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ARTICLE · 19 FEBRUARY 2014

Auditors’ Liability to Third Parties: Massive Liability May Not Be Indeterminate

Lerners LLP
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Paradoxically, the application of the Hercules Managements duty of care test in cases like Widdrington (Estate of) v. Wightman, 2011 QCCS 1788, aff’d QCCA 1184 ("Castor Holdings") may actually work to expand, rather than narrow, liability.

CanadaLitigation, Mediation & Arbitration
Lisa Munro
Lisa Munro
Eni Eski
Eni Eski
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Paradoxically, the application of the Hercules Managements duty of care test in cases like Widdrington (Estate of) v. Wightman, 2011 QCCS 1788, aff'd QCCA 1184 ("Castor Holdings") may actually work to expand, rather than narrow, liability.

In Castor Holdings, the plaintiff claimed against the auditors of Castor Holdings, a private investment bank, for misrepresentations made in various financial statements. The audited financial statements were intended for several purposes, among them, to obtain financing. The plaintiff had invested in the company and suffered a loss when it was discovered that the financial statements bore no resemblance to reality. This case was a "test" case, whose results were binding in 75 other cases with claims totalling over $1 billion.

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