Auditor Held To Owe Duty To "Client's Clients"

In Lavender v. Miller Bernstein LLP, Justice Belobaba heard a motion by the representative plaintiff for summary judgment on several of the common issues certified in the class proceeding against the defendant auditor. The disposition of the motion turned on the question of whether a duty of care arose between Miller Bernstein and the class members who held investments with the auditor's client, a defunct securities dealer. Such a duty was found by Justice Belobaba, with the motion being decided in favour of the representative plaintiff.

The facts of the case are straightforward, and concern the failure of a securities dealer, Buckingham Securities ("Buckingham") to segregate investor (class member) assets and maintain minimum net free capital in breach of regulatory requirements. The Ontario Securities Commission ultimately placed Buckingham in receivership, yet the unsegregated assets had by that time been appropriated resulting in a loss to the class members. In