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The Québec Court of Appeal, in a judgement rendered on March, 29 2005 in IKEA Property Limited v. BNP Paribas (No. 500-09-010667-012), has ordered BNP Paribas ("BNP") to pay IKEA Property Limited ("IKEA") damages in the amount of $811,417, with costs and interest, for gross negligence in providing IKEA with incomplete and misleading information about the financial state of BNP’s client, Construction Structura ("Structura"). IKEA had hired Structura to build a warehouse and was making periodic payments to structure based on the progression of the work. Concerned about the rumours regarding Structura’s financial condition, IKEA sought information on the state of Structura’s finances from Structura’s banker, BNP. BNP informed IKEA (and subsequently confirmed in writing in a letter containing a disclaimer) that Structura’s financial condition was "good". What BNP did not reveal, however, is that its rating scale ranged from "excellent", "very good", and "good", to "fair", "poor" and "watch". BNP also informed IKEA that Structura had a "mid seven figure" line of credit that was seldom used. However, the reality was that Structura was in a precarious and worrisome financial state, that it had cash-flow problems, was late in remitting its internal monthly financial statements and lists of accounts receivable to BNP, and that in fact its line of credit was seldom used because Structura did not comply with the terms and conditions thereof.
The Court of Appeal held that the provision of incomplete and misleading information was a gross fault from which BNP could not protect itself by use of a disclaimer. The fault did not stem from ignorance of all the facts or a wrong assessment of known facts or from excess optimism but rather, according to the judge, from "incorrectly conveying to IKEA those facts which it (BNP) did know, thereby misleading IKEA" [translation].
What emerges from this judgement is that a financial institution which agrees to provide financial information on one of its clients to third parties must act with caution and must diligently ensure that any information so provided is sufficiently complete so as not to be misleading, is sufficiently neutral and objective, without overstating positive elements or omitting main negative ones, and is accurate and based on established facts and verified information and not on hope. Failure to do so may result in liability for the financial institution despite any disclaimer, waiving the liability of the institution.
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