Canada: Discoverability, Deference, And Di Filippo

The debate over discoverability, and the deference owed to findings of discoverability, continues with the Court of Appeal for Ontairo's decision in Di Filippo v. Bank of Nova Scotia, 2024 ONCA 33.

In this class proceeding, the plaintiffs sought to amend their pleadings to add new defendants and amend existing claims against a number of large global financial institutions for alleged conspiracies to fix the price of gold and silver. The class proceeding case management judge, also the motion judge, dismissed the motion on the basis that the fresh claims were statute-barred.

Justice Feldman allowed the appeal, with reasons agreed to by Justice Paciocco, and overturned the motion judge – determining that the motion judge had misapplied the test for discoverability. Interestingly, Huscroft J.A. dissented on the issue of three banks that were added as defendants. Justice Huscroft wrote that the discoverability analysis was a mixed question of fact and law, which was entitled to deference on appeal.

This case, and its dissent, leave open questions around deference owed where there is a full record and no credibility issues to be determined. The majority took the view that an appeal court is in a good position to draw the necessary inferences from a paper record, whereas the dissent disagreed.

QUICK FACTS

The representative plaintiffs commenced two class proceedings against a number of financial institutions that were involved in the international gold and silver trading markets as "market makers", for conspiracy to fix the prices of gold and silver respectively, and implementing the fixes in a number of ways, all to the detriment of the class. The proceedings claimed that the defendants used various illegal methods and practices to fix the prices, depriving the class of the actual value of their trades.

The representative plaintiffs moved to add a number of financial institutions as defendants and to amend their claim as against the initial defendants. Prior to the motion to amend, the statements of claim had been amended numerous times. The motions for certification were scheduled for October 2020 but were adjourned to allow the representative plaintiffs to seek further amendments, following the release of decisions in 2019 and 2020 by a U.S. regulatory body, which made findings and orders against two of the existing defendant institutions, UBS and HSBC, and against four other financial institutions, Bank of America, Merrill Lynch, JP Morgan, and Morgan Stanley.

MOTION JUDGE'S DECISION

The motion judge dismissed the motion in its entirety. He found that the proposed amendments constituted time-barred new claims, and in the case of one bank – while the claim was not time-barred – it could not be joined in the action because it did not arise out of the same transaction or occurrence.

The motion judge found that the motion to add the Bank of America and Merrill Lynch as new defendants was also time-barred. This conclusion was based on the motion judge's finding that class counsel had "actual knowledge" in March 2018 that both banks had been added to U.S. proceedings and/or were otherwise potentially involved in the impugned conspiracies.

Regarding the proposed addition of Morgan Stanley as a new defendant, the motion judge also found that the clause was clearly time-barred. Again, this was based on the class counsel's "actual knowledge" as of March 2018 of the U.S. proceedings.

The motion judge therefore dismissed the motion.

THE APPEAL

Justice Feldman allowed the appeal and overturned the motion judge. She determined that no relevant facts were in dispute on this appeal, and the only question was whether the motion judge erred in finding that the plaintiffs had actual knowledge of their claims as of March 2018 and the U.S. proceedings. For this reason, Feldman J.A. determined that the court was in a proper position to review the motion judge's inferences on the paper record.

Relying on the Supreme Court of Canada's decision in Grant Thornton LLP v. New Brunswick, 2021 SCC 31, the majority confirmed that a plaintiff discovers their claim when they have knowledge, either actual or constructive, "of the material facts upon which a plausible inference of liability on the defendant's part can be drawn". To meet this standard, the plaintiff must have "actual or constructive knowledge that: (a) the injury loss or damage occurred; (b) the injury loss or damage was caused by or contributed to by an act or omission; and (c) the act or omission was that of the defendant."

Applying this definition, the majority found that the motion judge erred in law in finding that the proposed amendments were statute-barred because they alleged new facts and a new cause of action. The additional facts in the proposed amendments constituted evidence of the facts already pleaded or further details of those facts. The proposed amendments, which included claims for damages for non-conspiratorial spoofing, constituted "an alternative theory of liability or an additional remedy based on facts that have already been pleaded". They were not a plea of a new claim under the Limitations Act, 2002.

Regarding the proposed amendments to add the three new banks, the majority determined that the motion judge erred by treating facts that might trigger a duty to investigate as material facts sufficient to trigger the limitation period – in his words, "the who and the what". For the majority, in assessing the plaintiff's state of knowledge, both direct and circumstantial evidence can be used. A plaintiff will have constructive knowledge when the evidence shows that the plaintiff ought to have discovered the material facts by exercising reasonable diligence. Suspicion may trigger the diligence obligation, but suspicion does not constitute actual knowledge.

Therefore, while class counsel may have had reason to suspect that the three banks were part of the conspiracy, that suspicion was not actual knowledge. Because the U.S. pleadings had not disclosed the necessary material facts, it was an error of law for the motion judge to find that the proposed amendments were statute-barred on the basis that class counsel had actual knowledge of the claims against the three banks more than two years before the motion to amend was brought.

THE STANDARD OF REVIEW DEBATE

Justice Huscroft dissented from the majority, holding that deference was owed to the motion judge's decision that the claim against the three banks was time-barred.

Justice Huscroft noted that the motion judge had managed these proceedings for an extended period of time and was familiar with the facts. He did not accept that there was an extricable error that was subject to review for correctness. For Huscroft J.A., whether a limitation period has expired prior to the commencement of an action is a question of mixed fact and law subject to review on the palpable and overriding error standard.

Accordingly, for Huscroft J.A., the motion judge did not err in concluding that the record and inferences he drew from it were sufficient to satisfy the actual knowledge of material facts standard. The pleadings in the U.S. proceedings asserted facts and it was open to the motion judge to find that a plausible inference of liability for the Bank of America and Merrill Lynch could be drawn from them.

KEY TAKEAWAYS

As evidenced by the dissent of Huscroft J.A., the Court of Appeal for Ontario has yet to present a solidified front on discoverability of claims, and in particular the issue of appellate deference to findings in case-managed class proceedings. Counsel on appeals with paper records that have no credibility determinations should be aware of cases such as Di Filippo, and those that it references, as this issue has not yet been conclusively decided.