Jeremy C. Millard

Following judgment awarding damages for auditor negligence, the court determined the appropriate prejudgment interest rate and start date under the Courts of Justice Act.

The court rejected the plaintiff’s proposed interpretation of the Ministry interest rate tables and held that the statutory quarterly rate corresponding to the commencement of the action applied.

The court also declined to average interest rates over the period absent compelling justification, emphasizing that deviations from the statutory scheme require substantial evidence.

Applying ss. 128 and 130 of the Act, the court structured the accrual of prejudgment interest to reflect when losses were actually incurred rather than the breach date alone.

Interest was calculated in stages culminating in a total prejudgment interest award exceeding $33 million.

Livent Inc., through its Special Receiver, sued its former auditors, Deloitte & Touche, for negligence and breach of contract in failing to detect massive corporate fraud perpetrated by Livent's directing minds, Garth Drabinsky and Myron Gottlieb.

The court found that Deloitte failed to conduct its 1996 and 1997 audits in accordance with generally accepted auditing standards (GAAS), particularly regarding preproduction costs and complex revenue transactions.

The court rejected Deloitte's defences based on the corporate identification doctrine and ex turpi causa, holding that the fraud of the directing minds could not be attributed to the company to shield the negligent auditors.

Damages were assessed at $84,750,000, representing the increase in Livent's liquidation deficit caused by the delayed discovery of the fraud, discounted by 25% for business contingencies.

The plaintiff sought approximately $2.6 million in damages against a contractor and an acrylic sheet manufacturer arising from alleged defects in the design, manufacture, and installation of a skylight system for a horse riding arena.

The plaintiff alleged negligent design, negligent manufacture of acrylic sheets, negligent misrepresentation in product literature, and spoliation of evidence.

After a lengthy trial, the court found no negligence or breach of contract by the contractor and no negligence in the manufacture of the acrylic sheets by the manufacturer.

Although the manufacturer should have disclosed certain test results regarding light transmittance, the plaintiff failed to prove causation.

The court further held the plaintiff fundamentally breached the contract and was contributorily negligent by refusing to install an automatic controller and by failing to implement recommended ventilation and heating measures, and also failed to mitigate its losses.

At the commencement of a lengthy construction dispute trial, the defendants sought to set aside an earlier bifurcation order so that liability and damages could be tried together, while the plaintiff moved to strike the defendants’ jury notice.

The court exercised its inherent jurisdiction to manage the trial process and set aside the earlier order, finding that trying all issues together would avoid multiplicity of proceedings and that evidentiary overlap justified a single trial.

The court also held that the case involved exceptionally complex factual, technical, and legal issues, including numerous expert reports, extensive documentary evidence, multiple causes of action, crossclaims, and potential apportionment under a Pierringer agreement.

Given these complexities, the court concluded that justice would be better served by a judge-alone trial rather than a jury.

The jury notice was therefore struck and the matter ordered to proceed on all issues before a judge.

The successful defendant sought substantial indemnity costs following summary judgment motions and the dismissal of the plaintiffs’ claims, arguing the allegations were akin to accusations of fraud and were unsubstantiated.

The plaintiffs argued that substantial indemnity costs are reserved for rare and exceptional cases involving reprehensible litigation conduct.

The court held that although the defendant succeeded on the motions, the plaintiffs’ conduct was not reprehensible and their cross‑motion was not unreasonable.

Applying s. 131 of the Courts of Justice Act and Rule 57.01 of the Rules of Civil Procedure, the court determined that partial indemnity costs were appropriate.

The defendant was awarded $150,000 in costs for the motions and the action.