A Commentary on Recent Legal Developments by the Opinions Group of McCarthy Tétrault LLP
The Supreme Court of Canada denied leave to appeal this week from three cases of interest to Canadian businesses and professions.
The first, Wightman c. Widdrington (Succession de), 2013 QCCA 1187, involved a test case on behalf of investors claiming over $1 billion against an accounting firm and its Canadian partners arising out of the 1992 bankruptcy of Castor Holdings Ltd. The investors had made loans to Castor or invested in it on the strength of the defendants' inaccurate audit reports, and the defendants were found liable for their negligence in auditing Castor after a lengthy trial. The Court of Appeal substantially upheld the finding of liability, which was made under the civil laws of Quebec pursuant to the lex loci delicti choice of law rule, despite the defendants' argument that the laws of New Brunswick should govern (as the place where Castor was incorporated). The leave application to the Supreme Court of Canada raised a host of interesting questions of significance to the accounting profession, including "whether [the] law applicable to auditors' liability is [the] law of [the] province of incorporation of [the] audited corporation or [the] law of province where fault occurred", "whether [the] 'law of province where fault occurred' is [the] law of province where negligent auditing work [is] conducted or [the] law of province where financial losses incurred" and "whether auditors can be held liable for damages incurred by third parties having relied on audited financial statements and opinions and having incurred losses due to negligence of auditors".
The second case is Dominion of Canada General Insurance Company v. Hannam, 2013 NLCA 37. It concerned the scope of an insurer's duty to defend under a homeowner's insurance policy containing an "ownership, use or operation" exclusion, in circumstances where the insured had been sued by a person who was injured from the operation of a recreational vehicle which the insured's child had allowed another child to operate. The issues raised in the leave application included whether "allowing another child to operate the insured's vehicle constitute[s] a 'use' of the vehicle engaging [an] exclusionary clause in a homeowner's policy", whether there exists "a tort of negligent entrustment which imposes liability on a parent based on an expanded definition of 'use' or a parent's ownership of a recreational vehicle" and whether "liability for negligent parental supervision [is] derivative of a tort of negligent entrustment".
The third case consisted of the two related appeals in Lévesque c. Hudon, 2013 QCCA 920 and Hudon c. Carpentier, 2013 QCCA 921. They concerned medical negligence claims against a hospital and two physicians which were unsuccessful in the Court of Appeal based on a lack of causation. One of the issues raised in the leave to appeal application was whether it was appropriate to reverse the burden of proof so it rests on defendants and thus to presume causation.
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