Toronto Dominion Bank v. Forsythe et al. Forsythe et al. v. Toronto Dominion Bank [Indexed as: Toronto Dominion Bank v. Forsythe]

47 O.R. (3d) 321

[2000] O.J. No. 686

No. C32742

Court of Appeal for Ontario

Finlayson, Labrosse and Goudge JJ.A.

March 8, 2000

Banks and banking -- Fiduciary duty -- Investors of bank's customer alleging that bank owed them fiduciary duty -- Bank having no duty to other creditors to keep them aware of financial status of its customer.

Torts -- Negligent misrepresentation -- Duty of care -- Investors of bank's customer alleging that bank having duty of care to them -- Facts not establishing prima facie duty of care and policy grounds for negating duty of care -- Imposing liability would create indeterminate liability to virtually an unlimited class.

The TD Bank sued the guarantors of loans made by the Bank to BP Ltd. and two subsidiary companies, BTF Corp. and A Corp. The guarantors were shareholders of BP Ltd. By way of defence and counterclaim, the guarantors alleged that the Bank breached a fiduciary duty and a duty of care owed to them. In particular, the guarantors complained that the Bank had advised RF, one of the guarantors, that the Bank had been contacted about an incident involving C, the president of BTF Corp., and that the Bank had been told that C could not be trusted. When the Bank related this incident, RF requested that the Bank investigate, but the Bank declined and advised RF that there was nothing to worry about. It was alleged that RF and the other guarantors, whom he informed, accepted and relied on the Bank's advice in this regard.

The guarantors counter-claimed and the counter-claim included a claim by added parties. These parties, who were not guarantors, were investors in BP Ltd. and BTF Corp. The proposed plaintiffs by counter-claim alleged that the Bank owed them a fiduciary duty and a common law duty of care to exercise reasonable care and skill in handling the accounts of the corporations in which they had invested. They alleged that they invested and continued to invest assets in reliance upon the Bank's representations. Master Birnbaum ordered that the investors could be added as plaintiffs by counter-claim. This order was set aside by Juriansz J. and the investors appealed.

Held, the appeal should be dismissed.

The Bank owed no fiduciary duty to the investors. They could provide no authority for the proposition that the Bank owed some special duty of care to other creditors of its customers, simply because they are creditors, to disclose to them its information as to the creditworthiness of their common debtors. They are all creditors, and the submission that the Bank qua creditor had a unilateral duty to other creditors to keep them abreast of the financial status of its customers was totally lacking in authority. Apart from certain provisions of insolvency law or special circumstances that had not been pleaded, there was no reason why one creditor was not entitled to consider its own interest in assessing the creditworthiness of its borrowers without alerting other creditors of its customer as to matters of concern. This disposed of the claim that the Bank had a fiduciary relationship with the investors or owed them a special duty to protect their interests.

The claim in negligent representation also was flawed. For it to succeed, it was necessary for the Bank to have a duty of care to the investors. Applying the two-part test from Anns v. Merton London Borough Council and Kamloops (City) v. Neilson (the "Anns/Kamloops" test), it was necessary to establish that a prima facie duty of care was owed and that, if the duty existed, it was not negated or limited by policy reasons. Here, however, there were no facts pleaded that met the first step of the Anns/Kamloops test. Additionally, even if the analysis could survive the first step of the test, it would founder on the second based on the policy ground that liability would create an indeterminate liability to virtually an unlimited class.

APPEAL from an order of Juriansz J. reversing the order of Master Birnbaum adding plaintiffs by counter-claim.

Cases referred to Anns v. Merton London Borough Council, [1978] A.C. 728, [1977] 2 All E.R. 492, [1977] 2 W.L.R. 1024, 121 Sol. Jo. 377, 141 J.P. 526, 75 L.G.R. 555 (C.A.); Bertolo v. Bank of Montreal (1986), 1986 150 (ON CA), 57 O.R. (2d) 577, 18 O.A.C. 262, 33 D.L.R. (4th) 610 (C.A.); Foley v. Hill (1848), 2 H.L.C. 28, 9 E.R. 1002; Foss v. Harbottle (1843), 2 Hare 460, 67 E.R. 189; Hercules Managements Ltd. v. Ernst & Young, 1997 345 (SCC), [1997] 2 S.C.R. 165, 115 Man. R. (2d) 241, 146 D.L.R. (4th) 577, 211 N.R. 352, 139 W.A.C. 241, [1997] 8 W.W.R. 80, 31 B.L.R. (2d) 147, 35 C.C.L.T. (2d) 115; Hunt v. Carey Canada Inc., 1990 90 (SCC), [1990] 2 S.C.R. 959, 49 B.C.L.R. (2d) 273, 74 D.L.R. (4th) 321, 117 N.R. 321, [1990] 6 W.W.R. 385, 4 C.C.L.T. (2d) 1, 43 C.P.C. (2d) 105 (sub nom. Hunt v. T & N plc); Ingles v. Tutkaluk Construction Ltd. (2000), 2000 SCC 12, 46 O.R. (3d) 736n, 2000 SCC 12; Kamloops (City) v. Nielsen, 1984 21 (SCC), [1984] 2 S.C.R. 2, 66 B.C.L.R. 273, 10 D.L.R. (4th) 641, 54 N.R. 1, [1984] 5 W.W.R. 1, 29 C.C.L.T. 97, 26 M.P.L.R. 81, 26 M.P.L.R. 81; Lloyd's Bank Ltd. v. Bundy, [1975] 1 Q.B. 326, [1974] 3 All E.R. 757, [1974] 3 W.L.R. 501, 118 Sol. Jo. 714, [1974] 2 Lloyd's Rep. 366 (C.A.); Manulife Bank of Canada v. Conlin, 1996 182 (SCC), [1996] 3 S.C.R. 415, 30 O.R. (3d) 577n, 139 D.L.R. (4th) 426, 203 N.R. 81, 30 B.L.R. (2d) 1, 6 R.P.R. (3d) 1; R.D. Belanger & Associates Ltd. v. Stadium Corp. of Ontario Ltd. (1991), 1991 2731 (ON CA), 5 O.R. (3d) 778 (C.A.); Ryan v. Victoria (City), 1999 706 (SCC), [1999] 1 S.C.R. 201, 59 B.C.L.R. (3d) 81, 168 D.L.R. (4th) 513, 234 N.R. 201, [1999] 6 W.W.R. 61, 44 C.C.L.T. (2d) 1, 40 M.V.R. (3d) 1, 50 M.P.L.R. (2d) 1

Jack B. Berkow and Orie Niedzviecki, for appellants. Malcolm M. Mercer, for respondent.

The judgment of the court was delivered by

[1] FINLAYSON J.A.: -- This appeal involves the addition as plaintiffs by counter-claim of a number of parties whose status in this action raises some concern. The parties are listed in the order of Master Birnbaum, dated May 5, 1999, as John S. Cowan, Nawoc Holdings Limited, Forsythe Family Trust, by its trustee Robert Forsythe, Simcoe Coach Lines Limited and Thomas Harold Lincoln Gallagher, by his litigation guardian Thomas William Gallagher. The appellants moved successfully before Master Birnbaum to have the named parties added to this action on the basis that as "investors" in corporate customers of the respondent, The Toronto Dominion Bank ("TD Bank"), they were in a fiduciary relationship with the TD Bank, and that TD Bank breached a duty owed to them. A second basis for adding the parties was that they allege damages by reason of the tort of negligent misrepresentation by the TD Bank.

[2] The pleadings in this case are lengthy but, on analysis, the issues are narrow. The TD Bank commenced an action against the guarantors of three of its corporate customers who had defaulted on their respective loans. The first customer was Balmoral Partners Limited ("Balmoral Partners"), which, according to the TD Bank's pleadings, was in the business of providing financing to early-stage high-technology companies. The other two customers were subsidiaries of Balmoral Partners named Balmoral Trade Finance Corporation ("Balmoral Trade") and AdvantEdge Corporation ("AdvantEdge"). Both Balmoral Partners and Balmoral Trade are now bankrupt, and AdvantEdge, according to the defendant's pleadings, is no longer a going concern. These three corporate customers have been referred to by the defendants as the "principal debtors" in this action, and I will do the same for the purposes of this appeal.

[3] There was a third subsidiary of Balmoral Partners that was also a customer of TD Bank, named Sinkel North America Ltd. ("Sinkel"), which was a computer software company. There is no claim on Sinkel's guarantors because all indebtedness of this customer relevant to these proceedings has been repaid.

[4] The defendants Robert G. Forsythe, Lawrence Herbert Enkin, Thomas William Gallagher, Llewellyn Sifton Smith Family Holdings Inc., and Gary N. Curtis were at all material times shareholders of Balmoral Partners. The added plaintiff by counter-claim, John S. Cowan, was a shareholder as well.

[5] In their statement of defence, the defendant guarantors allege that the TD Bank knew or ought to have known that they would rely on the bank's discretion, judgment and guidance in dealing with the principal debtors' accounts as a means of protecting the guarantors from unnecessary exposure pursuant to their guarantees. Further, or in the alternative, the defendant guarantors allege that the TD Bank owed a common law duty of care and a fiduciary duty to the principal debtors, and to the defendants as guarantors, to conduct itself in accordance with these consequent obligations, and to act at all times in good faith and with full and open disclosure.

[6] The specific complaint of the defendant guarantors giving rise to the alleged breach of fiduciary and common law duty of care arose out of the dealings between the TD Bank and the defendant Gary Curtis. As indicated, Curtis was a shareholder of Balmoral Partners. He was also a guarantor of the various corporate indebtednesses and, more importantly, the president of Balmoral Trade. In this capacity, he was the person who communicated regularly with the TD Bank on behalf of the principal debtors. It is alleged that Curtis, without the knowledge or consent of Balmoral Trade or the other guarantors, arranged for a $12,000 cheque to be payable to a company called Nadim Group Inc. ("Nadim"), a company with which Curtis was at one time associated. The guarantors allege that Curtis had attempted to direct these funds to himself but that the cheque, in error, went to Nadim. The statement of defence goes on to allege:

13. Upon receipt of this cheque a representative of Nadim Group Inc. contacted the Bank and put the Bank on notice that Curtis was not to be trusted.

14. The Bank subsequently contacted the Defendant Forsythe and advised him of the above incident. Forsythe expressed concern and asked the Bank if it could utilize the resources available to it (which resources were unavailable to these Defendants) to conduct a background check on Curtis.

15. The Bank declined Forsythe's request, advising him that there was nothing to worry about.

16. Forsythe reasonably concluded that the Bank had sufficient information to reach such a conclusion respecting Curtis, and accepted and relied on the Bank's advice in that regard.

17. Forsythe, in turn, relayed the Bank's advice to the Principal Debtors and to the rest of these Defendants who, to the Bank's actual or implied knowledge, reasonably relied on such advice.

18. These Defendants state that as a result of the particular circumstances described above respecting Curtis, and/or in any event, the Bank owed them and the Principal Debtors an implied contractual, as well as a common law and a fiduciary duty of care to ensure that all necessary precautions and measures were taken before advancing funds to the Principal Debtors, and before allowing funds to be drawn on the accounts of the Principal Debtors.

[7] Further to the above, the statement of defence alleges acts of negligence and certain misrepresentations on the part of the TD Bank in other dealings with Curtis, with AdvantEdge, and with Forsythe and other guarantors, in the face of the financial difficulties of the principal debtors. These include various allegations that the TD Bank permitted Curtis to open bank accounts in furtherance of his dishonest activities, that it refused to honour payroll cheques to the employees of AdvantEdge, leading to the demise of that company, and that it misled the defendants in its efforts to secure additional guarantees from them. I do not think I am understating what is alleged in this pleading when I say that the failure of the TD Bank to recognize that Curtis was dishonest is the linchpin of the defence and counter-claim so far as the new parties are concerned. I note that the above paragraphs numbered 13 to 18 are incorporated by specific reference in the appellants' amended counter-claim respecting the parti es they seek to add to this action.

[8] It is pleaded that the TD Bank continued to advance more funds to the now bankrupt Balmoral Partners and Balmoral Trade, and to AdvantEdge, thus increasing the exposure of the defendants on their guarantees. Further, some of the defendants executed additional guarantees or renewed existing ones, without knowledge of Curtis' alleged duplicity. Additionally, some of the guarantors continued to advance funds to Balmoral Trade and Balmoral Partners, as "investors" in these customers of the TD Bank, and in so doing relied on what they perceived to be a responsibility on the part of the TD Bank to oversee the financial dealings of these customers, as well as their guarantors. In responding to the statement of claim as a whole, the defendants allege:

90. These defendants state that any and all outstanding liability owed by the Principal Debtors to the Bank, and which the Bank now claims as against these Defendants, was caused or contributed to by the Bank's own acts and omissions as hereinbefore described, such that the Bank is in breach of its duties and obligations to these Defendants. The result is that these Defendants are discharged from any and all liabilities under their guarantees.

[9] The proposed plaintiffs by counter-claim, in their amended counter-claim, state that the TD Bank owed them a common law and fiduciary duty to exercise all reasonable care and skill in the handling of the accounts and credit facilities of Balmoral Trade and Balmoral Partners in accordance with its own internal policies and the standards within the financial industry.

[10] In addition to their status as fiduciaries, the proposed plaintiffs by counter-claim state that they invested and continued to invest assets in Balmoral Trade and Balmoral Partners in reliance upon the TD Bank's representations. They state that they would not have done so had they known the information available to the TD Bank regarding the trustworthiness of Curtis at the time the bank knew of such information. Thus, according to their counter-claim: ". . . the Investors state that they relied upon the representations of the Bank regarding Curtis, as detailed in paragraphs 13-18 of this Statement of Defence, which representations were made recklessly and/or negligently and without regard to their accuracy".

[11] It is to be noted that there is no allegation pleaded that is personal to these proposed parties other than the allegations that the TD Bank, by reason of its ongoing contact with one of the guarantors, Forsythe, should have known of their existence, their relationship to the guarantors and to each other, and their investments in two of the TD Bank's customers.

Issues

1. Is it plain and obvious that the pleadings disclose a fiduciary relationship between the TD Bank and the parties to be added?

2. Is it plain and obvious that the amended statement of defence and counterclaim disclose a basis for the tort of negligent misrepresentation?

[12] The issues are framed to comply with the standards enunciated in R.D. Belanger & Associates Ltd. v. Stadium Corp. of Ontario Ltd. (1991), 1991 2731 (ON CA), 5 O.R. (3d) 778 (C.A.); Hunt v. Carey Canada Inc., 1990 90 (SCC), [1990] 2 S.C.R. 959, 74 D.L.R. (4th) 321.

Analysis

[13] The propriety of the original statement of defence and counter-claim is not before us. The TD Bank had set the matter down for trial before the motion to add the parties as plaintiffs by counter-claim was made. It was held below, and not challenged in this appeal, that it was too late to attack the original pleadings with respect to the original parties. In any event, there are facts pleaded respecting the circumstances that existed at the time of the renewal and extension of existing guarantees by the original defendants that would appear to require a trial. Consequently, I am concerned only with the decision of Master Birnbaum, reversed by Juriansz J., to permit the addition, as plaintiffs by counter-claim, of certain parties who are not guarantors and were not named in the original action. These new parties are referred to as "investors" in Balmoral Trade "and/or" Balmoral Partners, although one of them, Cowan, is also a shareholder of Balmoral Partners. It was explained to us in argument that the se investors were lenders to the principal debtors. In the present circumstances, they are more accurately described as unsecured creditors.

[14] There is ample authority for the proposition that the relationship that exists between a bank and its customer is that of debtor and creditor: see Foley v. Hill (1848), 2 H.L.C. 28, 9 E.R. 1002; Bertolo v. Bank of Montreal (1986), 1986 150 (ON CA), 57 O.R. (2d) 577, 33 D.L.R. (4th) 610 (C.A.). Special facts would have to be pleaded before that relationship could be transformed into a fiduciary one as in Lloyd's Bank Ltd. v. Bundy, [1975] 1 Q.B. 326, [1974] 3 All E.R. 757 (C.A.). The relationship between a bank and the guarantor of its customer's loan is determined by the terms of the guarantee. The conditions under which the guarantor can be excused has most recently been discussed by the Supreme Court of Canada in Manulife Bank of Canada v. Conlin, 1996 182 (SCC), [1996] 3 S.C.R. 415, 139 D.L.R. (4th) 426.

[15] As indicated, we are restricted to an examination of the relationship between the TD Bank and unsecured creditors of its customers who are not guarantors and do not suggest that they have any exposure to the TD Bank arising out of the default by the principal debtors of the bank. What they have in common with the TD Bank is that they have all lent money to the same corporate entities. The appellants could provide no authority for the proposition that a bank owes some special duty of care to other creditors of its customers, simply because they are creditors, to disclose to them its information as to the creditworthiness of their common debtors. There is certainly no suggestion that the plaintiffs by counter-claim had some concomitant obligation to share with the TD Bank any information that they might have on the subject. They are all creditors, and the submission that the TD Bank qua creditor has an unilateral duty to other creditors to keep them abreast of the financial status of its customers, is totally lacking in authority. Apart from certain provisions in our insolvency laws or special circumstances that have not been pleaded, I know of no reason why one creditor is not entitled to consider its own interest in assessing the credit worthiness of its borrowers without alerting other creditors of its customer as to matters of concern.

[16] I think that this disposes of the claim that the TD Bank is in a fiduciary relationship with these particular creditors or owes them a special duty to protect their investment in the principal debtors. However, it is said of them in the amended counter-claim that they were known to the TD Bank or ought to have been known to it as being controlled, closely related or otherwise sufficiently proximal to the defendant guarantors, "and as such", that the proposed plaintiffs would rely on communications and information given to any one of the defendant guarantors by the TD Bank in making their investment decisions.

[17] This brings us to the second issue and the branch of the pleadings in which it is alleged that the TD Bank is liable for the tort of negligent misrepresentation. From a reading of the pleadings, it emerges that the corporate defendant Llewellyn Sifton Smith Family Holdings Inc., the individual defendants including Curtis and the added plaintiff by counter-claim, Cowan, were effectively partners in Balmoral Partners, a corporation that they controlled as shareholders and which in turn controlled the other corporate entities that were customers of the TD Bank. These shareholders had their own personal corporate vehicles that acted as lenders to Balmoral Partners and its subsidiaries and also as guarantor for their indebtedness to the TD Bank. When Nadim informed the TD Bank that the partner Curtis had arranged for a Balmoral Trade cheque payable to Nadim, and thereby "put the Bank on notice that Curtis was not to be trusted", the TD Bank drew this to the attention of another of the partners, Forsythe. Forsythe's response was to ask the bank to "do a background check" on his partner Curtis. The appellants maintain, probably correctly, that in talking to Forsythe, the TD Bank was in effect talking to all the partners. As such, they maintain that Forsythe would convey to the others that the TD Bank had declined the request and had advised Forsythe that there was nothing to worry about. This is pleaded by those defendants who are guarantors in their counterclaim. The same position, i.e., the allegations in paras. 13 to 18, is repeated with respect to those added plaintiffs by counter-claim who are merely investors. It seems to be the specific factual basis for alleging that the TD Bank "owed them and the Principal Debtors an implied contractual, as well as a common law and fiduciary duty of care".

[18] In the recent case of Ingles v. Tutkaluk Construction Ltd., 2000 SCC 12, released March 2, 2000 [46 O.R. (3d) 736n], Bastarache J. for the Supreme Court of Canada (at para. 16) stated that the court affirmed in Ryan v. Victoria (City), 1999 706 (SCC), [1999] 1 S.C.R. 201, 168 D.L.R. (4th) 513 that the two-part Anns/Kamloops test (Anns v. Merton London Borough Council, [1978] A.C. 728, [1978] 2 All E.R. 492 (C.A.); Kamloops (City) v. Nielsen, 1984 21 (SCC), [1984] 2 S.C.R. 2, 10 D.L.R. (4th) 641) is the appropriate test for determining whether a private or public actor owes a duty of care such that the law can impose on the actor a private law liability in a civil suit for breach of that duty.

[19] In Ryan v. Victoria (City), the court was dealing with the effect of statutory authority on the civil liability of railways. Major J., speaking for the court stated (at p. 219 S.C.R., p. 524 D.L.R.) that the duty of care owed by a railway with respect to public crossings is determined, as it is for other private and public actors, under the two-step test in Anns as adopted by the Court in Kamloops "and numerous subsequent decisions". He then stated that the first step of the Anns/Kamloops test presented a relatively low threshold, namely whether a relationship of "proximity" existed between the parties such that it was reasonably foreseeable that a careless act by the railway could result in injury to the plaintiff.

[20] The second step is an analysis of the duty of care established in the first step to determine if there are any statutory or judicial impediments to imposing liability. As Major J. stated at p. 220 S.C.R., p. 525 D.L.R.:

The existence of a duty of care must be considered in light of all relevant circumstances, including any applicable statutes or regulations. Thus a legislative exemption from liability can negate a duty of care in circumstances where that duty would otherwise arise. The same holds true for immunities created by the courts. A policy decision is made in such cases to prevent the law of negligence from regulating certain relationships or relieving certain injuries, notwithstanding a finding of proximity between the parties.

(Emphasis added)

[21] Accordingly, the Anns/Kamloops analysis calls for two findings: (1) proximity and (2) an absence of statutory or judicial immunity. However, there is a problem of application to the case in appeal because almost all the reported cases that apply the Anns/Kamloops analysis involve public actors. Fortunately, one application to the private sector is almost dispositive of this case. It is Hercules Managements Ltd. v. Ernst & Young, 1997 345 (SCC), [1997] 2 S.C.R. 165, 146 D.L.R. (4th) 577 and deals with the tort of negligent misrepresentation. Here, La Forest J., for the court, applied the two-part Anns/Kamloops test, i.e., whether the respondents owe to the appellants a duty of care for their alleged negligent acts depends on (a) whether a prima facie duty of care is owed, and (b) whether that duty, if it exists, is negated or limited by policy decisions.

[22] Hercules Managements was an action against auditors of two interrelated corporations by three shareholders. One of the shareholders was the sole shareholder of one of the corporations, and the other two were the only shareholders of the second. The shareholders claimed that they had suffered investment losses in the two corporations because of their reliance upon audit reports of the financial statements of the corporations that the auditors had been hired to perform and deliver to the corporations and to their shareholders.

[23] To invert the analysis of La Forest J. and deal with the last issue first, the court applied Foss v. Harbottle (1843), 2 Hare 460, 67 E.R. 189 to hold that a shareholder's claim for losses incurred is a derivative action because individual shareholders have no cause of action for wrongs done to the corporation. This takes care of the claim of the added plaintiff by counterclaim, Cowan, in so far as he is claiming as a shareholder. However, the case is more valuable in its application of the proximity part of the Anns/Kamloops test. La Forest J. ruled that "proximity" in negligent misrepresentation cases pertains to some aspect of the relationship of reliance. It inheres when (a) the defendant ought reasonably to foresee that the plaintiff will rely on his or her representation, and (b) reliance by the plaintiff would, in the particular circumstances of the case, be reasonable.

[24] I doubt very much that a court would hold that the TD Bank could foresee that the representations it made to one of the guarantors of the loans in issue would be relied upon by other lenders to the Balmoral group of companies, and much less that it would be reasonable for them to do so. As La Forest J. stated, there must first be a finding that there was some aspect of reliance in the relationship. Since there is no governing statute in this case to determine proximity as there is with government actors, the legal basis for finding proximity in the private sector must lie in the common law. I think I have already established that such reliance does not arise out of the mere fact that the TD Bank is one of a number of creditors of the principal debtors. It can only be created from facts peculiar to the case. The pleadings treat Forsythe as the recipient and the disseminator of the representations in issue. The statements to him are relied upon by all the shareholder partners, all the guarantors and all of the investors. However, the pleadings provide no support for a finding of reliance. Quite the contrary. The pleadings allege that the TD Bank, after passing along to Forsythe what the pleadings describe as notice of the dishonesty of one his partners, declined Forsythe's request to investigate the impugned partner further. How can such reluctance to assume further responsibility for the conduct of Forsythe's partner create a relationship of reliance? Clearly, it can not. There is no reliance, no proximity and no duty of care.

[25] I am mindful that the investors seeking to be added as parties insist that the statement "there was nothing to worry about" is a representation that they could rely upon. However, that presupposes a relationship of reliance in the first place. This latter statement is the alleged negligent representation, but the court does not concern itself with negligent acts if there is no duty of care. There are no facts pleaded that meet the first step of the Anns/Kamloops analysis.

[26] Additionally, even if the analysis could survive the first step of the test, it would most assuredly founder on the second. In Hercules Managements, La Forest J. enunciated the policy consideration that centres on the possibility that the defendant might be exposed to a "liability of indeterminate amount for an indeterminate time to an indeterminate class". He applied this policy consideration to negate the prima facie duty of care that he had already found to exist in Hercules Managements, notwithstanding that the class involved was very narrow: it consisted of the three shareholders that commissioned the audits and to whom they were delivered. The duty of care in this case was negated by the fact that the audit reports were prepared for the shareholders in question to allow them to exercise their role as a class to oversee the corporations' affairs at their annual general meetings. It was not intended to assist the individual shareholders to protect their own investments in the corporations but to permit informed judgments on their part to make decisions to safeguard the interests of the corporations (p. 210).

[27] Accordingly, the mere use of the information for a use to which it was not intended was enough to negate the duty of care owed to those to whom the reports were delivered. This is so even where the uncontradicted evidence, and all common sense, supports the insistence of the three individuals that they did rely upon the audits for their decisions to invest further moneys in the corporations. Compare this to the case in appeal where whatever was said to Forsythe about not worrying about the honesty of his partner related at the highest to the state of the accounts of the principal debtors and the contingent liability of the guarantors. On the analysis of Hercules Managements, a court would have to hold that it was not intended as an assurance that Forsythe and any others he chose to speak to should invest additional moneys in the corporations in issue.

[28] Of course, the real concern in the case in appeal is not the use to which the information was put, but the policy consideration that it could create an indeterminate liability to virtually an unlimited class. Who knows to whom Forsythe might have spoken and to whom those he spoke to may have spoken and what gloss could have been placed on the alleged assurances of the TD Bank about Curtis. This was certainly the concern of Juriansz J. who quoted counsel for the appellants as agreeing that the class could include a guarantor's barber. These pleadings will not satisfy the policy requirement of La Forest J.'s analysis. In my opinion, there is no basis in these pleadings for the tort of negligent misrepresentation.

Disposition

[29] Juriansz J. gave full and careful reasons for allowing the appeal and setting aside the order of Master Birnbaum. In the result, the motion to add the proposed plaintiffs by counter-claim is dismissed. While the analysis of Juriansz J. does not proceed precisely along the lines of my own, I agree with it. The appeal is dismissed with costs.

Appeal dismissed.