Cooperatieve Centrale Raiffeeisen-Boerenleenbank B.A. v. Liebig & Keown LLP et al.,

• Judge: Robertson
• Neutral Citation: 2015 ABQB 669
• Citation: [2015] A.R. TBEd. OC.085,2015 ABQB 669,[2015] AR TBEd OC085
• Date: 05 October 2015
• Court: Court of Queen's Bench of Alberta (Canada)

Cooperatieve Centrale v. Liebig & Keown, [2015] A.R. TBEd. OC.085

MLB being edited

Currently being edited for A.R. - judgment temporarily in rough form.

Temp. Cite: [2015] A.R. TBEd. OC.085

Cooperatieve Centrale Raiffeeisen-Boerenleenbank B.A., "Rabobank International", New York Branch (plaintiff) v. Liebig & Keown LLP, Stout & Company LLP, Grant Thornton LLP, Brett Liebig Professional Corporation, Chris L. Keown Professional Corporation, and James Stout (defendants)

(1301 07048; 2015 ABQB 669)

Indexed As: Cooperatieve Centrale Raiffeeisen-Boerenleenbank B.A. v. Liebig & Keown LLP et al.

Alberta Court of Queen's Bench

Judicial District of Calgary

Robertson, Master

October 22, 2015.

Summary:

Rabobank International carried on a factoring arrangement with Agra Services of Canada, Inc., whereby in the course of its business, Agra generated receivables which it would then factor to Rabobank. Rabobank sued Liebig & Keown LLP (LKL) and Stout & Company LLP (SCL) and others for damages for negligent misstatement in connection with financial statements prepared by them for Agra. Rabobank asserted that it was the principal user of both the audited and unaudited financial statements, and it had a proper claim for damages against LKL and SCL in respect of both forms of statements. A claim based on the doctrine of successor liability against one defendant was dismissed on a summary judgment motion (see [2015] A.R. TBEd. OC.041). LKL, SCL and the remaining defendants applied for summary judgment.

A Master of the Alberta Court of Queen's Bench held that it was clear that a duty of care was owed to Rabobank. The evidence disclosed that the receivables shown in statements were, at least starting in 2009, wrong. Rabobank should not have placed any reliance on LKL respecting unaudited financial statements. The information contained within those statements were provided by Agra's management. The "Notices to Reader" made it clear that LKL had done nothing to audit those statements. There was merit to LKL's argument that there was no evidence that the audited statements which it prepared contained any misstatement. The only evidence was that fraud began in September 2009. By then LKL was no longer auditing Agra's financial statements, merely assembling the "Notice to Reader" unaudited statements. Without at least some evidence that there was a misstatement appearing in the audited statements prepared by LKL, there was no claim. Each party had to "put its best foot forward". The Master was unable to conclude that the defendants' positions respecting the audited financial statements prepared by SCL for the years following 2008 were unassailable, meaning that it was highly likely that they would succeed. In the result, the Master dismissed the claim as against LKL and related defendants. The application insofar as it related to SCL and the defendant Stout was allowed respecting the allegations relating to the audited statements for years ending December 31, 2007 and December 31, 2008, and dismissed respecting the allegations relating to the audited financial statements for the years ending December 31, 2009 and December 21, 2010.

Fraud and Misrepresentation - Topic 2502

Misrepresentation - General principles - Elements of actionable misrepresentation - See paragraph 78.

Fraud and Misrepresentation - Topic 2508

Misrepresentation - General principles - Negligence misrepresentation - See paragraphs 42 to 102.

Fraud and Misrepresentation - Topic 2535

Misrepresentation - Elements - Reliance - See paragraphs 84 to 95 and 99.

Practice - Topic 5702

Judgments and orders - Summary judgments - Jurisdiction or when available or when appropriate - See paragraphs 99 to 102.

Torts - Topic 77

Negligence - Duty of care - Relationship required to raise duty of care - See paragraphs 80 and 81.

Torts - Topic 81

Negligence - Duty of care - Requirement that duty be owed to plaintiff - See paragraphs 80 and 81.

Counsel:

Gregory W. Jaycock (Parlee McLaws LLP), for the applicants/defendants, Liebig & Keown LLP, Stout & Company LLP, Brett Liebig Professional Corporation, Chris L. Keown Professional Corporation and James Stout;

Christian J. Popovich, Katherine Reiffenstein and Ben Frenken (Code Hunter LLP), for the respondent/plaintiff.

This application was heard on October 5, 2015, by Robertson, Master, of the Alberta Court of Queen's Bench, Judicial District of Calgary, who delivered the following memorandum of decision on October 22, 2015.