GAP Mining Supply Inc v, 2016 ABQB 698

Court of Queen’s Bench of Alberta Citation: GAP Mining Supply Inc v 0865970 BC Ltd, 2016 ABQB 698 Date: 20161209 Docket: 1203 16086 Registry: Edmonton Between: GAP Mining Supply Inc, Peter Rossburger and Gisela Rossburger Plaintiffs - and - 0865970 BC Ltd., 911270 Alberta Ltd formerly known as Wayne D. Herbert Professional Corporation, 911263 Alberta Ltd formerly known as Rodney P.

Briere Professional Corporation, Herbert Briere LLP, Wayne D Herbert, Rodney P Briere, John Doe, ABC Corporation and XYZ Corporation Defendants _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice D.A. Sulyma _______________________________________________________ I. Introduction [ 1 ] Peter and Gisela Rossburger became clients of the Defendants Rodney Briere and Wayne Herbert and the partnership Herbert Briere LLP in 2002. In October of 2009 they sold GAP Mining Supply Inc (“GAP”) for a purchase price of $500,000.

The sum of $300,000 was due to the Rossburgers in November of 2009. On October 21, 2009 they met with Mr Herbert and from then on became involved in an investment recommended to them by the accounting firm. [ 2 ] This led to the present action founded in alleged breach of their contractual, fiduciary and other legal duties to the

Rossburgers. The claim for damages is based on what the Rossburgers could have made investing as compared to the failed investment. II. Evidence A. Plaintiff Evidence 1. Peter Rossburger [ 3 ] This Plaintiff confirmed his own background and that of the corporate entity GAP. He was introduced to Herbert Briere and the two partners by Spencer Melnyk, an advisor at RBC Dominion Securities. Mr Melnyk looked after the couple’s investments.

On his recommendation, the couple moved all GAP accounting services to the two partners’ firm. [ 4 ] The accountant, Mr Herbert, had been “working out” prices for the sale of GAP which was put into place in the fall of 2009. The first installment of the purchase price was due in November, 2009.

According to this witness, it was first put into the GAP bank account and at the same time there was a “very nonchalant suggestion from Mr Herbert that he had access to a good investment which was short term and would garner high interest”. [ 5 ] He and his wife were in Mr Herbert’s office and were told that the investment would be 1) short term and 2) at 18 % interest. They were told it was related to a senior’s housing project in Nanaimo. When asked whether he was told when the project was due to be completed, he answered “not to my knowledge”.

Security would be obtained by Mr Herbert and cash flow was not discussed. [ 6 ] Regarding the meeting, which resulted in the first investment, he stated “I saw some sketches”. He was later provided a copy of the Venture

article which praised Mr Prue, the main party in the investment. This was by e-mail. He was asked whether there was any discussion at the time about purchasing individual units or an individual unit in this project and he replied “no”. [ 7 ] Surprisingly during this same discussion, he had told Mr Herbert that every real-estate investment he had participated in had gone sour. He reported having three real-estate investments end in this manner. When asked how Mr Herbert responded, his reply was “I don’t think he touched on it at all”. His impression was that he would see 18% on his investment.

After that, he was asking for documentation and Mr Herbert kept stating he could not get a hold of Mr Prue. Similarly with respect to security, he was promised that Mr Herbert would get it for him. When asked what that security would be, his answer was “I can’t remember, a guarantee of the repayment of the investment of $500,000 plus $18% to be achieved at the end of 2011”. [ 8 ] He recalled mention of another investor related to a Stony Plain project, another Prue project. [ 9 ] He was asked whether Mr Herbert told him that he and Mr Briere were involved in the project and his answer was no.

There was a discussion of a Promissory Note. There was no suggestion he get independent investment or legal advice. [ 10 ] He did computer check the investment. He never had personal contact with Mr Prue. His discussions were with Mr Herbert. A series of documents regarding the project were provided and then he invested $300,000, payable to the Victoria lawyers. That led to the summer of 2010 when he invested a further $200,000. His evidence is that came about as a result of a discussion with Mr Herbert, after golf at the Mayfair Golf and Country Club.

At that time Mr Herbert guided him through the additional investment “the same way”. As a result, he provided a cheque payable to the BC company yet, at the time, had no idea who that company was or its significance to the investment. When asked what information he had by that time, he responded “it was very vague and unstable and I began to suspect things”. This was followed up with a question of why he then provided the additional $200,000 investment. His answer was that he trusted Wayne. [ 11 ] Then there was a further subsequent social meeting at the Plaintiffs home where this investment was not discussed.

Mr. Rossburger then became concerned that he had not received the Promissory Note. That led to a flurry of e-mails from Mr Rossburger in November 2010 while he was in Phoenix and he finally received the Note executed by Prue on behalf of the BC company. [ 12 ] Later, in the new year, 2011, he was concerned about lack of progress and lack of information and Mr Herbert told him that there was some difficulty in getting funds for construction.

During the same period, some financial statements were prepared for GAP indicating these investments as long term and there was a discussion about a change in the Herbert Briere partnership in late 2010 and early 2011. [ 13 ] As 2011 progressed, documents now show the investment was failing. Indeed by May of 2011, other investors were meeting to save the project and Mr Prue had declared bankruptcy. Mr Rossburger had not been informed of any of these facts. By May 2011, he had not been told by Mr Herbert that the Comox project was in difficulties.

Although he could not recall receiving an October 19, 2011 e- mail, by then he was aware of the difficulties with the project and with Mr Prue. He tried to get in touch with Mr Prue as he could not get satisfactory answers from Mr Herbert. When advised of the state of the investment, he was totally shocked and when he told Mr Herbert of his communications with Mr Prue, who did not take any responsibility for his investment, he felt Herbert too was shocked. [ 14 ] Mr Herbert never offered him shares in the BC company. He was never offered more than the Promissory Note as security.

His investment by 2011 totalled $542,707. He has never received anything as payment on the Promissory Note and had not been copied of e-mails that were earlier directed at saving the funds of other investors such as Mr Doll. [ 15 ] In cross-examination, he confirmed that at the first discussion of this with Mr Herbert in October of 2009, the GAP sale proceeds had not been received. This did not occur until November 18, 2009. He confirmed that he had consulted Spencer Melnyk about this investment and had received advice from him. He confirmed his experience with three failed real estate investments.

He was asked whether as a result he realized the investment was speculative. He responded that yes he did, but it had been presented by a good friend, his accountant Wayne. In questioning, he had been asked the same question that the investment had been speculative and that he realized

he could lose on such an investment and his answer had been “that’s correct”. In reply to several questions that related to risk and return, he acknowledged that he understood the connection between the two but stated “I appreciate that but this was presented to me by my good friend and a professional man”. [ 16 ] Prior to investing, he had not made any inquiries of his own regarding Mr Prue. The role of Mr Swift, a Victoria lawyer, had been explained to him and he had been advised that his initial investment money would be held in a trust account. He had been told to make the cheque payable to that law firm.

There were a series of questions put to him regarding how the GAP account had been closed but this investment was in the GAP name and that the GAP balance sheet showed this investment payable by 2011. He was asked whether he was aware that the accountants were merely raising funds for the developer and he responded he was not.

However, he did know that the investment was directed to a land purchase as early as July of 2009. [ 17 ] During cross examination he was directed to the copy of the cancelled cheque for $200,000, which was made payable to the BC company and that the memo on the cheque read “SkyRider Development”. He was asked to confirm that he knew that Mr Herbert and his partner were not actually doing this development as he also knew that Mr Herbert remained a full time accountant. He responded “I don’t know”. At questioning, he had responded “yes”.

He confirmed that even as early as July 2009, he knew that the project itself involved raw land. He confirmed the Promissory Note was consistent with his knowledge of the investment. He was referred to a series of emails where Mr Prue was informing him that his investment was not with him but rather was with the accounting partnership. He conceded that this correspondence did not make sense, as he felt his investment was with Herbert, because Mr Herbert represented the opportunity. Also, that as at time of trial, he had no information of the truth of statements within the e-mail.

He confirmed that the October 19, 2011 e-mail from Mr Herbert was consistent with advice he had been given by Mr Herbert. The cross-examination was concluded on the basis that he had thought he had been investing with Mr Herbert and “he lied, he didn’t tell me the project was not going well”. [ 18 ] In redirect, he stated that Spencer Melnyk was unable to give him advice on this project for ethical reasons. He had never been made aware of the Directors of the BC company nor had he been provided financial statements for that company. 2.

Gisela Rossburger [ 19 ] Mrs Rossburger testified about the October 2009 meeting with Mr Herbert. She was of the view that they discussed investments, one of $300,000 and another $200,000. When asked if Mr Herbert had advised the couple that he was or wasn’t involved in the project, she stated that she could not remember. She did state that they wanted to invest in property. 3. Witness Spencer Melnyk [ 20 ] Mr Melnyk is a portfolio manager at RCB Investments. He described the Rossburgers as relying on him and being interested in medium risk capital projects and “being passive”.

He had not been advised of their intention to invest in this project until after the fact. He confirmed in cross-examination that the investments of all his Alberta clients had been depressed subsequent to the 2008 recession. 4. Witness Gordon Keiller [ 21 ] This witness was qualified as an expert in the area of accounting and the rules that apply to that profession, including rules that apply to conflicts and investment advice. He confirmed that where a client seeks to invest in an investment of another client, that that is an issue of professional conflict.

Then the member either should recuse himself or apply conflict management techniques. The first technique is to advise the client of the conflict and then obtain consent from the client to go ahead. [ 22 ] Written consent is preferable. If consent is oral, the member has to demonstrate he met a reasonableness standard. At the least, such oral consent requires a note to be made in a file. He gave further evidence relating to the meaning of a standard “Notice to Reader” clause which appears in audit documents used by members of the profession. 5.

Witness Brian Rooke [ 23 ] He is an accountant who Mr Melnyk referred the Rossburgers to in 2012. He described the Rossburgers bringing the failed $500,000 investment details to him. He described the couple as “a little unsophisticated, they literally came in with a box of documents”. He noted that Mr Herbert’s financials had described this investment as “a long term investment”. In cross, he declined to describe these clients as naive, immature or childlike. 6. Witness Derek Prue [ 24 ] Mr Prue is presently pursuing a PHD after having received an MBA from Athabasca University in 2003.

He testified he had been in the land development business for 15 years. He also described that his endeavours came to an end by bankruptcy. He described some former adventures in land development. He described that the accountants here, Mr Herbert and Mr Briere were to raise seed money for the Comox project. They were not to be receiving cash in return but would instead receive profits through shares in the company. The relationship between him and the Accounting firm evolved out of a personal relationship with Mr Briere. He knew that they were obtaining investment funds from their clients.

He had an agreement with them to raise funds and how they raised funds was, according to him, up to them. [ 25 ] He outlined the in-house dealings that involved the BC company and a firm named SkyRider and with Herbert and Briere’s shareholdings in the BC company. As the project went on, there were problems paying bills. During this same period the two defendants wanted to be more involved in the project.

[ 26 ] There had been an offer to investors, in another Prue project, to roll over investments into this project. That offer would have been made by Herbert on behalf of Prue. He could not recall the outcome of that offer. He confirmed these two Defendants received no fees for commission. He confirmed that the Promissory Note had been provided to GAP for comfort. He could not remember where the 18% return referred to in the Note originated. He believed there were other Promissory Notes brought to him by the Defendants.

He was questioned regarding an investor, Mr Tom Doll, who may have been given an interest in the BC company. His words. [ 27 ] There was no cross-examination of this witness. B. Defendants’ Evidence 1. Witness Wayne Herbert [ 28 ] Mr Herbert is what was then called a Chartered Accountant who practiced in a partnership with Mr Briere from 2001 to 2010. He met the Plaintiffs in late 2005 and prepared their financial documents and tax returns, that is their personal taxes and that of three companies.

All of these documents were prepared on a “Notice to Reader” basis. [ 29 ] By the time he met them, their company had already been transferred to their son. They were wealthy, successful and sophisticated people. They had discussed their unsuccessful real estate investments with him at a time prior to 2009. [ 30 ] At the same time, Mr Briere had a client Mr Prue who was an up and coming real estate developer. He offered a business opportunity to the two partners, Herbert and Briere.

Their job was to find investors looking for a healthy return. [ 31 ] The development was still at a raw land stage although it was anticipated it would eventually be developed into residential condominiums. Mr Herbert himself never dealt with Mr Prue. [ 32 ] Mr Herbert’s first discussion about this investment with the two Plaintiffs occurred in mid-August of 2009. By that time, he had spoken to Briere and they had reached a deal that they would be partners on an equity basis with Mr Prue and further, in exchange would look for investors.

At the same time, Mr Rossburger told him he was not happy with his own return on investments, Mr Herbert thought that he would be a perfect fit for this investment. He had at the beginning of the venture estimated a roughly 15% to 18% return could be achieved for any investor. [ 33 ] The Rossburgers did not decide to invest in this project immediately. Rather they got back to him with respect to the investment and the amount to be invested approximately two weeks later. They had decided to invest $300,000 through the corporate entity GAP. [ 34 ] Mr Herbert did not suggest any amount of investment.

But, he did know that there were sale proceeds forthcoming from the prior sale of GAP. [ 35 ] Later, in July 2010, he and Mr Rossburger were at the Mayfair Golf Club. Mr Rossburger asked how the investment was going and Mr Herbert responded that the presales were going strong but the project had to deal with some payables. Mr Rossburger asked how much do you need and Mr Herbert suggested $200,000 and then Rossburger suggested he would put up that sum. He was asked whether on that date, Mr Rossburger was aware they were discussing an “equity interest” and he answered absolutely.

He confirmed that he had never told Mr Rossburger that the investment was guaranteed or that the return was guaranteed or that it “couldn’t fail”. Importantly, he testified that both Plaintiffs were aware of Herbert and Briere’s equity interest in the project, right from day one in October 2009. [ 36 ] He testified that after the July investment, the Rossburgers called him for updates on the investment. By the time of February or March of 2011, Mr Rossburger was calling Mr Herbert every second or third day.

Mr Herbert would give any information to Mr Rossburger that he had at the time and they remained friends during this period. [ 37 ] He was questioned on his handling of the Rossburgers texts that had been sent over the years. He was also questioned on the

article about Mr Prue that he had provided to Mr Rossburger . He was questioned about a contract which dealt with the new company’s land purchase. He stated their basic arrangement with Mr Prue was that he and his partner would receive 25% each as shareholders and that they were to approach clients to invest. He stated his own enthusiasm for the project continued steadily despite delays in construction time lines. [ 38 ] He described the process of obtaining the additional $200,000 from Mr Rossburger in July of 2010. They had discussed payables and financing and Mr Rossburger offered to invest another $200,000.

He was not concerned then with the progress or lack of progress of the project. Then, in the fall of 2010, Mr Rossburger was demanding the Promissory Note. The Note was eventually provided to Mr Rossburger who was in Arizona at the time. He stated the Note reflected the relationship between GAP and the BC company. That is, that the BC company acknowledged the debt to GAP. [ 39 ] He outlined concerns that arose in early 2011 about outstanding payables and financing.

When asked if he had significant concerns about the project at that time, he responded that these were normal payables and he and others were focused on obtaining construction financing. At the time, Mr Prue was in charge of that. He was pointed to information that indicated that in that time frame, monies were not being directed to the land purchase but were instead being directed to companies controlled by Mr Prue.

This information he described as being “in hindsight”. [ 40 ] During the same time, he states that Tom Doll was brought in to bolster the net worth of the group and that he participated as an equity investor. By May 13, 2011, Mr Herbert was aware that there were difficulties with the construction financing. This information came from the broker Mr Snyder. He acknowledged that by this point it was looking like Mr Prue could be the problem. Then he and his partner participated in meetings with other investors in the absence of Mr Prue. At the same time, by May 20, 2011 the presales were still

in place and the investors were still pursuing construction financing. By May 24, 2011 they had been unable to get Mr Prue to provide necessary financial statements and they also knew the trade creditors were unhappy. However, according to Mr Herbert “construction financing would have solved all our problems”. [ 41 ] At the same period of time, Mr Snyder, the broker who was charged with obtaining financing “bailed out”. He described what, in hindsight, was a rather frantic attempt to obtain financing.

During the same period of time, he was learning about Mr Prue’s past from Mr Doll, that Mr Prue and his companies had been sued many, many times. [ 42 ] On June 23, 2011, First National made an offer to finance the project. Although this had been what they were waiting for, the site manager by that time had returned all of the deposits to the purchasers of presold units. So, by July 11, the project was in serious jeopardy. [ 43 ] By October 17, 2011, Mr Rossburger started looking closely into his investment. Mr Herbert and his partner were trying to get information from Mr Prue, who was dodging them.

During that time frame, Mr Rossburger had received an e-mail from Mr Prue which stated that Mr Rossburger was not an investor in the actual property deal but rather had an agreement with the accounting firm. This resulted in his aggressively asking Mr Herbert what was going on. [ 44 ] He did prepare the financials for GAP on March 12, 2012, reflecting a year-end of October 2011. He went to the Rossburgers home to get their source papers. There was no discussion then that his services would be terminated.

His next contact was a courtesy letter from another accounting firm on November 9, 2012 advising they had been retained to take over the accounting functions. [ 45 ] He and his partner lost their own money in this investment. They did not make any profit on the investment and were never paid fees or commission fees for their efforts. [ 46 ] The Plaintiffs did not lodge a complaint with the Accountants’ regulating body. [ 47 ] On cross-examination he was questioned on time sheets to substantiate his billings. He confirmed his files contained no notes of meetings with the Plaintiffs or phone calls.

He utilized e-mails to correspond with them and had to refer to produced documents to refresh his memory. He was certain that the meeting with the Rossburgers occurred in the middle of October 2009 although in examination for discovery, he had indicated that they met prior to that date. He was questioned about his business dealings with Mr Prue and projects that involved Mr Prue that preceded this deal. He was pointed to the fact that he and his partner had been involved in previous projects that involved clients advancing monies for a 15% return. He could not recall these events.

He could not recall any other investment opportunities offered to the Plaintiffs. [ 48 ] He was examined on the January 2011dissolution of the Herbert Briere partnership. He stated that was connected to addiction problems of Mr Briere. He was questioned on the theory that he had manipulated the financial statements of Herbert Briere to a year end of October. [ 49 ] He confirmed that by June 8, 2010 he and his partner were demanding Mr Prue release shares reflecting their equity positions generally. He had envisioned a joint venture. He confirmed the list of clients he and his partner had persuaded to invest.

He confirmed that the conversations he had with the Rossburgers contemplated an 18% return. He stated he had obtained that information from Mr Briere who in turn had it from Mr Prue. [ 50 ] He did not think he ever discussed mortgages as security with the Rossburgers. He knew at the time of discussing this investment that Mr Rossburger had been unhappy with his returns on other investments and his then portfolio. Despite the ongoing recession at that time, Mr.

Herbert was of the view that the BC opportunity looked to be promising given the upcoming Vancouver Olympics. [ 51 ] He did not provide written material to the Rossburgers during the initial meeting. He thought he was aware of their past experiences in real estate, but did not know when they discussed that. He did not introduce the Plaintiffs to Mr Prue so they could negotiate their own arrangement with him. He did not refer them to their or any investor advisor. When asked whether he told them that he was not giving independent advice, he replied “I don’t believe I lost that capacity at all”.

He acknowledged that he was bound by ethical rules to tell the Rossburgers that he had an equity interest in the project and he replied that he did tell them. He stated he made it clear that he had an equity interest. He could not say if he advised them of his exact stake. He replied that what was important is that he told them he and his partner had an interest in the project on an equity basis. [ 52 ] He acknowledged that there was no written confirmation of these discussions and he did not provide Mr Rossburger the Promissory Note until one year later.

Before that time he had not pursued Prue for a Promissory Note. In the same vein, he could not recall what details he had about the project from Mr Prue or otherwise prior to his discussion with the Rossburgers. He never gave the Rossburgers the contract of land purchase. As of September 30, 2010 the Rossburgers (GAP) were the largest investor in the project. Mr Doll also invested a great deal of money in early 2011, when he got involved as a shareholder in the project. [ 53 ] Documents show that $100,000 of the initial Rossburger investment was directed to the land purchase.

Mr Herbert believed that he did not have to clarify that with the Plaintiffs as they had provided him with the whole $300,000 for the overall investment. [ 54 ] He was led through a series of documents detailing the troubles this project faced and the problems that he and his partner had in getting information from Mr Prue. In each case of individual pieces of information, he was repeatedly asked whether he shared that information with the Rossburgers and he repeatedly stated that he “doesn’t share my receivables with my clients”. He generally stated that Mr Rossburger was aware of an issue with payables.

He confirmed that as of April 10, 2010, when a ground breaking was anticipated that the group had not yet obtained construction financing. He confirmed other indications of Mr Prue being in difficulties financially. [ 55 ] He confirmed that in February 2010, he and his partner were encouraging Comox investors to roll over their money into this project. He was asked to acknowledge that at the time he obtained the additional $200,000 from Mr Rossburger that there was no project

of Mr Prue’s that was doing well. He responded “other projects didn’t need construction financing”. [ 56 ] He confirmed that although the Rossburgers were the largest investors in the project, that he had not discussed with them alternative manners of investing such as the provision of shareholdings, or a mortgage or indeed any type of security other than the Promissory Note. He stated that this was not done as “the deal was a loan”. [ 57 ] He was led into a discussion of how invested monies were to be paid or not paid to Mr Prue as management fees.

By September 2010, Mr Prue was advising Mr Herbert that he had no money. At the same time Mr Herbert was aware of delay costs and at the same time sales were slowing. [ 58 ] He was questioned on the process of the other large investor, Mr Doll, becoming involved in bail out discussions. He confirmed that by January 2011, there were at least three brokers involved in obtaining construction financing, all unsuccessful.

Many accounts were payable but he then trusted Mr Prue as the man in charge. [ 59 ] He was asked about an April 2011 meeting with the Plaintiffs face-to-face where he did not advise them of the problems with financing, or of money apparently being diverted to Mr Prue and other Prue failures he was aware of by that date. He acknowledged that the trouble with construction financing lay with Mr Prue.

Although he continued to speak with the Rossburgers, he acknowledged he had not advised them of efforts by investors including Mr Doll, without the Rossburgers, to save the project and how those efforts did not play out. These events included the failure to obtain mortgage financing, the large number of unpaid bills, litigation in BC and the resignation of the construction manager of the project. This information was not shared with the Rossburgers.

He also did not advise the Rossburgers at the end of June 2011 that all of the presales had been cancelled. [ 60 ] Despite his knowledge of these failures, he did not personally move to get all investors together to save the project. His global answer to not passing on information to the Rossburgers was “he just gave us a loan”. He acknowledged that by a certain date Mr Doll was no longer taking his calls and eventually he heard that Mr Doll bought the property in a foreclosure action. He stated “we took steps to seek control of the project, apparently Mr Doll chose to go on his own way”. 2.

Witness Rod Briere [ 61 ] Mr Briere has held a certified accountant certification since May of 1998. He was in a partnership until January of 2000 when he and Mr Herbert resigned former positions to form a partnership. [ 62 ] He testified he had a number of personal problems in 2010 and had not sought help. This was nothing to do with the Nanaimo project or the Prue group of companies. [ 63 ] In March of 2011 he declared bankruptcy. The creditors that were listed did not include the Rossburgers personally. Rather, he had listed GAP as a creditor.

He was discharged some years later. [ 64 ] Around September of 2009, his client Mr Prue stated he had an opportunity to purchase land and construct multi-family dwellings in BC. He got the details of that investment project from Mr Prue and passed them on to Mr Herbert. Mr Prue had asked him if they could bring in investors and Mr Briere stated he wanted to be in on that investment. He described earlier projects where he had approached clients for money being for Stony Plain and Comox projects (all Prue Projects).

Although Herbert Briere was to get a portion of profits at the end of this project, that never occurred. [ 65 ] He described this investment. He was pleased with the numbers of previous investments that later became part of a Skyrider “executive

summary” and with the market value of the land in BC. He was of the view that the keys to the project were to ensure numerous pre-sales and obtain cash for construction. [ 66 ] The agreement he had with Prue was that he and his partner were to source loans to the BC company up to $2,000,000 needed and in return they would be receiving 25% each of the shares of the BC company. Generally the plan was for all of the investors in the project to obtain a charge on the land after construction financing was in place. [ 67 ] He too described the timeline which went into the spring and early summer of 2011.

He knew that there were outstanding payables but there was no real concern on his part as construction was ongoing as of September 2010 and in his words “I could see boots on the ground”. He stated that his lack of concern continued through May 2011. In June 2011, he was not yet aware of Mr Prue’s litigation issues. [ 68 ] He confirmed Mr Doll’s arrangement that he would receive 25% of the shareholding from 50% held by Mr Prue. He stated that financing was obtained June 23, 2011 but by that time the pre-sales had evaporated.

At that time he stated that the two partners were doing their best to protect investors from creditors and he knew that Mr Doll was the only person capable of investing further. [ 69 ] In cross-examination he confirmed he did not provide written material to his clients on the investments. The idea of the partners’ involvement being through a management corporation was Mr Prue’s idea. His recollection of the investment opportunity he offered was that his clients would receive 13% payable quarterly. He did not keep notes of any meetings regarding this project. He met with Mr Prue on an “as needed” basis.

The only written confirmation of a contract between the accountants and Mr Prue was an unsigned draft agreement. [ 70 ] He confirmed that by the end of January 2010, that there were issues with payables and that at the same time, no construction financing had been secured on this or the Stony Plain project. He and his partner wanted more control of the project but it did not happen. At that time the two accountants were paying the interest owed to investors themselves. He “feels foolish in hindsight” with his lack of knowledge and financial control by April 2010.

He confirmed that it was Mr Doll who provided $300,000 to cover the first draw against construction. He stated the shareholder loans were supposed to be bridge loans on a short term basis.

III. Positions of the Parties A. Position of the Plaintiffs [71] The Plaintiffs submit the facts here raise issues of false information, willful and wrongful acts, breached professional rules ofconduct and breached fiduciary duties. On the last point, counsel acknowledged that not all relationships are fiduciary.

Counsel for thePlaintiffs, Mr Cotter, relies on Hodgkinson v Simms, (SCC), 1994 Carswell BC 438, which describes the conceptualapproach to fiduciary duties as a three step analysis at para 30: (1) scope for the exercise of some discretion or power; (2) that power or discretion can be exercised unilaterally so as to affect thebeneficiary's legal or practical interests; and, (3) a peculiar vulnerability to the exercise of that discretion or power. [72] The Court there set the evidentiary factors to be considered in making a determination of a fiduciary relationship.

Thesefactors apply to determining whether an ad hoc fiduciary relationship has been formed. There must be evidence of a mutualunderstanding that one party has relinquished his own self-interest and agreed to act solely on behalf of the other party. In advisoryrelationships where, because of the presence of elements such as trust, confidentiality and the complexity and importance of the subjectmatter, he submits it may be reasonable for the advisee to expect that the advisor is in fact exercising his or her special skill in that otherparty’s best interests. This unless the contrary is disclosed.

This is described in Hodgkinson v Simms at para 32: As I noted in LAC Minerals, however, the three-step analysis proposed by Wilson J. encounters difficulties in identifying relationshipsdescribed by a slightly different use of the term "fiduciary", viz., situations in which fiduciary obligations, though not innate to a givenrelationship, arise as a matter of fact out of the specific circumstances of that particular relationship; see at p. 648.

In these cases, thequestion to ask is whether, given all the surrounding circumstances, one party could reasonably have expected that the other party wouldact in the former's best interests with respect to the subject matter at issue. Discretion, influence, vulnerability and trust were mentionedas non-exhaustive examples of evidential factors to be considered in making this determination. [73] He submits that in this case the Rossburgers were unsophisticated and used to relying on professionals in conducting theiraffairs and therefore vulnerable.

In this case, Mr Herbert was aware of the Plaintiffs’ vulnerability, and of the trust like nature of theadvisory relationship between him and the Rossburgers. Mr Cotter poses the question as: Does this simple action of providingaccounting advice create a fiduciary relationship and states that the answer is yes. He asks that the Court look to the evidence that MrHerbert was aware of sale proceeds becoming immediately available and that he spoke highly of Mr Prue.

All these factors must beconsidered along with the fact of the particular vulnerability of these Plaintiffs. [74] Indeed, he submits that an analysis of factors that point to the relationship versus those that do not, that all of the factorsadduced at trial establish the relationship here as being an ad hoc fiduciary relationship beyond that of giving accounting advice. [75] He submits that each Defendant had an obligation to disclose their financial interest in the project and to get anacknowledgment of that disclosure in writing.

Further, that in this case, each accountant ought to have urged the Plaintiffs to getindependent business advice about the investment being proposed. Mr Cotter submits that in this respect, the facts and conclusion inFedirchuk v Levitz, (1998), OJ No 831are on point. Also, that the facts here are similar to the facts and conclusions in Goldberg vPollock, 2006 NBCA 116. [76] Mr Cotter also submits that as occurred in Goldberg there was more than one opportunity granted to the Rossburgers toinvest.

Thus, by July 2010, Mr Herbert was aware of bounced cheques of the BC company and that the company was clearly in trouble.At this juncture he and his partner again should have insisted that the Rossburgers get independent advice. There were a number ofoccasions when they ought to have provided details of the investment and the course of the project and did not. This occurred during thesame period of time that the two partners recognized a need for them to be more involved in the project. [77] During the same time they stated that they relied on Mr Prue for such information. But it was not forthcoming.

Mr Cottersubmits that by this time the terrible conflict facing the accountants was clear. Yet they continued to represent Mr Prue as reliable whenthey knew he was not. Indeed, Mr Rossburger was never told of the foreclosure until after July 2011 and was never told of the problemswith Mr Prue’s invoices which showed his suspicious payments for work done apparently by his father. [78] Further, in the same sequence, the Defendants did not provide the Rossburgers with a Promissory Note until November 2010.Indeed, Mr Herbert testified he did not know who had prepared that Note.

Mr Cotter points to this as a credibility issue as he submits it isclear from the evidence that the Promissory Note was prepared at Mr Herbert’s accounting firm. [79] This lack of disclosure and particularly of the recent and continuing knowledge in May 2011 of the number of law suits thathad been launched against Mr Prue in the past constitute a clear failure to disclose. Similarly, during the same period, Mr Herbert failedto advise the Rossburgers that he and his partner were meeting with other investors who had discussed other arrangements to save theproject and obtain proper security.

They never offered the Rossburgers an opportunity to take shares as security. Importantly, in June of2011, the independent brokers were indicating they were unable to obtain financing. This information was not disclosed to theRossburgers until late in 2011. [80] He contrasts this behaviour to the offer of security to other investors such as Mr Doll. During the same period of time thepartners were aware of significant problems, yet they were overstating the success of the project and clearly not disclosing, rather wereunderstating, the very real financial problems.

Mr Cotter submits the evidence shows the lack of frank disclosure of all facts to thePlaintiffs which continued to late 2011. Mr Cotter also points out discrepancies between the evidence of Mr Herbert to that of Mr Briereon issues of what had been offered to other investors such as a rollover from another investment or a second charge as against property orshares. [81] Mr Cotter points out there is further uncertainty about the attempts of the Plaintiffs to call in the Promissory Note. Mr Prue

denied in evidence here that he had anything to do with the Note. He was vague on all questions.

None of these individuals were clear onthe terms of the investment opportunity, however what is clear is that the two accountants were in breach of their duty to their clients.This all emanates from Mr Herbert’s initial and continuing failure to advise the Rossburgers that in the course of this investment he had astake and was not just acting as their accountant. [82] Mr Cotter then points to the professional rules governing the accounting profession which confirm that accountants cannotborrow from clients and if they do they have a duty to provide full disclosure, in this case, of an interest in an investment project.

Here,Mr Cotter submits there were many positive and negative representations made. He submits that the same facts which give rise to theclaims against the Defendants found the action in negligence. [83] Mr Cotter summarized the various positions his client had on liability issues including issues of damages and vicariousliability which he submits survive the bankruptcies of either of the two accountants. B. Position of the Defendants [84] Mr Jaycock, on behalf of the accountants, submits that claims against Mr Briere’s Professional Corporation and numberedcompanies must be dismissed.

Further that individual claims against Mr Briere must be dismissed. He notes that by the terms of theBankruptcy and Insolvency Act, the only debts and liabilities that survive bankruptcy are those arising out of fraud. In this case, there areno allegations of fraud pled against Mr Briere and no evidence of his fraud. He cannot be vicariously liable for the fraud of Mr Herbert. [85] He submits that any possible professional negligence here on Mr Herbert’s part must be limited to his accounting duties.Regular duties of engagements do not apply to investment advice with respect to real property or otherwise.

So, although the accountingrelationship between the parties informs professional duties, it does not inform other duties owed. Here no special engagement or adviceregarding this or any other investment has been proven. [86] He submits that with respect to a duty to provide information such as for an internet search that these Plaintiffs did see theirinvestment advisor Mr Melnyk. That is an indication that they were not relying solely on Mr Herbert for advice. [87] In this case, the Plaintiffs have conceded that the relationship between Mr Herbert and the Plaintiffs was not a per se fiduciaryrelationship.

Then, Mr Jaycock submits that the relationship that was in place does not meet the criteria required at law for an ad hocfiduciary relationship. [88] He cites Financial Management Inc v Planidin, 2006 ABCA 44, at para 18 as follows: FMI submits that the appellant owed it fiduciary duties because Wyne reposed trust and confidence in the appellant, evidenced by thefact that the parties entered into an oral agreement. However, this is not sufficient to impose fiduciary obligations on the appellant.

Afiduciary relationship does not arise simply because one of the parties to a commercial transaction has wrongly assessed thetrustworthiness of the other and reposed confidence in that other party.

FMI was a corporate entity, and there is no evidence to show thatits principal was an unsophisticated businessman; there is no peculiar vulnerability on the part of FMI, nor are there any otherexceptional circumstances that would justify the imposition of fiduciary obligations. [89] He submits the authorities thus establish that having confidence in any party is not enough to found a fiduciary relationship.The factors of confidence or reliance by themselves cannot found a fiduciary duty. [90] He submits that it is fundamental to an ad hoc fiduciary relationship that there be an undertaking either expressed or impliedthat the fiduciary will act in the best interests of the other party: Galambos v Perez, 2009 SCC 48 , 2009, SCJ 48, 2009; Albertav Elder Advocates of Alberta Society, 2011 SCC 24 , 2011 SCJ 24; PIPSC v Canada (Attorney Genera), 2012 SCC 71.

Furtherthat the parties asserting the duty must be able to point to a forsaking by the alleged fiduciary of the interests of all others in favour ofthose of the beneficiaries in relation to the specific legal interest at stake. Here he submits Mr Herbert did not agree to forsake hisinterests or that of other lenders in favour of the Plaintiffs with respect to the loan or at all. Indeed, Mr Herbert’s evidence is that heexpressly told Mr Rossburger of his equity interest in the project. There is clear evidence that there were other investors in this projectand the Rossburgers were aware of this information.

Thus on this evidence, there can be no conclusion that Mr Herbert made such anagreement or undertaking and that is fatal to the Plaintiffs claim of a fiduciary relationship or duty. [91] He submits that in addition the test requires a fiduciary have a discretionary power to affect the other parties’ legal or practicalinterests. The absence of a discretionary power negates the existence of an ad hoc fiduciary duty. Mr Jaycock submits that in thisrelationship, there was no such discretionary power. Rather, Mr Rossburger paid the initial $300,000 as he had decided to invest in thisproject.

These facts can be distinguished from cases such as Simms where factually there was advice on issues requiring special skills.Simms (supra) at para 32: As I noted in Lac Minerals, however, the three-step analysis proposed by Wilson J. encounters difficulties in identifying relationshipsdescribed by a slightly different use of the term "fiduciary", viz., situations in which fiduciary obligations, though not innate to a givenrelationship, arise as a matter of fact out of the specific circumstances of that particular relationship; see at p. 648.

In these cases, thequestion to ask is whether, given all the surrounding circumstances, one party could reasonably have expected that the other party wouldact in the former's best interests with respect to the subject matter at issue. Discretion, influence, vulnerability and trust were mentionedas non-exhaustive examples of evidential factors to be considered in making this determination. [92] Further, there has to be reliance on such skill and knowledge. In this case, the Plaintiffs had invested in real estate before. MrJaycock submits that in this case, the Rossburgers were not unsophisticated.

Rather, Mr Rossburger was a successful businessman andhad then and in the past retained other advisors such as Mr Melnyk who managed his investment portfolio. Mr Rossburger himselfadmitted that the 18% return on the investment discussed was a lucrative rate of return. That such return was five to six times greaterthan a conservative or market rate of return at the time. This admission, submits Mr Jaycock, is indicative of Mr Rossburger’sunderstanding of the investment and the fact that he was providing a loan to a company involved in the investment.

[93] Mr Jaycock distinguishes cases cited by the Plaintiff and refers to factors in the evidence in this case that negate a finding ofan ad hoc fiduciary duty. He notes the statements in Dyck v Roulston, 1997 CarswellBC 1254 at para 18 as applying here: Not only do I think it was open to the judge to see the case as she did, I think she was right in seeing it as she did on the facts before her.There is no vulnerability here. The money was not advanced because of professional advice but rather on no more than an invitation witha view to making a quick and substantial profit.

It cannot be said on the facts that the appellants could have expected the respondent tobe disinterested to the exclusion of his own interests. [94] Mr Jaycock submits that this should lead the Court to accept that not every claim arising out of a fiduciary relationship willgive rise to a claim for a breach of fiduciary duty and that a breach of duty by a fiduciary is not necessarily a breach of fiduciary duty.Rather, in the case of a professional person who has an unrelated retainer to the transaction in dispute, no obligation can arise to actsolely in the Plaintiffs’ interest in relation to that transaction: Galambos. [95] He submits that the Supreme Court of Canada decision in Sharbern Holding Inc v Vancouver Airport Centre Ltd, 2011 SCC23 , [2011] 2 SCR 175, indicates that if an investor knows of the professionals’ interest in the project to be invested that therecan be no claim of breach of fiduciary duty. [96] The Defendants submit that the facts here are:

a) Mr Herbert and Herbert Briere LLP were engaged for limited purposes which did not include providing investment advice to thePlaintiffs;

b) Mr Herbert disclosed to the Plaintiffs that he and Mr Briere had an equity interest in this project;

c) The Plaintiffs had considerable prior business experience and investment experience;

d) The Plaintiffs were not vulnerable to Mr Herbert’s presentation of the Nanaimo investment opportunity. Investment advice wasoutside the scope of Mr Herbert’s engagement and the Plaintiffs had a longstanding relationship with other advisors such as Mr Melnykand Mr Murray;

e) The Plaintiffs made the loan not on the basis of Mr Herbert’s presentation of the Nanaimo investment opportunity, but with aview to getting a higher than market rate of return on the loan. [97] Factually, the Defendants submit that the problems with the investment project over time were just normal business problems.In 2009 and as of July 2010, the reported pre-sales were still healthy and optimistic. Indeed they themselves were convinced of that factfor a long period of time. It was not until the summer of 2011 when the pre-sales contracts were cancelled by the construction managerthat they became alarmed.

Until that time, the key to the project’s success was based on pre-sales and financing, and both wereanticipated signs of future success. [98] In this case, there is no evidence that any of the ongoing and daily problems experienced with the project were material andought to have been disclosed. Mr Herbert’s evidence was that in July of 2010 he was advising Mr Rossburger that the problem was withpayables and, it was not until early 2011 that he and others became concerned with the problems of obtaining financing.

Indeed, on June23, 2011 financing was offered. [99] The Defendants urge that there are five elements necessary to prove negligent misrepresentation and that materiality must beproved by the evidence. [100] In this case, the Defendants submit that any alleged misrepresentations were not material. That it is just common sense that nopromotor or investor would guarantee an 18% return on a real estate investment. In this case the Promissory Note exactly reflected thecharacter of the agreement. That is admitted by Mr Rossburger.

That confirms the characterization of his investment as being that of aloan and the opportunity offered was to achieve a higher return in a relatively short period of time. [101] The Defendants deny that the Plaintiffs have proved on a balance of probabilities any negligent misrepresentations and anyreasonable reliance on such. Mr Herbert did not make representations regarding the nature or strength of any security that could beprovided. The development presentation facts were correct and the Promissory Note was valid as the promised security.

As such, thePlaintiffs have failed to prove that GAP has suffered any damages as a result of any alleged misrepresentations. [102] Given the findings I have made on disclosure and that the Rossburgers took an opportunity to lend money, I cannot find thatthere was any continuing duty on the part of Mr Herbert to advise them of problems in proceeding with the project. I add this finding tothe fact that Mr Herbert himself was confident of the coming success of the project into the summer of 2011. Meetings with Mr Dolloccurred as he did have an equity interest in the project.

The Rossbugers did not. [103] With respect to claims of vicarious liability, the Defendants state there is no basis for finding the accounting firm or Mr Brierevicariously liable for any actions of Mr Herbert. Although the Plaintiffs rely on sections of the Partnership Act, there is no evidence thatthose provisions apply so as to make the firm or Mr Briere vicariously liable. Mr Herbert was not a partner of Herbert Briere LLP andhere he was not acting in the ordinary course of business of the firm, as required for liability. Neither Mr Herbert nor Mr Briere werepartners of Herbert Briere LLP.

Their PC’s were the partners. [104] The Defendants quote the common law test for vicarious liability as set out in Bazley v Curry (SCC), [1999] 2SCR 534 (SCC). Here the test is not made out on the evidence. The allegedly wrongful acts are not sufficiently related to conductauthorized by the firm. Rather, the evidence establishes that the scope of the Plaintiffs’ engagement of these accountants and the overallbusiness of the firm were unrelated to the provision of investment advice. [105] There is no basis for finding Mr Herbert or Mr Briere liable for any breach by the BC company in respect to the loan. They

were not shareholders, directors or officers of the BC company nor otherwise responsible for any debt or obligation of that corporation. [ 106 ] The Defendants submit that any claim for damages has not been proved here. The claim must fail as the Plaintiffs have not proved any fraud on the part of Mr Herbert nor proven any professional negligence on his part such as would found a claim for damages.

The Plaintiffs have not proved any negligent misrepresentations on the part of Mr Herbert and have not proved any vicarious liability on the part of the firm or Mr Briere. [ 107 ] The Plaintiffs failed to prove that they have sustained any damages as a result of any of the pleaded causes of action. The Defendants are not parties to the Promissory Note and the claim against them is not sustainable at law.

Finally, the Plaintiffs have not proven any fraud or unjust enrichment and there is no basis for the claims for aggravated or punitive damages, or the claims for tracing, or accounting, or a constructive or resultant trust. [ 108 ] Factually, the Defendants urge the Court to conclude there was no recommendation to invest. Rather the evidence is the parties met and discussed the matter, which included a discussion of a rate of return. It was only after that meeting that the Plaintiffs themselves chose to invest $300,000. Similarly in July the Plaintiffs themselves chose to invest a further $200,000.

In evidence, Mr Rossburger acknowledged that he understood that a high interest return did reflect a high risk investment.

a) Reply of the Plaintiffs [ 109 ] In a brief reply on the issue of evidence of an “undertaking”, Mr Cotter submits that the Court can imply such on all of the circumstances of the facts. He submits that the ad hoc relationship has been established here as was done in Simms . That is, the Plaintiffs had an implied duty of loyalty in this case. It was not a coincidence that the money invested by the Rossburgers was money Mr Herbert was aware was forthcoming from the sale of the business.

He notes that the plan of the accountants all along was that they would solicit investment funds from their clients. [ 110 ] He submits that the professional rules must be considered. The rules prohibit borrowing from clients. This Promissory Note was payable to BC company and as they were shareholders, that was an indirect loan. Also that the onus is on the Defendants to prove compliance with professional rules. [ 111 ] Mr Cotter submits that the required discretionary power has been proved to have been that of Mr Herbert. He had the power to advance or not advance the Rossburgers’ money.

He had the discretion to withdraw or not withdraw their money when at the purchase of land stage he knew that the land sale was not in place and the money his clients were advancing was not sufficient to close that land contract. [ 112 ] In the end he emphasises that the facts here make it clear that the accountants had a duty to make their roles known to the Plaintiffs.

b) Further Reply of the Defendants’ [ 113 ] In further reply, Mr Jaycock emphasises that the duty that arose was to disclose the accountants’ interest in the project and Mr Herbert did. That was all that was required. IV. Analysis and Conclusion [ 114 ] Both counsel for the parties provided me with an overview of the principles of law governing fiduciary duty. Not all relationships involve specific fiduciary duties. There is a tripartite test to be used to establish an ad hoc fiduciary relationship.

Both counsel conceded that there is no issue of a per se relationship here. [ 115 ] In my view, the initial fact I must determine is a fact that forms further conclusions. That is, whether Mr Herbert at the time of raising this investment opportunity with the Rosburgers, informed the Rossburgers of his interest in the same investment opportunity. Mr Rossburger says no. Mrs Rossburger cannot remember.

Mr Herbert states that he did indeed disclose his interest at the very beginning of their conversations. [ 116 ] I must judge each person’s credibility and in doing so, must have reference to all of the facts surrounding the commencement of the new relationship. Mr Rossburger, admittedly a successful businessman, with prior contact with professionals, states Mr Herbert’s interest and that of his partner, was never disclosed. Yet he was and is a successful businessman, although by the evidence he showed little interest in the deal itself. He did not demand the Promissory Note until the late fall of 2010.

Although Mr Herbert had at that time reassured him about Mr Prue’s wrongful communications that his investment was with the accountants (wrong), the Promissory Note he then received indicated that his investment was in the BC company. At best he could not explain that obvious fact, although he confirmed the Note itself properly reflected his understanding of the investment. [ 117 ] Knowing this in 2010, he did not follow up with further inquiries as to the nature of his investment and how the project was proceeding.

Indeed, he was obviously satisfied with the decision he had made in the fall of 2009 and was willing to invest a further $200,000 in June of 2010. Both Mr Rossburger and Mr Herbert described a golf game and a discussion about the investment, which included that there were concerns with outstanding payables. I cannot place this conversation contextually within Mr Rossburger’s evidence that he was not aware of Mr Herbert’s stake in the investment. He had a discussion with Mr Herbert over details of the project and its short term concerns with payables, and then offered to invest more.

In my view, the only inference I can make is that the two were discussing what was clearly a mutual investment. Indeed, Mr Herbert described the issue and Mr Rossburger asked how much money would cover the probelm. [ 118 ] By both Mr Herberts and Mr Rossburger’s evidence, there was no pressure put on Mr Rossburger to invest more money. I find

that Mr Rossburger decided to invest more money. Counsel for the Plaintiffs’ submits that Mr Rossburger was “persuaded” by this conversation. I find that is an attempt to put a gloss on Mr Rossburger’s own offer to invest an additional amount in the project. [ 119 ] I find that evidence to be far more consistent with that of Mr Herbert that he disclosed the partners’ interests in that project from the time he first broached the subject of investment.

There was a suggestion that at the time of the initial investment, Mr Herbert was aware that the Rossburgers were receiving payout purchase monies from the sale of GAP. I cannot find this to be of significance other than that clearly at the time, Mr Herbert and his partner were approaching clients to invest funds in the project. It may be that Mr Herbert found the timing to be excellent given the expected sale proceeds.

However, that is consistent with his and Mr Briere’s mission to obtain financing for the Prue project. [ 120 ] It is lamentable that neither Mr Herbert or Mr Briere kept notes of any of their discussion with clients/investors which could have confirmed that the appropriate discussion of conflict of interest occurred and that Mr Rossburger waived the conflict. However, I accept that that is evidence of sloppiness. These two accountants were clearly chasing a dream at the time Mr Prue granted them an opportunity.

After that they seemed to be inexperienced and incapable of pressing Mr Prue for proper documentation or details of the investment. However, on the whole of the evidence, I cannot find this sloppiness to be causative. In the end, I accept Mr Herbert’s evidence that he properly disclosed his and his partner’s interest in this investment. And, I find Mr Rossburger’s interest in the investment was driven by a view to making a quick high rate of return.

As was found in Dyck , I find here that “the money was not advanced because of professional advice but rather on no more than an invitation with a view to making a quick and substantial profit.” Certainly, Mr Herbert gave Mr Rossburger only bare facts and Mr. Rossburger did not pursue his own investigation of the project itself. [ 121 ] The factors I must consider in determining whether there was a fiduciary relationship formed around this investment, and whether it was breached, must start with this finding. [ 122 ] The three step analysis is fatal at any one step.

In this case given the relationship between these parties and the circumstances of the investment being introduced, there was, arguably, scope for the exercise of some discretion or power on Mr Herbert’s side. Certainly he had more knowledge of the issues that arose during the course of the investment. However, arguably this is rebutted by the fact the Rossburgers chose their investment contribution and he distinguishes his role as an equity partner as basis for his following the investment and I contrast this to the view that Mr Rossburger was merely a lender.

Finally, the opportunity was not, in my view, presented as a recommendation but as an opportunity to loan money for a greater rate of return. [ 123 ] On the second branch of the test, the Plaintiffs have not been able in evidence to establish a forsaking by Mr Herbert or his partner of the interests of all others in favor of these two Plaintiffs. Indeed, by my finding that Mr Herbert advised Mr Rossburger of his equity interest in the project, such an expressed or implied forsaking cannot make sense.

Also, the other evidence in this case is that Mr Rossburger was well aware, both at the time of the introduction of the investment and as time went on that clearly other investors were involved. On these facts, no obligation could arise to act solely in the Plaintiffs’ interests, implied or otherwise. [ 124 ] With respect to the third part of the test, I cannot find any particular vulnerability. Rather, the evidence establishes that the investment was introduced and Mr Rossburger himself was intrigued by an 18% return which was many times greater than the market return at the time.

He understood the nature and scope of the investment and the risk he bore as he was providing money to a company involved in development. He knew that the development began with a purchase of raw land. [ 125 ] All of the tripartite arms of the test must be analyzed in context of all of the evidence before the court. I accept the Defendants’ submission, that the facts here rebut any claim of a breach of duty or duties, as I have found that Mr Rossburger was aware of the interest of the accountants in this project from the outset. Mr Herbert disclosed his interest.

Mr Rossburger had considerable business experience and investment experience. The Plaintiffs were not vulnerable to the presentation of the investment opportunity and the loan was made not on the basis of Mr Herbert’s presentation of the investment opportunity but rather with a view to getting a higher than market rate of return on the loan. The Plaintiffs had the sole discretion of deciding the investment amount. [ 126 ] I must deal with the cause that is based on material misrepresentations after and during the course of the investment.

Again, I must view this finding in the context of all of the evidence and with regard to my initial fact finding. I cannot on this evidence find misrepresentations of Mr Herbert to Mr Rossburger. Mr Herbert himself was confident of the eventual success of the investment until and through June of 2011. He was supported in his altruistic view by the fact that on June 23 rd , 2011, financing was offered. The Promissory Note here reflected the character of the agreement GAP had entered into and the facts behind the presentation of this investment were, albeit naively, on Mr Herbert’s

part correct as he understood them. This until the time of the obvious cratering of the deal in the spring and summer of 2011. [ 127 ] There is no basis on the facts here to found liability of the accounting firm or of Mr Briere vicariously as I have not found a breach on Mr Herbert’s part. The provisions of the Partnership Act apply and neither partner was himself a partner of Herbert Briere LLP. [ 128 ] I have found that the scope of the Plaintiffs’ engagements as accountants cannot be related to the provision of any investment advice.

Although these Defendants did not make note of their statements of conflict, I have found that the separation in roles of accountants and the role of people seeking investment monies was made clear to these defendants. I cannot find any breach of the profession’s rules causative of any losses claimed here. [ 129 ] It goes without saying that in the absence of facts establishing negligent representations or misrepresentations and breach of fiduciary duties that the facts surrounding this high interest return establish that quite simply there was a failed risky investment.

These facts cannot found the Plaintiffs’ claims for relief or any claim for damages. [ 130 ] As a result I do not find it necessary to deal with the issue of quantification of damages. [ 131 ] Accordingly I dismiss the action and the basis of the action in all respects as against these Defendants. Costs may be spoken to.

Heard on the 16 to 20 November; 23 November; 3, 10 December, 2015. Dated at the City of Edmonton, Alberta this 9 th day of December 2016. D.A. Sulyma J.C.Q.B.A. Appearances: R. C. Cotter, QC of Dentons Canada LLP for the Plaintiffs R.W. Jaycock of Parlee McLaws LLP for the Defendants