I am not aware of any fixed caps.

If my memory serves, when Andrew Burrows spoke at the Commercial and

Consumer Law Workshop in Toronto about five years ago, he mentioned that as

a Law Commissioner he became aware of what was effectively a global lobbying

effort by accountants to limit their liability, particularly via changes to

the regime of joint and several liability, which is effectively solidary

liability in civilian terms.

In Canada, traces of this lobbying can be found in a 1998 Report of the

Standing Senate Committee on Banking, Trade and Commerce,

http://www.parl.gc.ca/36/1/parlbus/commbus/senate/com-e/bank-e/rep-e/report0

9mar98-e.htm

This led to changes the Canada Business Corporations Act (see Part XIX.1). I

teach corporate law and I find the provisions very difficult to understand.

Basically, they disapply joint and several liability in favour of

proportionate liability ... but only in relation to losses arising from

incorrect financial information ... and because they are in the CBCA, only

if the information relates to a CBCA corporation ... and only as against

rich plaintiffs. The level of richness is in the regulations (right now, if

your stake in the corporation is worth less than $20,000, joint and several

liability applies). As under the English Consumer Credit Act 2006, we

therefore have a relatively unusual situation in which there is literally

one law for the rich and another for the rest; although richness is being

used, I think, as a proxy for level of sophistication (is that any more

principled?).

These provisions are of doubtful constitutional validity, because private

law belongs to the provinces, not the federal level. If you disapply joint

and several liability to the auditor of a corporation, is that corporate law

or private law? Only if it is corporate law (or both) are these rules valid.

In Canada, we have both federal and provincial business corporations; the

vast majority of corporations are provincial (although among really big

corporations, most are federal, and these are usually created under the

CBCA). I think the Senate Committee thought that if they put this stuff in

the CBCA, the provinces would follow; but to my knowledge, none has. I have

not, however, verified this among the 13 provincial and territorial

statutes.

Most Canadian provinces now allow professionals to practice in limited

liability partnerships. This legislation swept over North America from

Texas, I believe, for no principled reason whatsoever. I think the

accountants (and maybe the lawyers) convinced Texas legislators that there

was an "anomaly" in that they could not use the corporate form, and then

having got what they wanted, they went on to tell every other state and

provincial legislature that their jurisdiction was now at a competitive

disadvantage because it did not have shiny new LLP legislation like Texas.

(Texas might have needed it more, due to jury-measured punitive damage

awards.)

For an example of this type of argument, see this "legal environment" page

on the web site of "CA's For Change"

http://www.casforchange.ca/LE/index.aspx

which begins with a quotation from an English auditor: "Ontario CAs are

right to call for legal liability reform. The province must keep up with

liability changes amongst your major trading partners to ensure that

business transactions can continue to happen here in a secure environment,

on a level playing field for finance and accounting professionals. Indeed,

Ontario¹s competitiveness depends on it." A little further down,

"Various forms of proportionate liability have now been enacted by all of

Ontario¹s competing Great Lakes states as well as 30 other states, and is

either being implemented or is under consideration by the U.K., the E.U.,

Australia and many other of Ontario¹s leading major trading partners.

Failure to keep pace on liability reform puts Ontario at a distinct and

growing competitive disadvantage." Hmm.

There is a very good discussion of this phenomenon (ie, unprincipled reform

of private law as a response to fearmongering lobbyists) in R. Flannigan,

³The Political Path to Limited Liability in Business Trusts², (2006) 31

Advocates¹ Q. 257. He mainly addresses recent legislation limiting the

liability of the beneficiaries of business trusts, but also discusses the

developments over the last few years in relation to LLPs.

If a jurisdiction wants to keep auditors in business, should there be a

keep-the-auditors-in-business tax rather than piecemeal attempts to cut down

awards made to successful plaintiffs, ie the victims of auditors' fault?

Lionel

On 27/11/08 4:40 AM, "Andrew Burrows" <Andrew.Burrows@law.ox.ac.uk> wrote:

> Dear Marten,

> You might find of some interest the 1996 'Feasibility Investigation of

> Joint and Several Liability' by the Common Law Team of the Law

> Commission produced for the Department of Trade and Industry (ISBN

> 0115154523) which looked at various options for limiting the liability

> of auditors and other professionals. It rejected the idea of replacing

> joint and several laibility by proportionate liability but thought

> capping was worth further investigation.

> Andrew Burrows

>

> Mårten Schultz wrote:

>>

>> A proposal for new legislation on liability for auditor's in Sweden

>> has recently been presented. I am supposed to, on behalf of my

>> faculty, to comment on the proposal. The proposal notes the

>> difficulties of the big auditor firms working in Sweden to insure

>> themselves, especially after Andersen. It thereafter proposes some

>> liability limitations, the most interesting being that the auditor is

>> liable only as a last resort (if a third party has a claim she must

>> start with the company representatives) and in addition a cap on

>> damages is suggested. (Approx. 11 million Euro.)

>>

>> I tend to dislike caps intuitively, but I guess there are some sound

>> arguments for it. I would be very grateful for any comment on how caps

>> in general are motivated in other countries and especially if some of

>> you have experiences of caps on damages for auditors in particular.

>>

>