixing in the market for LCD panels and products.²

Background to the motion

This action (the Fanshawe Action) concerns an allegation of price-fixing in the LCD marketplace between January 1, 1998, and December 11, 2006. The Fanshawe Action was commenced in July of 2009.³

Two of the defendants moved for summary judgment dismissing the action on the basis it was statute-barred – more than two years had elapsed between December 11, 2006, when the alleged unlawful conduct ended, and July 2009, when the Fanshawe Action was commenced.

In support of their position, among other arguments, the moving parties relied on prior law stating that the principle of discoverability could not be used to extend the limitation period set out in section 36(4) of the Competition Act.⁴ Unlike the Limitations Act, 2002,⁵ which provides that its limitation periods are subject to discoverability, section 36(4) sets out a two-year limitation period without any reference to discoverability.  

Prior law holding no discoverability

The position taken by the moving parties – that the limitation period set out in s. 36(4) of the Competition Act should not be subject to discoverability – was accepted by Justice Snider of the Federal Court in Laboratoires Servier v Apotex Inc. (Servier) who held that since "the statutory limitation period in s. 36(4) expressly runs from a specific date independent of knowledge, the discoverability principle cannot apply."⁶ These reasons were cited favourably by Justice Russell of the Federal Court in Garford Pty Ltd. v Dywidag Systems International, Canada Ltd. (Garford) who also declined to apply the judge-made discoverability rule to extend the statutory limitation period under s. 36(4).⁷ 

Servier and Garford have recently been followed and applied in various provincial superior and appellate courts, including the Alberta Court of Appeal,⁸ the British Columbia Supreme Court⁹ and the Ontario Superior Court.¹⁰  In Fairview Donut Inc. v The TDL Group Corp., a proposed price-fixing class action before the Ontario Superior Court of Justice, Justice Strathy cited the reasons in Garford as rejecting the argument that discoverability applied to s. 36(4) of the Competition Act.¹¹  Justice Strathy went on to find that the Competition Act claims in that case were statute-barred and allowed the defendants' motion for summary judgment.¹²

Fanshawe reasons – discoverability applies to Competition Act

In dismissing the defendants' motion for summary judgment in the Fanshawe Action, the court departed from prior jurisprudence and held that the principle of discoverability does apply to the limitation period set out in s. 36(4) of the Competition Act. It reasoned that because conspirators can be expected to conceal their conduct, affected individuals may not find out about those conspiracies until more than two years after the conduct has ended.¹³   

As such, if discoverability does not apply to the s. 36(4) limitation period, individuals may see their rights of action expire before they learn about possible harm.¹⁴  The court found it implausible that Parliament intended to create such an "illusory" right of action, and thus held that s. 36(4) is subject to discoverability.¹⁵

Implications

The Fanshawe decision creates uncertainty for plaintiffs and defendants to s. 36 claims as it departs from the prior decisions in Ontario, Alberta, British Columbia and the Federal Court, which held that discoverability does not apply to s. 36(4). The court's reasoning may or may not be adopted by those other courts, and it remains to be seen whether it will be followed or upheld in Ontario.

The ruling is significant as the limitation period set out in s. 36(4) applies not only to price-fixing claims, but to the private right of action under s. 36 of the Competition Act based on any breach of the provisions set out in Part VI of the Competition Act, including bid-rigging,¹⁶  false or misleading advertising¹⁷  and pyramid selling.¹⁸

Footnotes

1 RSC, 1985, c. C-34

2 2015 ONSC 2046 (the Motion Decision).

3 Motion Decision at para 16.

4 Motion Decision at para 101.

5 SO 2002, c. 24, Sched. B.

6 2008 FC 825 at para 488, citing Fehr v Jacob (1993), 85 Man. R. (2d) 64 (Man. C.A.).

7 2010 FC 996 at paras 31-33.

8 CCS Corp. v Secure Energy Services Inc., 2014 ABCA 96 at para 4.

9 Watson v Bank of America Corp., 2014 BCSC 532 at paras 116-127.

10 Fairview Donut Inc. v The TDL Group Corp., [2012] O.J. No 834 (ONSC) at paras 646-650.

11 2012 ONSC 1252 at para 646 [Fairview Donut].

12 Fairview Donut at para 650.

13 Motion Decision at paras 117-118.

14 Motion Decision at para 118.

15 Motion Decision at paras 118 and 120.

16 Section 47.

17 Section 52.

18 Section 55.1.

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