Deloitte Haskins & Sells v. Coopers & Lybrand Ltd., (1996) 192 A.R. 371 (QB)

• Judge: Cooke, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: November 29, 1996
• Citations: (1996), 192 A.R. 371 (QB)

Deloitte Haskins v. Coopers & Lybrand (1996), 192 A.R. 371 (QB)

MLB headnote and full text

In The Matter Of the Companies Creditors Arrangement Act, Chapter C-25, R.S.C. 1970 as amended;

    

And In The Matter Of Associated Investors of Canada Ltd.;

And In The Matter of the Judicature Act, Chapter J-1, R.S.A. 1980, as amended.

Deloitte Haskins & Sells (applicant) v. Coopers & Lybrand Limited (respondent)

(Action No. 8703 16333)

And In The Matter Of First Investors Corporation Ltd.;

And In The Matter Of the Judicature Act, Chapter J-1, R.S.A. 1980, as amended.

Deloitte Haskins & Sells (applicant) v. Coopers & Lybrand Limited (respondent)

(Action No. 8703 16334)

In The Matter Of the Winding-Up Act, R.S.C. 1970, c. W-10, as amended;

And In The Matter Of the winding-up of Principal Savings and Trust Company.

Canada Deposit Insurance Corporation (petitioner) v. Principal Savings and Trust Company (respondent)

(Action No. 8703 19333)

In The Court of Queen's Bench of Alberta Judicial District of Calgary (In Bankruptcy) In The Matter Of the Bankruptcy of Principal Group Ltd.

Deloitte Haskins & Sells (applicant) v. Ernst & Young Inc., Trustee Of the Estate of Principal Group Ltd., A Bankrupt (respondent)

(Action No. A25333)

Indexed As: Deloitte Haskins & Sells v. Coopers & Lybrand Ltd.

Alberta Court of Queen's Bench

Judicial District of Edmonton

Cooke, J.

November 29, 1996.

Summary:

Deloitte Haskins & Sells applied for leave to issue third party proceedings against two companies protected under the Companies' Creditors Arrangement Act and one company protected under the Bankruptcy Act.

The Alberta Court of Queen's Bench directed that the companies apply under the insolvency legislation for distribution of funds not later than March 31, 1997, at which time Deloitte would appear and either consent to or oppose the distribution. If the insolvency judge considered that the matter could not reasonably and effectively be dealt with under that legislation, the matter could be returned to the court which would then grant leave to commence third party pro­ceedings.

Editor's Note: For related proceedings see (1993), 135 A.R. 389; 33 W.A.C. 389 (C.A.), leave to appeal denied 160 N.R. 319; 149 A.R. 159; 63 W.A.C. 159 (S.C.C), (1994), 151 A.R. 153 (Q.B.), affd. 178 A.R. 199; 110 W.A.C. 209 (C.A.) and (1996), 178 A.R. 209; 110 W.A.C. 209 (C.A.).

Bankruptcy - Topic 6463

Administration of estate - Actions against bankrupt - Leave to commence action - Plaintiffs sued Deloitte, Haskins & Sells, alleging that it knowingly assisted three companies to breach their fiduciary duty - Two companies were protected under the Companies' Creditors Arrangement Act (CCAA), the third under the Bankruptcy Act - Deloitte applied for leave to issue third party proceedings against the com­panies for contribution - The matter was 9.5 years old - Granting leave would delay the distribution of funds for another five to seven years - The Alberta Court of Queen's Bench directed that the companies apply under the insolvency legislation for distribution of funds, at which time Deloitte would appear and either consent to or oppose the distribution - If the in­solvency judge considered that the matter could not reasonably and effectively be dealt with under that legislation, the matter could be returned to the court which would then grant leave to commence third party proceedings - See paragraphs 79 to 84.

Company Law - Topic 8564

Winding-up legislation - Actions against company - Requirement of leave - [See second Creditors and Debtors - Topic 8588 ].

Company Law - Topic 8565

Winding-up legislation - Actions against company - Special circumstances - [See second Creditors and Debtors - Topic 8588 ].

Creditors and Debtors - Topic 8588

Debtors' relief legislation - Companies' creditors arrangement legislation - Stay of proceedings against debtor - Leave to commence proceedings against debtor - [See Bankruptcy - Topic 6463 ].

Creditors and Debtors - Topic 8588

Debtors' relief legislation - Companies' creditors arrangement legislation - Stay of proceedings against debtor - Leave to commence proceedings against debtor - Deloitte Haskins & Sells applied for leave to issue third party proceedings against two companies protected under the Companies' Creditors Arrangement Act (CCAA) and a third company protected under the Bankruptcy Act - The courts applied different tests for granting leave under the two Acts - Deloitte argued that because here the CCAA was being used to windup the two companies and not pre­serve them, the proper test was the one used in similar proceedings under the Bankruptcy or Winding-Up Acts - The Alberta Court of Queen's Bench held that the same considerations applied to the first two companies as applied to the third - See paragraphs 1 to 29.

Limitation of Actions - Topic 528

Equitable limitation periods - Laches - Trusts - Breach of - Plaintiffs sued Deloitte, Haskins & Sells alleging that it knowingly assisted three companies to breach their fiduciary duty - Deloitte applied for leave to issue third party pro­ceedings against the companies for com­mon law contribution - The companies resisted on the ground, inter alia, that Deloitte was guilty of laches - The Alberta Court of Queen's Bench rejected the argument where Deloitte's cause of action had not yet begun to run, Deloitte had been active in bringing an interlocu­tory application aimed at defeating or limiting the plaintiffs' success and Deloitte gave notice of their intention to bring these third party applications two years ago but were prevented from doing so because the defences had not been filed - See para­graph 65.

Limitation of Actions - Topic 1906

Actions - General - Derivative actions - Plaintiffs sued Deloitte, Haskins & Sells, alleging that it knowingly assisted a bank­rupt company to breach its fiduciary duty - Deloitte applied for leave to issue third party proceedings against the company for common law contribution - One company resisted on the ground, inter alia, that because the plaintiffs had signed an under­taking not to sue the company, Deloitte could not third party them because there had to be common liability - The Alberta Court of Queen's Bench rejected the argu­ment where the third party claim was not derivative of the plaintiffs' action - See paragraphs 55 to 64.

Limitation of Actions - Topic 1906

Actions - General - Derivative actions - [See first Limitation of Actions - Topic 6006 ].

Limitation of Actions - Topic 6006

Trusts - General - Constructive trusts - Plaintiffs sued Deloitte, Haskins & Sells, alleging that it knowingly assisted three companies to breach their fiduciary duty - Deloitte applied for leave to issue third party proceedings against the companies for common law contribution - The com­panies resisted on the ground, inter alia, that the claim was derivative of the plain­tiffs' claim and barred by the Limitation of Actions Act - The Alberta Court of Queen's Bench held that any liability imposed on Deloitte would arise from the imposition of a constructive trust - Deloitte's cause of action for contribution would not accrue until there was a judg­ment against it - The third party action was not barred - See paragraphs 37 to 51.

Limitation of Actions - Topic 6006

Trusts - General - Constructive trusts - The Alberta Court of Queen's Bench com­mented on the combined effect of ss. 40 and 41 of the Limitation of Actions Act - The court stated that the sections operated so as not to bar an action by a cestui que trust against his trustee where there was a fraudulent breach of trust, including one by a constructive trustee - See paragraphs 52 to 54.

Limitation of Actions - Topic 6025

Trusts - Actions against trustee - By beneficiary - [See second Limitation of Actions - Topic 6006 ].

Practice - Topic 1043

Parties - Third party procedure - General - Application of limitation periods - [See Limitation of Actions - Topic 528 and first Limitation of Actions - Topic 6006 ].

Practice - Topic 1121

Parties - Third party procedure - When available - Claim for contribution or indemnity - [See Limitation of Actions - Topic 1906 and first Limitation of Actions - Topic 6006 ].

Trusts - Topic 4153

Administration - Liability of trustee - Joint and severable liability of co-trustees - Plaintiffs sued Deloitte, Haskins & Sells, alleging that it knowingly assisted three companies to breach their fiduciary duty - Deloitte applied for leave to issue third party proceedings against the companies for common law contribution - The com­panies resisted on the ground, inter alia, that s. 25 of the Trustee Act relieved Deloitte of any liability save that occa­sioned by it and hence no third party liability was possible - The Alberta Court of Queen's Bench rejected the argument - See paragraphs 66 to 77 - The court stated that "... s. 25 can be invoked by a co-trustee when he is shown to be blameless. However, where a co-trustee bears some degree of fault he is jointly and severally liable to the beneficiaries." - See para­graph 75.

Cases Noticed:

Bowles v. Barber (1985), 36 Man.R.(2d) 209; 60 C.B.R.(N.S.) 311 (C.A.), refd to. [para. 7].

Canadian Credit Men's Trust Association v. Umbel (1931), 13 C.B.R. 40 (Alta. T.D.), refd to. [para. 7].

Canada (Attorney General) v. Astra Trust Co. (1983), 47 C.B.R.(N.S.) 218 (Ont. S.C.), refd to. [para. 13].

Stewart v. LePage (1916), 53 S.C.R. 337, refd to. [para. 14].

Advocate Mines Ltd., Re (1984), 52 C.B.R.(N.S.) 277 (Ont. S.C. Bktcy.), appld. [paras. 17, 79].

Bookman, Re (1983), 47 C.B.R.(N.S.) 144 (Ont. S.C. Bktcy.), refd to. [para. 18].

Northland Bank, Re (1989), 60 Man.R.(2d) 29; 73 C.B.R.(N.S.) 297 (Q.B. Bktcy.), refd to. [para. 18].

Meridian Developments Inc. v. Toronto-Dominion Bank; Meridian Developments Inc. v. Nu-West Group Ltd., (1984), 53 A.R. 39; 52 C.B.R.(N.S.) 109 (Q.B.), refd to. [para. 27].

Canada Deposit Insurance Corp. et al. v. Prisco et al. (1996), 181 A.R. 161; 116 W.A.C. 161; 38 Alta. L.R.(3d) 97 (C.A.), refd to. [paras. 37, 39].

Barnes v. Addy (1874), L.R. 9 Ch. App. 244, refd to. [para. 41].

MacDonald v. Hauer (1976), 72 D.L.R.(3d) 110 (Sask. C.A.), refd to. [para. 42 et seq.].

Robinson v. Harkin, [1896] 2 Ch. 415 (Ch. Div.), folld. [para. 43].

Wolmershausen v. Gullick, [1893] 2 Ch. 514, folld. [para. 43].

Chillingworth v. Chambers, [1896] 1 Ch. 685 (C.A.), folld. [paras. 43, 63].

Hawrish v. Peters, Resky, Dunbar and Russell, [1982] 1 S.C.R. 1083; 42 N.R. 541; 16 Sask.R. 346, refd to. [para. 44].

Moxham v. Grant, [1900] 1 Q.B. 88 (C.A.), refd to. [para. 45].

Behin v. Hughes (1886), 31 Ch. D. 390, refd to. [para. 62].

INA Life Insurance Co. of Canada v. Stoyles Insurance Services Ltd. (1987), 65 Nfld. & P.E.I.R. 116; 199 A.P.R. 116 (Nfld. T.D.), refd to. [para. 74].

Statutes Noticed:

Limitation of Actions Act, R.S.A. 1980, c. L-15, sect. 40, sect. 41 [para. 52].

Trustee Act, R.S.A. 1980, c. T-10, sect. 25 [para. 67].

Authors and Works Noticed:

Keaton, Law of Trust (7th Ed.), p. 369 [para. 71].

Snell, Principles of Equity (29th Ed. 1990), pp. 285 [para. 70]; 296 [para. 73].

Waters, Donovan W.M., The Law of Trusts in Canada (2nd Ed. 1984), p. 1005 [para. 72].

Counsel:

Brian Burrows, Q.C. (McLennan Ross), for Deloitte Haskins & Sells;

Stephen D. Laird, and W. Scott Schlosser (Duncan & Craig), for Coopers Lybrand Ltd.;

B.A.R. Smith, Q.C., and Matthew R. Lindsay (Milner Fenerty), for Ernst & Young Inc.

This case was heard by Cooke, J., of the Alberta Court of Queen's Bench, Judicial District of Edmonton, who delivered the following judgment on November 29, 1996.