Canadian COMPETITION LAW

On February 13, 2012, the Federal Court of Appeal released an important limitations period judgment in Garford Pty Ltd. v. Dywidag Systems International.

In this case, the Australian company Garford commenced an action against Dywidag Systems International and several individual defendants seeking damages for alleged infringement of some of Garford’s Canadian patents and based on alleged violations of section 45 of the Competition Act (criminal conspiracy agreements).

In a lower court decision, the Federal Court granted the defendants summary judgment dismissing Garford’s claim on the basis that it was limitation barred under the Competition Act.

Section 36 of the Competition Act contains specific limitation periods that require, among other things, claims to be brought within two years of the relevant conduct (“two years from … the day on which the conduct was engaged in”).

Garford appealed, and the Federal Court dismissed its appeal.  The Court of Appeal held that it could find no error in the lower court’s application of the law or factual findings and was “in substantial agreement with [its] reasoning with respect to the limitation period.”

Garford had argued that the lower court erred in failing to hold that the “discoverability principle” applied to extend the limitation period under section 36.  The “discoverability principle” or “rule” operates on the theory that, in competition law matters, the start of the limitation period should be postponed until the time a plaintiff knew (or ought to have known) of the anti-competitive conduct.

The Court of Appeal held that the issue of discoverability did not arise on the facts of this case because, among other things, between April 10, 2006 (the date on which Garford’s solicitors sent a cease and desist letter to the defendants) and the date the action was commenced (August, 2008 – more than two years later) there were no new facts relevant to the alleged breaches of section 45.  In the Court’s words: “the information available to Garford on April 10, 2006 was essentially the same information it had when it commenced the action.”

Interestingly, however, the Court of Appeal left the door open for the discoverability rule to apply in other cases:

“For these reasons, the judge’s findings of fact, which on the applicable standard of review cannot be set aside in this case, preclude any argument based on discoverability, assuming without deciding, it is legally available.”

As such, the applicability of the discoverability rule as a mechanism to extend the limitation period under section 36 of the Competition Act remains unsettled.

Also interestingly, the Court of Appeal agreed with the lower court judge’s finding that any anti-competitive effects that may have arisen as a result of the alleged conduct cannot operate to extend the limitation period:

“Last, Garford argues that the judge erred in finding that any ongoing effects of the conspiracy do not extend the time period established by subsection 36(4) of the Act. The judge thoroughly canvassed this issue at paragraphs 39-46 of his reasons. We are in substantial agreement with his analysis in this respect.

Eli Lilly & Co. v. Apotex, 2005 FCA 361 (Eli Lilly) does not assist Garford because the evidentiary issues at play in Eli Lilly are not present in this case. Here, it is common ground that the basis of Garford’s claim under the Act is the purchase agreements. Similarly, 351694 Ontario Ltd. v. Paccar of Canada Ltd., 2004 FC 1764 (Paccar) is of no benefit to Garford. Significantly, Paccar was not a section 45 case. Rather, it involved vertical restraints between a manufacturer/distributor and a retail dealer. The action was founded on resale price maintenance, refusal to supply and price discrimination. I note peripherally that these offences are no longer contained in the Act and thus cannot found a section 36 action. In Paccar, the court found ongoing conduct for the purpose of the limitation period on the basis that the prohibited conduct was discriminatory sales.

In this case, as the judge explained, the alleged offence under section 45 was complete at the time of the conclusion of the purchase agreements. Ongoing effects do not extend the time period established in subsection 36(4). Garford’s position is tantamount to saying that the conduct prohibited by section 45 is only an agreement which, in fact, injured the market. That is not the law. At the relevant time (section 45 has since been amended), the offence was complete upon the finalization of an agreement that, if carried into effect, would unduly limit competition.”

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