Nearly six years after 1,600 investors were bilked, left holding an estimated $130-million of worthless promissory notes when Montreal financial group Mount Real Corp. was shut down by the Quebec securities regulator, a Quebec judge authorized a class action against two former executives, two financial service companies and three accounting firms.
In a ruling that appears to have lowered the bar for class action certification against accounting firms, Quebec Superior Court Justice Jean-François Buffoni held that the representative plaintiff demonstrated that the allegations she is trying to establish between the fault allegedly committed by the accounting firms and the harm suffered by the class does not “appear to be frivolous nor manifestly unfounded” and stands a reasonable chance of succeeding, even though the representative plaintiff admitted that she did not rely on the audited financial statements to make an investment decision.
“This ruling represents an important precedent regarding the civil responsibility of accounting firms,” noted Bruce Johnston, a Montreal lawyer for one of the three law firms representing the investors. “I hope it sends a message to auditors. It’s very important that auditors do their work properly and be held accountable if they fail to do so.”