Canada: Accountability - April 2016

Last Updated: April 21 2016
Article by Jane Howard

Gowling WLG's dedicated professional liability team bring you their monthly update on the cases and issues affecting accountants and other financial professionals on a range of liability risk management issues.

High Court dismisses application for judicial review of KPMG's role in redress scheme

The High Court has dismissed an application for judicial review of the role KPMG played in a scheme to provide redress to customers who had been mis-sold financial products. In R (on the application of Holmcroft Properties Ltd) v KPMG LLP the court accepted that KPMG had been assisting the financial services regulator in its performance of its regulatory functions, however KPMG's duties did not have sufficient public law flavour to be subject to judicial review.


The claimant had been sold an interest rate hedging product (IRHP) by a bank. The IRHP was subsequently found to have been widely mis-sold.

In agreement with the Financial Services Authority (FSA) (the FSA at that time, now the Financial Conduct Authority (FCA)), the bank set up a scheme to provide redress to customers who had wrongly been sold the IRHP. KPMG was appointed by the bank to review offers of compensation that would be made to customers under the scheme.

The terms of KPMG's retainer included an express provision that KPMG acted only for the bank and owed no duties to the bank's customers. The bank also agreed not to make any offer of compensation to a customer without first securing KPMG's agreement that the offer was appropriate, fair and reasonable.

The FSA served a 'requirement notice' on the bank under the Financial Services and Markets Act 2000 (FSMA). The notice identified KPMG as the 'independent reviewer' - who could be called to provide reports on the redress scheme to the FSA.

The claimant was made an offer of compensation under the IRHP redress scheme, which had been approved by KPMG. The claimant asserted that the offer made by the bank was inadequate as it did not include compensation for consequential losses. The claimant argued the bank had not acted fairly - it had failed to provide the information used to reach the conclusion that no consequential loss had been suffered. Furthermore, the defendant had acted in breach of its public law duties in approving the bank's 'unfair' stance.

The claimant applied for judicial review of KPMG's approval of the bank's offer of compensation.

KPMG argued that it was not amenable to judicial review as it was not exercising a public function which attracted the principles of public law. In any event the bank was entitled to find that no consequential loss had been suffered and that the process adopted to reach that decision was fair. KPMG did not accept liability for approving the bank's decision and the procedures leading up to it.

The decision

The administrative court held that KPMG's duties did not have sufficient public law flavour to render it amenable to judicial review.

The court recognised there were factors in favour of amenity:

  • KPMG was clearly woven into the regulatory function - it could veto any offer it did not approve and could effectively compel the bank to tailor its offer;
  • The bank conferred the veto power on KPMG because it was required to do so by the FSA;
  • KPMG's reporting requirements were imposed by statute;
  • KPMG was undertaking its duties both for the bank and for the FSA - so as to assist the FSA in the effective performance of its regulatory function.

However, the public element was not sufficiently strong for the following reasons:

  • The FSA had chosen to adopt an essentially voluntary scheme of redress - although it could use more draconian statutory powers if the need arose;
  • KPMG's powers were conferred by contract and it had no relationship with the customers at all. Furthermore KPMG were not appointed by the FSA - the FSA just approved their appointment by the bank;
  • The fact that private arrangements are used to secure public law objectives does not bring those arrangements into the public domain sufficiently to attract public law principles;
  • The FSA had no regulatory obligation to carry out the role undertaken by KPMG - in the absence of a willing skilled advisor;
  • The FSA was not disqualified by the arrangements from talking a more active role in particular cases.

There was, therefore, no direct public law element in KPMG's role. KPMG's approval of the claimant's offer from the bank was not open to judicial review.

The court also stated that even if KPMG were under a public law duty (as alleged by the claimant), on the facts of the case there was no unfairness by the bank in the procedure adopted and there could, therefore, be no material breach by KPMG of any public law duty to secure fair process.


The claimant has applied to the Court of Appeal for permission to appeal this decision. We will update you once the permission application has been dealt with - in the meantime the decision in this case is welcome news for banks and the 'skilled advisors' who review the decisions they make as part of a redress scheme.

High Court refuses pre-action disclosure for existing claim but allows it for additional and separate causes of action in proposed proceedings

The High Court has confirmed it has no jurisdiction to hear an application for pre-action disclosure once proceedings have been issued, although the claimant's application for pre-action disclosure was successful in relation to a proposed second action against the same defendants.


In Anglia Research Services Ltd and another v Finders Genealogists Ltd and another [2016] the claimants issued an application for pre-action disclosure under Civil Procedure Rule (CPR) 31.16. The application related to proposed claims in defamation and harassment against the defendants.

The claimants had discovered the identity of the defendants as a result of successful Norwich Pharmacal applications, which required 'innocent' third parties to identify those responsible for certain twitter and website postings. It was these postings that the claimants alleged constituted a campaign of defamation and harassment against them.

The claimants sought pre-action disclosure of all documents which contained or referred to the defamatory material (as defined), or provided a link to that material on a specified web page. The claimants issued their application for pre-action disclosure on 26 November 2015. For limitation reasons they were then required to issue defamation proceedings against the defendants on 27 November 2015.

The defendants' challenged the court's jurisdiction to make the order being sought - on the basis that a claim form had now been issued.


The judge confirmed the starting point was s.33(2) of the Senior Courts Act 1981 and CPR 31.16, Respectively these set out the "Powers of High Court exercisable before commencement of action" and the court rules relating to "Disclosure before proceedings start...". It was clear these sections were directed to disclosure being sought before proceedings had been issued.

The recent decision in Personal Management Solutions Ltd v Gee 7 Group Ltd [2015] (the PMS case) was helpful. An appeal against a refusal by a master to hear an application under CPR 31.16 was dismissed because proceedings had already been commenced and the court no longer had jurisdiction to consider the application.

In the PMS case the judge had set out his analysis of how CPR 31.16 should be applied in various situations that had been canvassed in argument before him:

  • If an application is made before proceedings are commenced but proceedings were commenced before the application was heard, the court would not have jurisdiction to determine it;
  • If a claimant undertook to discontinue the first action and begin a second action - that was not an abuse of process - the court would have jurisdiction to determine an application made in relation to the second action but not made in relation to the first;
  • If one set of proceedings has been brought and a second set are contemplated - that would not be an abuse of process - the court could hear an application in respect of the second 'contemplated' proceedings, notwithstanding that the first action was continuing.

Adopting the position of the court in PMS the judge held that the court had no jurisdiction to hear the pre-action disclosure application in respect of the causes of action complained of in the first action, proceedings having already been commenced.

The court then considered two questions in respect of the proposed second action:

  • Would it be an abuse of process to bring the second action while the first action was still ongoing?
  • Does the pre-action disclosure application relate to the proposed causes of action in the second claim - as opposed to the causes of action pleaded in the first claim?

The court held it would not be an abuse of process for the second action to be commenced. The claimants had more than one substantive cause of action against the defendants. The application, as made, related to a bundle of potential causes of action, including those covered in the issued first action and those contemplated in the proposed second action. The proper course of action was for the court to award early disclosure in respect of the additional and separate causes of action and to disregard those causes of action covered by the 'issued claim'.

Having established that it had jurisdiction to hear the application in relation to the 'proposed claim' the court considered the specific requirements of CPR 31.16 and was satisfied they had been met.

The parties were likely to be parties to subsequent proceedings and the documents were likely to assist the claimant in assessing its claim against the defendant. Furthermore, the documents being sought would be given in standard disclosure if proceedings were commenced and the defendant would only need to undertake a reasonable and proportionate search. As a result ordering the defendant to provide pre-action disclosure in respect of the 'proposed' action would not be unfair or oppressive. The claimant's application in this regard was successful.


This case, and the PMS case, provide clear and helpful guidance on when the court has jurisdiction to hear an application for pre-action disclosure. It also confirms that pre-action disclosure can be granted in respect of a proposed second claim, provided the making of a second claim would not be an abuse of process.

Measure of damages in negligence and the duty to mitigate

The Court of Appeal has provided a helpful reminder that the general rule regarding recovery of damages in claims for negligence should not be applied mechanistically. The assessment of damages at the date when the damage occurred is the starting point, there is no reason why subsequent events should not be considered.


In Bacciottini and another v Gotelee & Goldsmith (2016) the claimants issued a claim seeking damages for negligent advice given by the defendant firm of solicitors. The claimants had acquired a residential property in May 2007. The defendant had acted for the claimants in relation to the purchase and during that time had negligently failed to advise them that the property was subject to a planning restriction - restricting its residential use (the Restriction).

In 2008 the claimants discovered the Restriction. They received advice from new solicitors to apply to the District Council to have the Restriction lifted. This was done in September 2009, at a cost of £250. No objections to the claimants' application were raised and the application was approved in November 2009.

The claimants subsequently issued proceedings against the defendant, seeking damages in respect of their negligent advice. They said that had they received proper advice they would not have purchased the property or, alternatively, that they would not have purchased the property for any more than its value with the Restriction attached.

The defendant admitted it had been negligent, however, the Restriction could be, and in fact was, lifted at very little cost. There was no material effect on the value of the property, so the only loss the claimants had suffered was the cost of lifting the Restriction.

The trial judge accepted that the claimants had paid approximately £100,000 more than the property was actually worth with the Restriction attached. However, he also held that applying to lift the Restriction was a simple, obvious and cheap step to take. As a result he did not accept the claimants' argument that they would have purchased the property at a reduced price or that they would have withdrawn from the sale had they been told about the Restriction at the outset.

The court held that awarding the claimants damages as claimed "would overcompensate" them. The principles of mitigation needed to be applied. In summary, they had no other realistic option but to apply for the Restriction to be lifted. The application was made pursuant to their duty to mitigate, it was not independent of the defendant's negligence. The overpayment they had made was then eradicated as a result of the steps they had taken.

Damages in the sum of £250 were awarded - representing the cost of the application to remove the Restriction, nothing more.

The claimants appealed.

The appeal

The claimants argued that the trial judge should have awarded them the sum of £100,000 (with interest) representing the difference between the value of the property in May 2007 without the Restriction and the value of the property at that date with the Restriction.

They relied on the general principle established by earlier case law that "damages must be assessed at the date when the damage occurred, which is usually the same day as the cause of action arises". This was the difference in value of the property with and without the Restriction as at the date of purchase. They said their successful application to remove the Restriction was a collateral and independent decision, an act they had pursued for their own benefit which lacked sufficient causal connection with the original breach of duty by the defendant.

The claimants argued that had they been properly advised they could have purchased the property at a price reduced by negotiation and could then have applied to lift the Restriction as part of their development plans. The gain secured by the reduced purchase price would then have been theirs outright.

The defendants argued that as a result of the successful application to lift the Restriction the claimants had got what they should have got. To award damages for the diminution in value at the time of purchase would involve double payment and overcompensating them for a loss they had not suffered. The claimants were under a duty to mitigate by applying to lift the Restriction, and even if that duty had not arisen they had mitigated their losses and the consequences of their mitigation had to be considered.

The decision

The appeal was dismissed. The Court of Appeal held that historic case law has encapsulated the core principle in cases of this kind - the measure of damages is ordinarily "...that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been if he had not sustained the wrong for which he is now getting his compensation or reparation".

Lord Justice Davis held that by applying to remove the Restriction the claimants had suffered no loss over and above the £250 fee they had paid. There was, therefore, nothing in respect of which they required compensation.

He held that there was no absolute principle in relation to capital loss cases that "damages must be assessed at the date when the damage occurred, which is usually the same day as the cause of action arises". The 'normal measure' is only to be applied if it produces a fair result - the assessment of damages is to be undertaken realistically and not mechanically. The 'normal measure' is a convenient starting point - but no less or no more.

There is no reason why events following the breach should not be considered. Issues such as mitigation and avoidance of loss will necessarily be geared to events occurring or steps taken after the date of breach and after the cause of action has accrued.

The claimants were under a duty to take steps to seek to remove the Restriction - to do so was not out of the 'ordinary course of things'. The procedure was "simple, obvious and cheap". In any event, even if they had not been under a duty the fact remains that they did mitigate their losses.

The application to lift the Restriction was not an independent development decision, pursued for the claimants' own benefit and taken at their risk. The original breach was the reason for the application - the application was a direct consequence of and was directly caused by the defendant's negligence.

The claimants were only entitled to recover the fee they had paid to apply to lift the Restriction: £250.


This is a welcome reminder that a party can only be compensated for the loss it suffers, which is not to be measured only at the date of the breach. A claimant is under a duty to take reasonable steps to seek to mitigate its losses and if the steps so taken substantially reduce or eradicate the loss suffered the claimant should not be able to recover more.

In case you missed it... Liquidator deemed not personally liable for solicitor's fees under CFA

The Chancery Court has held that an insolvency practitioner was not liable for his solicitor's fees under a CFA, despite the fact the definition of success had been met. See the March edition of our Insolvency Litigation alert for the full analysis.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
8 Nov 2016, Seminar, Ottawa, Canada

The prospect of an internal investigation raises many thorny issues. This presentation will canvass some of the potential triggering events, and discuss how to structure an investigation, retain forensic assistance and manage the inevitable ethical issues that will arise.

22 Nov 2016, Seminar, Ottawa, Canada

From the boardroom to the shop floor, effective organizations recognize the value of having a diverse workplace. This presentation will explore effective strategies to promote diversity, defeat bias and encourage a broader community outlook.

7 Dec 2016, Seminar, Ottawa, Canada

Staying local but going global presents its challenges. Gowling WLG lawyers offer an international roundtable on doing business in the U.K., France, Germany, China and Russia. This three-hour session will videoconference in lawyers from around the world to discuss business and intellectual property hurdles.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.