A recent decision of Ontario's Divisional Court leaves open
the possibilities that: (i) in a class action alleging negligent
misrepresentation, a court may be able to infer reliance on a
class-wide basis, as opposed to needing individual inquiries of
class members, and (ii) a lawyer may owe a duty of care to
non-clients, in circumstances where the lawyer's legal opinion
is used for promotional purposes.
In Cannon v. Funds for Canada Foundation, 2012 ONSC
6101, Justice Mary A. Sanderson of the Divisional Court denied
leave to appeal from a decision of Justice George R. Strathy
certifying a class action against those involved in a complex
charitable donation tax shelter (the Gift Program). The Court also
denied leave to appeal a summary judgment motion brought by the
defendant lawyers who had allegedly provided comfort letters
attesting to the legitimacy of the Gift Program.
Some defendants argued that Justice Strathy erred by certifying
as a common issue the claim for negligent misrepresentation.
Relying on other Ontario decisions, the defendants argued that
class members' reliance on the alleged misrepresentations would
be an inherently individual issue, incapable of being determined on
a class-wide basis. However, Justice Sanderson found there was no
good reason to doubt that Justice Strathy was correct when he found
that reliance could be inferred on a class-wide basis, based upon
specific representations made in written materials provided to each
Justice Sanderson also refused to grant leave from Justice
Strathy's dismissal of the lawyers' summary judgment
motion. The lawyers sought to have claims of both negligence and
negligent misrepresentation dismissed, on the basis that they could
not be found to have owed a duty of care to investors in the Gift
Program. The lawyers pointed to the written declarations investors
had signed, where they acknowledged receiving independent financial
advice and understanding the legal and tax consequences. However,
Justice Sanderson found there was no reason to doubt that Justice
Strathy was correct in finding that a trial court could conclude
that the lawyer had intentionally put himself in a close and direct
relationship with every investor by allegedly permitting his
opinion and reputation to be used in marketing.
While the facts of Cannon are complex and relatively
unique, the potential for a finding of inferred reliance by an
entire class could have an impact in class action litigation,
including in securities class actions where claims of negligent
misrepresentation are often asserted. Lawyers will also no doubt
take interest in the findings with respect to the potential
liability for lawyers to non-clients.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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