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ARTICLE · 24 DECEMBER 2013

Auditors’ Liability To Third Parties: Small Closely-Held Corporations

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In Waxman v. Waxman (2004), 186 OAC 201, the Ontario Court of Appeal considered whether the Hercules Managements analysis is applicable in a case brought by a shareholder of a small, closely- held corporation where concerns about indeterminate liability arguably do not arise.

CanadaLitigation, Mediation & Arbitration
Lisa Munro
Lisa Munro
Eni Eski
Eni Eski
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In Waxman v. Waxman (2004), 186 OAC 201, the Ontario Court of Appeal considered whether the Hercules Managements analysis is applicable in a case brought by a shareholder of a small, closely- held corporation where concerns about indeterminate liability arguably do not arise. 

This case involved an oppression remedy claim brought by one brother (Morris) against the other (Chester) based upon allegations that his brother had defrauded him out of an interest in the company.  Morris also sued the company's auditors, alleging that they had a duty to warn him that he was being exploited by Chester.  The trial judge and the Court of Appeal found in favour of Morris in respect of virtually all allegations made against Chester.

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