In Di Filippo v. Bank of Nova Scotia, 2024 ONCA 33, the Ontario Court of Appeal ("ONCA") recently clarified when plaintiffs may be permitted to amend their pleadings after the expiry of a limitation period. In this case, the ONCA set aside the order of the motion judge below, who had found the proposed amendments to be statute-barred, and allowed the plaintiffs to plead a new cause of action more than two years after the claim was discovered. The ONCA also allowed other pleading amendments adding new defendants, as the motion judge erred in determining that the claims were discovered against those defendants more than two years before the motion to amend was brought.

Background: The appeal arose from two class action proceedings against some of the world's largest financial institutions involved in the gold and silver trading markets, for an alleged conspiracy to fix the prices of gold and silver. The defendants were alleged to have implemented the fixes in numerous ways, including through a method called "spoofing".

Spoofing involves artificially inflating or deflating the price of a trade through fake orders. However, the original statement of claim only appears to have advanced a claim for "collusive" spoofing; that is, spoofing of a conspiratorial nature between financial institutions. The pleadings did not advance a claim for "non-collusive" spoofing (i.e. individualized spoofing within each financial institution).

In 2019 and 2020, a U.S. regulatory body, the Commodity Futures Trading Commission ("CFTC"), released decisions which made findings and imposed regulatory sanctions against UBS and HSBC (who were existing defendants in the Ontario class proceedings), as well as against Bank of America, Merrill Lynch, JP Morgan, and Morgan Stanley (who were not defendants in the Ontario class proceedings).

Significantly, the CFTC decisions made findings against each above-noted financial institution regarding individualized (non-collusive) spoofing.

Following the release of the CFTC decisions, the representative plaintiffs brought a motion to amend their statements of claim to add Bank of America, Merrill Lynch, JP Morgan and Morgan Stanley as defendants, and to add allegations and claims against UBS and HSBC relating to non-collusive spoofing.

The Motion Judge's Decision: The motion judge, Belobaba J., dismissed the motion in its entirety, refusing to allow any of the amendments or to allow the new defendants to be added.

With respect to UBS and HSBC (the two existing defendants), the motion judge found that the proposed amendments for non-collusive intra-bank spoofing were statute-barred under the Limitations Act, 2002, which provides that a proceeding shall not be commenced in respect of a "claim" after the second anniversary of the day on which the claim was "discovered".

In particular, the motion judge found that the amendments allege a new cause of action (and thus, in Belobaba J.'s view, a new "claim") against UBS and HSBC regarding non-collusive intra-bank spoofing. His Honour further found that class counsel had actual knowledge of this potential claim against UBS and HSBC more than two years before the motion to amend was brought, by way of press releases issued by the CFTC in 2018 announcing the spoofing allegations against UBS and HSBC.

With respect to Bank of America, Merrill Lynch and Morgan Stanley (three of the proposed new defendants), the motion judge similarly found that the representative plaintiffs were out of time to add these parties as defendants, on the basis that class counsel had actual knowledge of potential claims against these entities more than two years before the motion was brought, via press releases announcing allegations against these entities by U.S. and Swiss regulatory authorities in 2018.

Lastly, regarding JP Morgan (the fourth proposed new defendant), the motion judge found that the CFTC had only imposed sanctions on JP Morgan for "intra-bank non-conspiracy misconduct", but not for inter-bank collusion or conspiracy. As such, the motion judge found that JP Morgan was not a proper party defendant to the existing conspiracy actions and that the test for joinder had not been satisfied. The plaintiffs appealed the motion judge's decision to the ONCA.

The Court of Appeal's Decision: A majority of the ONCA allowed the appeal, set aside the order of the motion judge, and granted the plaintiffs' proposed amendments.

The ONCA found that the motion judge erred in determining that the new "claims" against UBS and HSBC regarding non-collusive spoofing were statute-barred.

After reviewing the relevant legal principles, the Court observed that where the plaintiff has pleaded the necessary facts grounding a claim, they are permitted to amend the pleading—even after the expiry of the limitation period—to assert another legal basis for a remedy arising out of the same facts.

Viewed in this context, the Court found that the plaintiffs had already pleaded the necessary facts to ground a claim in non-collusive spoofing, and that the proposed amendments were simply an "alternative theory of liability" based on facts already pleaded. As a result, the proposed amendments were not statute-barred.

With respect to the proposed addition of Bank of America, Merrill Lynch and Morgan Stanley as defendants, a majority of the ONCA found that the motion judge erred in finding that the press releases of the U.S. and Swiss regulatory authorities were themselves sufficient to constitute actual knowledge on the part of class counsel; that is, "material facts" upon which a plausible inference of liability can be drawn. The majority found that the press releases only "expressed allegations", not facts. As such, the motion judge erred in law by finding that class counsel had actual knowledge of the claims as a result of the press releases.

Lastly, the ONCA found that the motion judge made a palpable and overriding error by finding that none of the spoofing by JP Morgan was conspiratorial spoofing. Further, because the ONCA allowed the amendments for non-conspiratorial spoofing against the other defendants, there was no basis to deny the amendment adding JP Morgan to the actions.

Huscroft J.A dissented in part, and would have dismissed the appeal regarding the proposed addition of Bank of America, Merrill Lynch and Morgan Stanley as defendants. In Huscroft J.A.'s view, it was open to the motion judge to find that class counsel had actual knowledge of the claims against Bank of America, Merrill Lynch and Morgan Stanley more than two years before they brought the motion to amend, and the motion judge's decision on this point was entitled to deference. Huscroft J.A. did not accept that there was an extricable error subject to a correctness review, as the question of whether a limitation period has expired is one of mixed fact and law. Such a review requires a palpable and overriding error, a standard that, in his view, had not been met in this case.

Key Takeaways:

  • The ONCA's decision suggests that where a plaintiff seeks to amend its claim to assert an alternative theory of a liability or a new cause of action outside the two-year limitation period in Ontario, such amendments may still be permitted as long as the plaintiff has already pleaded the necessary facts grounding such cause of action within the limitation period;
  • In overturning the motion judge's decision, the ONCA has affirmed that pleadings ought to be read generously and permissively on early-stage motions, where the court may not have the benefit of a full evidentiary record. For example, notwithstanding the result of the appeal, the defendants will still be permitted to plead a limitations defence and raise it at trial or on a motion for summary judgment. The trial judge (or summary judgment motion judge) will be in the best position to adjudicate any such limitations defence on the merits based on all of the evidence.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.