New Brunswick waited too long to file lawsuit against Atcon's accountants

·3 min read
The Supreme Court of Canada ruled Thursday that the province of New Brunswick filed its lawsuit too late and can’t pursue the case against the former accountants for the Atcon group of companies. (Justin Tang/The Canadian Press - image credit)
The Supreme Court of Canada ruled Thursday that the province of New Brunswick filed its lawsuit too late and can’t pursue the case against the former accountants for the Atcon group of companies. (Justin Tang/The Canadian Press - image credit)

The New Brunswick government can't sue the former accountants for the Atcon group of companies over bookkeeping that the province blamed for bad loans and loan guarantees that cost taxpayers $50 million.

The Supreme Court of Canada ruled Thursday that the province filed its lawsuit too late and can't pursue the case.

It means New Brunswick has no hope of recouping any of the $50 million from Grant Thornton, the accounting firm whose audit the province says it relied on in agreeing to the loans and loan guarantees.

In a unanimous 7-0 ruling, Justice Michael Moldaver said the province learned in 2011, when it got a draft report from a second accounting firm, that Atcon's finances were in worse shape than Grant Thornton had said.

At that point, it had two years to file a lawsuit for damages under provincial law, the court found. But it waited more than three years to file it.

"The province had actual or constructive knowledge of the material facts — namely, that a loss occurred and that the loss was caused or contributed to by an act or omission of the auditor — when it received the draft report from the other firm on February 4, 2011," Moldaver wrote.

CBC
CBC

"Nothing more was needed to draw a plausible inference of negligence."

Moldaver said he was not making a finding on whether Grant Thornton was actually negligent. He wrote that would have been up to a trial, had New Brunswick filed the case in time.

"We are pleased with the Supreme Court of Canada's decision," said Lindsay Barnes, Grant Thornton's senior manager for Canadian media relations. "We will continue to focus on serving our clients in New Brunswick and fostering relationships with its communities."

A spokesperson for Attorney General Ted Flemming said, "the province is reviewing the decision and has no further comment at this time."

The Liberal government of Premier Shawn Graham approved the loan guarantees in 2009. The lawsuit was filed in 2014 under the Progressive Conservative government of Premier David Alward.

Auditor General Kim MacPherson later found that the Graham government ignored warnings from senior civil servants that lending money to Atcon was risky.

She also found that the company was badly managed, with millions spent on items such as a corporate jet, jewelry and a vacation property in Aruba.

In 2019 the Court of Queen's Bench ruled in favour of Grant Thornton's request that it throw out the case because the province waited too long to go to court.

CBC
CBC

But the province argued to the New Brunswick Court of Appeal that the clock only started ticking on the two-year deadline when the second auditor filed a final report in November 2012.

The appeal court agreed in 2020 and allowed the case to go forward.

Justice Ernest Drapeau wrote that "perceptions or assumptions based on suspicion, guesswork, speculation or any other means short of knowledge, actual or imputed, are insufficient to trigger the two-year limitation period."

The Supreme Court has now overruled that, saying the draft report in February 2011 was enough for the province to understand something was wrong.

"In my view, the province's knowledge about its potential claim crystallized at this point," Moldaver says. "The province had sufficient knowledge to draw a plausible inference that Grant Thornton had been negligent."

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