Case information

Civil procedure — Class actions — Negligence — Duty of care — Applicant investors lost savings when wealth management company placed in receivership for misappropriating assets — Auditor providing clean audit opinions to the Ontario Securities Commission and to unitholders — Applicant investors suing auditor for common law negligence in providing auditing services — Motion seeking certification of their action as a class proceeding dismissed in lower courts — Whether auditor owes applicant investors duty of care in respect of statutory audits.

Case summaries are prepared by the Office of the Registrar of the Supreme Court of Canada (Law Branch). Please note that summaries are not provided to the Judges of the Court. They are placed on the Court file and website for information purposes only.

The applicants were individual investors in the mutual funds of Crystal Wealth Management Systems Ltd. They lost their life savings when the Ontario Securities Commission put the company in receivership for misappropriating assets. The respondent, BDO Canada LLP, which was the auditor of Crystal Wealth from 2007 to 2017, provided clean audit opinions to the OSC and to the unitholders about Crystal Wealth’s mutual funds. The crux of the applicants’ claim against BDO for negligent performance of a service is that, in addition to any duty BDO owed to its audit client, Crystal Wealth, and its funds, BDO also owed duties to investors in Crystal Wealth’s Funds. As a result, the applicants seek to make BDO liable for damages arising from investments made by investors who invested in the funds at any point from 2007 onward, and continued to hold those investments as of April 7, 2017, when the OSC’s cease trade order was first issued. The narrow issue in dispute was whether the pleading discloses sufficient “proximity” between BDO and the class members to give rise in law to a duty of care owed by BDO.

The motion judge refused certification finding that while BDO had potential contractual liability to Crystal Wealth for negligent auditing, it did not have a proximate duty of care to the individual investors. Thus, in the case at bar, the cause of action criterion for certification was not satisfied, and with its failure all the other certification criteria failed.

The Divisional Court agreed and also dismissed the appeal. The Court of Appeal dismissed the motion for leave to appeal.