Auditors’ liability suffered a significant setback late
last year with the release of the Supreme Court of Canada’s
decision in Deloitte & Touche v. Livent Inc. (Receiver
of) (“Livent”)1. The
effect of the Livent decision was to make Deloitte liable
for the fraudulent mismanagement of Livent by its entire senior
management, who acknowledged that they were attempting to
fraudulently misrepresent matters to their own auditors, never mind
the investors and creditors of Livent.
Fast forward to the release of the Ontario Court of
Appeal’s decision in Lavender v. Miller Bernstein
(“Lavender”),2 where the Court of
Appeal recently applied the Supreme Court’s analysis of an
auditor’s duty of care from Livent, yet concluded
that the auditor, Miller Bernstein LLP (the
“Auditor”), did not owe a duty of care
to the plaintiff class of investors. The facts of Lavender
are as follows.
