PwC loses bid to avoid claims of the Castor creditors for more than $1 billion

Jan 27, 2014, 15:59 ET from Fishman Flanz Meland Paquin LLP

MONTREAL, Jan. 27, 2014 /CNW Telbec/ - The Quebec Court of Appeal ruled from the bench last Friday, dismissing the joint appeal of accounting firms PricewaterhouseCoopers ("PwC") and Coopers & Lybrand ("Coopers"). The decision represents an important win for the plaintiffs in their efforts to be compensated for monies lost as a result of the egregious negligence of Coopers in the services it provided to the Montreal-based company, Castor Holdings Ltd. ("Castor"). Today, with interest, these claims amount to more than $1 billion.  The decision also sends a message to the firms of PwC and Coopers and its individual partners that the Quebec courts will not assist them in their efforts to evade financial responsibility for judgments rendered, and to be rendered, against Coopers or in their continued litigation strategy which has been described by the courts as a scorched-earth war of attrition.

As announced on January 9, 2014, the Supreme Court of Canada dismissed Coopers' Application for Leave to Appeal in the "test case" on negligence (the action instituted by the late Peter Widdrington) and confirmed Coopers' liability for its professional negligence and for the resultant harm suffered by third parties who relied on its opinions when deciding to invest in or lend money to Castor.

PwC has publicly taken the position that it has no responsibility towards the Castor claimants. However, when PwC was formed in July 1998, a mere 2 months before the start of the Widdrington trial, Coopers' assets were transferred to the new entity, purportedly leaving its liabilities and contingent liabilities (including the Castor claims) behind. The plaintiff in last Friday's appeal was the Trustee in Bankruptcy for Castor, Richter Advisory Group Inc. ("Richter"), represented by the Montreal law firm of Fishman Flanz Meland Paquin LLP ("FFMP") which also represents Widdrington as well as various Canadian and foreign banks. Richter alleged that the transfer of Coopers' assets in 1998 was illegal, as it failed to comply with the applicable public order provisions of the Civil Code of Quebec governing the sale of an enterprise. PwC's and Coopers' attempts to block Quebec's jurisdiction to rule on this matter were unsuccessful before both the Superior Court and the Court of Appeal and these firms will now have to defend this substantial action before the Quebec courts.

The legal team at FFMP is gratified that the Court of Appeal sent such a clear message to PwC. FFMP's Avram Fishman describes the result as "an important victory for creditors and contingent creditors against PwC, which appropriated the goodwill and clientele of Coopers while attempting to avoid responsibility for the latter's liabilities."

SOURCE Fishman Flanz Meland Paquin LLP