On January 9, 2003, the Court of Appeal for Ontario dismissed an appeal by Joseph Menegon from Justice Gans’s judgment, rendered on March 6, 2001, Menegon v. Philip Services Corp. In November 1998, Menegon purchased shares of Philip Services Corp. on the secondary market. Philip later failed. In 1998, Menegon commenced a proposed class action, on his own behalf and on behalf of other purchasers of Philip shares, for damages for alleged misrepresentations contained in a prospectus dated November 6, 1997, pursuant to which Philip offered shares to the public. The offering had a value of US$379.5 million.
The defendants included Philip’s auditors, Deloitte & Touche, and its Canadian underwriters in its 1997 prospectus, Salomon Brothers Canada Inc., Merrill Lynch Canada Inc., CIBC Wood Gundy Securities Inc., Midland Walwyn Capital Inc., First Marathon Securities Limited, Gordon Capital Corporation, RBC Dominion Securities Inc. and TD Securities Inc.
The defendants included Philip’s auditors, Deloitte & Touche, and its Canadian underwriters in its 1997 prospectus, Salomon Brothers Canada Inc., Merrill Lynch Canada Inc., CIBC Wood Gundy Securities Inc., Midland Walwyn Capital Inc., First Marathon Securities Limited, Gordon Capital Corporation, RBC Dominion Securities Inc. and TD Securities Inc.
The court’s decision confirms that absent a special relationship, auditors and underwriters of publicly-traded companies owe no common law duty of care to investors. In the court’s view, Menegon failed to establish sufficient facts to support a finding of a special relationship.
J.L. McDougall, Q.C., and Michael Schafler of Fraser Milner Casgrain LLP acted for the respondent, Deloitte & Touche, and Benjamin Zarnett and Jessica Kimmel of Goodmans LLP acted for the respondents, the Canadian underwriters. John McDonald of McDonald, Ross, and Margaret McCarthy of Findlay & McCarthy acted for the appellant, Joseph Menegon.
The defendants included Philip’s auditors, Deloitte & Touche, and its Canadian underwriters in its 1997 prospectus, Salomon Brothers Canada Inc., Merrill Lynch Canada Inc., CIBC Wood Gundy Securities Inc., Midland Walwyn Capital Inc., First Marathon Securities Limited, Gordon Capital Corporation, RBC Dominion Securities Inc. and TD Securities Inc.
The defendants included Philip’s auditors, Deloitte & Touche, and its Canadian underwriters in its 1997 prospectus, Salomon Brothers Canada Inc., Merrill Lynch Canada Inc., CIBC Wood Gundy Securities Inc., Midland Walwyn Capital Inc., First Marathon Securities Limited, Gordon Capital Corporation, RBC Dominion Securities Inc. and TD Securities Inc.
The court’s decision confirms that absent a special relationship, auditors and underwriters of publicly-traded companies owe no common law duty of care to investors. In the court’s view, Menegon failed to establish sufficient facts to support a finding of a special relationship.
J.L. McDougall, Q.C., and Michael Schafler of Fraser Milner Casgrain LLP acted for the respondent, Deloitte & Touche, and Benjamin Zarnett and Jessica Kimmel of Goodmans LLP acted for the respondents, the Canadian underwriters. John McDonald of McDonald, Ross, and Margaret McCarthy of Findlay & McCarthy acted for the appellant, Joseph Menegon.
