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Ahmed Shafey

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CANADA – In Lavender v. Miller Bernstein, 2017 ONSC 3958, a recent class action decision of the Ontario Superior Court, the auditor of a now-insolvent securities dealer was found liable for financial losses sustained by the dealer’s clients. The decision of Justice Belobaba focuses on the question: does an auditor have a duty of care to its client’s clients, including where there is no direct relationship with or reliance by these third party clients?

The dealer, Buckingham Securities (the “Dealer”), held the investments of roughly 1000 retail customers (the “Class Members”). The defendant auditors, Miller Bernstein LLP (the “Auditor”), was found to have negligently signed-off on Form 9 reports, which are filed annually with the Ontario Securities Commission (the “OSC”), the provincial securities regulator, to ensure compliance with segregation of assets and minimum free capital requirements. The Dealer had not segregated the Class Members’ funds, which it later misappropriated causing an alleged loss of $10.6 million. These facts were later admitted by the Auditor in disciplinary proceedings against the Auditor.

The Ontario Court of Appeal recently reconsidered its decision (the “Original Stay Appeal”) to stay a securities class action claim in Canada, on the basis that Ontario was not the most appropriate forum, where the securities at issue were purchased on foreign stock exchanges. Leave to appeal the Original Stay Appeal was dismissed by the Supreme Court of Canada. In its most recent decision the Court of Appeal considered an argument that the Original Stay Appeal…

CANADA – In an earlier post we discussed the implications of the Ontario Superior Court decision of Coffin v. Atlantic Power Corp. (“Coffin”) on secondary market securities class actions. We observed that the decision reiterated a higher threshold for secondary market misrepresentation class actions under the Ontario Securities Act (“OSA”), stating that the test for leave under the OSA was intended to be a “robust deterrent screening mechanism” to help “weed out hopeless claims”. Coffin was…

CANADA – In a recent post we described the Ontario Court of Appeal’s finding, in Kaynes v. BP, PLC, that Ontario was not the most convenient forum for a class action commenced by an Ontario resident who had purchased the defendant’s securities on the NYSE. The claim alleged market misrepresentation under section 138.3(1) of the Securities Act, R.S.O. 1990, c. S.5. The proposed class included those who purchased securities on the TSX, NYSE and LSE…