Patrick O’Kelly

This appeal concerned proposed class actions against auto insurers for improperly deducting HST from statutory accident benefits (SABs) and against the Financial Services Commission of Ontario (FSCO) for alleged regulatory failures.

The motion judge had dismissed claims against insurers due to the exclusive jurisdiction of the Licence Appeal Tribunal (LAT) under s. 280 of the Insurance Act, but allowed claims against FSCO to proceed.

The Court of Appeal upheld this decision, confirming the LAT's exclusive jurisdiction over SAB disputes and affirming the court's jurisdiction over tort claims against the regulator.

The court also refused leave to appeal the motion judge's costs order, finding it within his discretion.

Following a jurisdiction motion where the defendant insurers successfully argued that the court lacked jurisdiction over the proposed class actions, the insurers sought costs of approximately $620,000.

The court found this request preposterous and excessive, fixing costs payable by the plaintiffs to the 13 non-settling insurers at $28,000 on a partial indemnity basis.

The costs payable by the government regulator to the plaintiffs were settled at $12,500.

This appeal concerns an auditor's liability action arising from the Bernard Madoff Ponzi scheme.

The appellants, three Fairfield feeder funds incorporated in the British Virgin Islands, invested in Madoff's company and suffered losses when the fraud was revealed in December 2008.

The funds sued PricewaterhouseCoopers for breach of contract and negligence in auditing their financial statements for 2006 and 2007, claiming damages of approximately $2.5 billion.

The motion judge granted summary judgment dismissing the action on the basis that no damages were suffered, applying the Livent damages methodology.

The appellants appealed on five grounds, all involving findings of fact or mixed fact and law regarding the calculation of damages.

The Court of Appeal dismissed the appeal, finding no palpable and overriding errors in the motion judge's analysis.

In a negligence appeal arising from an auditor’s failure to detect corporate fraud, the Court applied the Anns/Cooper framework to pure economic loss claims for negligent misrepresentation and negligent performance of a service.

The Court held that liability must be confined to losses that fall within the purpose of the defendant’s undertaking and the plaintiff’s reasonable reliance.

It found no recoverable loss tied to services provided for investment solicitation, but upheld liability for losses flowing from a negligent statutory audit prepared for shareholder oversight.

The appeal was allowed in part, and damages were reduced to reflect only losses causally connected to the statutory audit.

The defendants, an auditing firm, brought a motion for summary judgment to dismiss a $5 billion negligence claim arising from their audits of feeder funds that invested in the Bernard Madoff Ponzi scheme.

The plaintiffs alleged that the auditors failed to discover the fraud, causing the funds to remain invested and suffer massive losses.

The court granted summary judgment, finding that the plaintiffs failed to prove any damages.

Applying the plaintiffs' own damages formula, the court concluded that the funds actually benefited from the delayed discovery of the fraud due to net withdrawals and the exclusion of fictitious profits and unasserted liabilities.

The applicant sought leave to commence a class action under s. 138.8 of the Securities Act, alleging the respondent mining company failed to disclose a material change regarding the introduction of cement grout pack supports which allegedly caused a decline in production.

The court reviewed the evidence, including expert reports and fact witness affidavits, and found that the overwhelming weight of the evidence demonstrated that cement grout packs were not introduced during the relevant quarter.

Applying the Supreme Court of Canada's threshold test from Theratechnologies, the court concluded the proposed action had no reasonable prospect of success at trial and dismissed the motion for leave.

The defendants moved for security for costs in a $5 billion auditor negligence action arising from audits connected to investments with Bernard L. Madoff Investment Securities.

The plaintiffs, investment funds in liquidation, did not dispute entitlement to security but contested the amount sought.

The court considered estimates for pleadings, discovery planning, document review, examinations for discovery, and disbursements, including expert evidence.

Applying Rule 56.01 and assessing reasonable partial indemnity rates, the court found the plaintiffs’ proposed figures unrealistic given the complexity and scale of the litigation.

Substantial security for costs was ordered to cover work through the first stage of examinations for discovery.

In a leave application under Part XXIII.1 of the Securities Act alleging failure to disclose a material change in mining operations, the parties brought competing motions to strike expert and fact affidavits.

The respondents sought to strike the applicant’s mining expert affidavit on the basis that it improperly opined on legal issues, relied on false assumptions, and lacked independence.

The applicant sought to strike several fact and expert affidavits filed by the respondents, arguing they violated Rule 39.01(5), relied on hearsay, and attempted to shield witnesses from cross-examination.

The court held that expert evidence may rely on second-hand information and that Rule 39.01(5) does not govern admissibility of expert opinion.

The alleged conflicts and factual disputes affected weight rather than admissibility.

Both motions to strike were dismissed and no costs were awarded.

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.

In a professional negligence action arising from accounting advice regarding eligibility for Canadian Controlled Private Corporation status, the defendant accountants moved for summary judgment dismissing the plaintiffs’ claim.

The defendant also brought a third party claim against the plaintiffs’ solicitors alleging negligent misrepresentation and seeking contribution and indemnity.

The court held that the accounting negligence claim involved complex factual disputes, credibility issues, and professional standards unsuitable for determination on summary judgment and therefore required a trial.

However, the court granted summary judgment dismissing the third party claim against the solicitors, finding no duty of care and no reasonable reliance by the accountants on the solicitors’ confirmations regarding a shareholders’ agreement.

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 moving party sought an order permitting it to call and cross-examine certain current and retired partners of the defendant accounting firm at trial under Rule 53.07(5) of the Rules of Civil Procedure.

The court considered whether such individuals could be treated as adverse parties or partners of an adverse partnership for the purpose of cross-examination.

The court held that current partners of the defendant partnership clearly fell within the rule and could be called and cross-examined.

The court further concluded that retired partners could also qualify as adverse parties due to potential personal liability for partnership obligations incurred before retirement under the Partnerships Act.

The motion was granted in part, permitting cross-examination of specified partners and recognizing the applicability of the rule to retired partners.

The defendant auditor brought motions to compel answers to written discovery questions, to compel production of the plaintiff's expert files, and to increase the quantum of security for costs.

The court dismissed the motion to compel discovery answers, finding the requests for summaries of evidence and lists of documents to be relied upon at trial were overly broad and disproportionate.

The court ordered reciprocal production of prior expert report drafts but otherwise upheld litigation privilege over the experts' files.

The court granted the motion to increase security for costs, adding $577,995 to the previous order due to an extended trial estimate and the plaintiff's new litigation financing arrangement.

In CCAA restructuring proceedings, the plaintiff in a securities class action sought to lift the stay of proceedings to continue the class action against the debtor company and related defendants.

The moving party argued the action should proceed in order to access insurance proceeds that would not be available to other creditors.

The court considered the purposes of the CCAA stay, including preserving the status quo and facilitating a restructuring or sales process for the benefit of stakeholders.

Balancing prejudice, convenience, and the interests of the restructuring process, the court held that permitting the litigation to proceed would divert management resources from the ongoing court‑supervised sales process.

The stay was maintained except to permit the plaintiff to pursue a leave application to the Supreme Court of Canada on a limitation period issue.

The representative plaintiffs in two certified class proceedings regarding allegedly defective implantable defibrillators appealed orders of the motion judge.

The motion judge had ordered the bifurcation of discovery and trial of common issues relating to the quantification of compensation for waiver of tort from the liability issues.

In one of the actions, the motion judge also refused to certify punitive damages as a common issue.

The Divisional Court dismissed the appeals, finding no error in principle in the motion judge's exercise of discretion to bifurcate the proceedings to ensure a fair and expeditious determination.

The Court also upheld the refusal to certify punitive damages as a common issue, agreeing that entitlement to punitive damages could not be rationally determined without first determining individual issues of causation and compensatory damages.

The plaintiffs brought a motion for leave to appeal an order bifurcating common issues relating to the quantification and apportionment of any accounting or disgorgement for a claim based on waiver of tort from the other common issues in a class action concerning allegedly defective cardiac defibrillators.

The court granted leave to appeal, finding conflicting decisions on the issue of bifurcation and good reason to doubt the correctness of the order, noting the matter is of sufficient importance to warrant appellate review.

The defendants sought leave to appeal a decision certifying a class action against them.

The Divisional Court denied leave, emphasizing the deference owed to case-management judges in certification motions.

The court found no conflicting decisions or errors in the certification judge's treatment of waiver of tort, conspiracy pleadings, or special damages.

The appellant appealed a decision holding that Ontario was neither the appropriate nor the convenient jurisdiction for his legal malpractice claim against a New York law firm.

The appellant had commenced the Ontario action after a New York court precluded him from continuing his litigation there due to his repeated failure to obey court orders.

The Court of Appeal dismissed the appeal, agreeing with the motion judge that there was no real and substantial connection to Ontario and that New York was the convenient forum.

The applicants, franchisees of the respondent debtor company, sought leave to appeal an order sanctioning a Plan of Arrangement under the CCAA.

They sought to introduce fresh evidence alleging that they had over-contributed to the national advertising fund compared to other franchisees, giving them a claim for unjust enrichment that they were unaware of during the claims process.

The Court of Appeal dismissed the application, finding that the fresh evidence did not meet the due diligence requirement for admission, as the differential treatment had been disclosed in the debtor's materials.

Furthermore, the applicants failed to meet the stringent test for granting leave to appeal in CCAA proceedings, as they offered no alternative plan and there was no evidence the sanctioned plan was unfair or unreasonable.

Ardagh PLC, an unsuccessful bidder in a court-approved sale process under the CCAA, sought leave to appeal the order approving the sale of Consumers Packaging Inc.'s assets to Owens-Illinois, Inc. The Court of Appeal refused leave, noting that leave to appeal in CCAA proceedings should be granted sparingly and not where it would prejudice the restructuring.

The court also noted that an unsuccessful bidder generally lacks standing to challenge a sale approval order.