Strathy J has declined to dismiss a claim against Weir Foulds LLP (WF) for the alleged misrepresentations made by Aspen Group, a firm client. Egan, a partner of WF, acted for the company in preparing a take-over bid circular and also served as one of its directors: Allen v Aspen Group Resources Corp, 2012 ONSC 3498.
The judge took the view that it was arguable that a lawyer acting as counsel and who also sits on the client’s board ‘may well be acting in the ordinary course of the law firm’s business when he or she takes a seat at the boardroom table.’ If so, then the firm would be liable for the acts or omissions of its partner. The evidence supported such a conclusion in this case. It was foreseeable that shareholders would suffer damage if the circular contained misrepresentations and that a duty of care on the part of both the lawyer and WF could arise. There might be policy reasons to negative such a duty, but a summary judgment motion was not the place to decide them. Justice Strathy also didn’t buy the argument that vicarious liability of a firm for its partner under the law of partnerships could not extend to a statutory cause of action for misrepresentation under s 131 of the Securities Act; there was nothing in the Act to exclude the possibility of vicarious liability, but again this was an issue best left for trial on a full record.
Time to rethink those directorships?
[Link available here].