Various Deloitte entities have succeeded in having a negligent misrepresentation claim against them dismissed on summary judgment. The issue before the Ontario Superior Court of Justice in Canadian Imperial Bank of Commerce v. Deloitte & Touche was whether Deloitte owed a duty of care to potential lenders when it prepared audited financial statements for Philip Service Corp.. The Canadian Imperial Bank of Commerce, which lead a syndicate of investors who entered into a credit agreement with Philip, had relied on the audited financial statements that Deloitte had prepared. Philip's enterprise imploded and it became insolvent following the discovery of an accounting fraud and a substantial decrease in its net earnings after it restated its audited financial statements. The lending syndicate lost US $524 million. Philip's receiver and High River Limited Partnership, which purchased some of Philip's debt, commenced actions against Deloitte for breach of contract and for the auditor's professional negligence. CIBC sued for negligent misrepresentation. Deloitte moved for summary judgment with respect to CIBC's claim (the remaining claims are scheduled to go to trial in the fall of 2017). In granting summary judgment, Perell J. found that CIBC did not have a legally tenable negligent misrepresentation claim against Deloitte, because Deloitte did not owe the lenders a duty of care. The decision is a helpful affirmation of the principle set down by the Supreme Court of Canada in Hercules Managements Ltd. v. Ernst & Young that, as a rule, accountants and auditors do not owe a duty of care to persons other than the corporation and its shareholders collectively, because of the public policy that imposing a broader duty of care would entail unacceptable indeterminate liability. Perell J. found no reason to make an exception in the present case.
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