DATE: 20040512

DOCKET: C39747

COURT OF APPEAL FOR ONTARIO

RE: BERNICE GABAY (Plaintiff) (Appellant) – and – GERRY GOLDBERG AND SCHWARTZ, LEVITSKY, FELDMAN AND DOANE RAYMOND CHARTERED ACCOUNTANT MANAGEMENT CONSULTANTS (Defendants) (Respondents)

BEFORE: WEILER, ABELLA and ARMSTRONG JJ.A.

COUNSEL: Altor Shields

for the appellant

Peter Manderville

and James Lane

for the respondent

HEARD: April 16, 2004

On appeal from the judgments of Justice Rouleau of the Superior Court of Justice dated February 20, 2003 and June 9, 2003.

E N D O R S E M E N T

Nature of Appeal

[1] The appellant appeals from the dismissal of her claim for damages for negligent misrepresentation. The appellant also seeks leave to appeal the costs judgment of Rouleau J. dated June 9, 2003, where the appellant was ordered to pay costs to the respondents.

[2] The appellant brought an action against the respondents for investment losses sustained when she invested in Nabtech Trading Corporation and subsequently in Target Nabtech Inc. (“Target Nabtech”), a company in which her cousin, Murray Posner, was Vice- President and had an interest. Target Nabtech was created in March 1992 through the merger of Nabtech Trading Corp. and another company, Target Importers Inc.

[3] The appellant claimed that the respondent, Gerry Goldberg, made negligent misrepresentations to her concerning the affairs of Target Nabtech, and that she relied upon these misrepresentations to her detriment. The appellant alleges that she invested approximately $825,000.00 in Target Nabtech as a result of Mr. Goldberg’s alleged representations. The company failed in 1996 and the appellant’s investment in the company was lost.

[4] The respondent, Gerry Goldberg was the accountant for Target Nabtech. He first met the plaintiff at a meeting held at Target Nabtech’s premises in August 1992. At that time he was a partner of the respondent, Doane Raymond Chartered Accountant Management Consultants. One of the principals of Target Nabtech asked Mr. Goldberg to explain the difference between preference shares and a loan. He did so. There is no suggestion that he erred in the explanation he gave. At a later point in the meeting Mr. Posner told Mrs. Gabay that if she invested in preference shares she would share in the profits of the company. Mr. Goldberg was concerned that this was not the case. After the meeting, Mr. Goldberg spoke to one of the principals of the company and received an assurance that she would be treated as a 25 per cent investor and participate in 25 per cent of the profits. The trial judge accepted this evidence.

[5] The appellant submits that Mr. Goldberg had an accountant-client relationship with Mrs. Gabay as a result of the explanation he gave, and that he ought at least to have told her he could not advise her as to whether to make the investment and that she should obtain independent legal advice.

[6] At paras. 66 and 70 of his reasons the trial judge stated:

When the plaintiff attended that meeting she had already invested personally or on behalf of her mother, well over $300,000. The reason for the meeting was not to consider the making of that investment but rather the structuring of it. There was no indication at the meeting that she was reconsidering her position. There was no discussion of the merits of the investment nor any advice given concerning the appropriateness of making or not making the investment. All of the discussion centred around the amount of investment required to be a one-quarter partner and how it should be structured.

…There was nothing to alert Goldberg that the plaintiff was relying on him to do anything other than to inform her of the different treatment of investments made by way of preference shares or by way of loan. The plaintiff admitted that this was the first time she met Goldberg. She did not, at that meeting or thereafter retain Goldberg as an investment advisor. By her conduct at the meeting it was clear that she had already committed to making the investments and was not seeking nor expecting any confirmation or comment from Goldberg.

[7] Given these findings, we are of the opinion that there was no accountant-client relationship between Mr. Goldberg and Mrs. Gabay at that time.

[8] After the first meeting in August 1992, the appellant’s cousin suggested she retain Mr. Goldberg as her accountant to do her income tax returns, and she did. Mrs. Gabay testified that she met with Mr Goldberg a second time in August 1992 at her home. She testified she was told that the company was a good small business. The trial judge found that this statement was made. The appellant submits that the 1992 financial statement shows that in a three‑month period, January to March 1992, the company lost $122,000. The appellant says that Mr. Goldberg had an obligation to tell Mrs. Gabay that the company was in financial difficulty, not the opposite.

[9] The financial statement that the appellant relies on relates to one of the predecessors of the company and not to the newly formed company. The newly formed company had a small profit in the year in question. The trial judge therefore correctly concluded that this was not a misrepresentation at the time it was made.

[10] In addition, Mrs. Gabay attended a later meeting at which she was told that the company was in financial difficulty and she knew that putting further money into the company would be risky. She continued to invest in the company. There was, accordingly, ample evidence upon which the trial judge could conclude that in any event Mrs. Gabay did not rely on any representation by Mr. Goldberg in deciding to continue investing in the company. Accordingly, we would dismiss the appeal.

[11] With respect to the costs at trial, the parties are agreed that the trial costs of counsel to Goldberg and to Schwartz, Levitsky, Feldman ought to be reduced to $106,394.74, while those of Doane Raymond should be reduced to $30,318.79. An order will go allowing the appeal with respect to costs to this extent.

[12] We are of the view that the appropriate amount in the circumstances is $8,500 for each of the respondents.

“Karen M. Weiler J.A.”

“R. S. Abella J.A.”

“Robert P. Armstrong J.A.”