Court of King's Bench Confirms Importance of Disclaimer Clause When Assessing Duty of Care

The Court of King’s Bench recently confirmed the importance of a disclaimer clause in the context of a property appraisal in their December 10, 2025 decision First National Financial Corporation v Letterio. The principles enumerated in this decision will apply to a wide range of professionals who include similar language when rendering opinions to clients.

Background

In the spring of 2017, a request was made for an appraisal of a residential property in Calgary. The request was made by ‘First National’ through a mortgage broker. The appraiser had conducted many appraisals for First National Financial Corporation (“FNFC”) in the past, and as such rendered a further report addressed to FNFC as the client and intended user. Unbeknownst to the appraiser, the report was later provided to First National Financial GP Corporation (“FNF GP Corp.”), which was the general partner of First National Financial Limited Partnership (“FNF LP”).

FNFC, FNF GP Corp. and FNF LP were all separate legal entities, and FNFC was the only limited partner of the limited partnership.

At no time did FNFC lend any money, with all mortgage lending being conducted through FNF GP Corp.

FNF GP Corp. extended a mortgage to a borrower, who eventually defaulted on their loan. FNF GP Corp. was unable to recover their losses from the borrower and as such sued the appraiser and appraisal company.

The appraiser filed a Summary Dismissal Application which was successful before the Applications Judge in an oral decision dated April 19, 2023. The Plaintiffs, which included FNFC, FNF GP Corp. and FNF LP, appealed to a Justice, and that appeal was dismissed on December 10, 2025. Both decisions do not get into the merits of the actual appraisal and the only issue was whether any of the Plaintiffs had a valid claim against the appraiser in this matter.

There was no dispute that FNF GP Corp. was the entity that lent money to the borrower, and eventually foreclosed on the subject property. The appraisal report (“Appraisal Report”) contained the following Ordinary Assumptions and Limiting Conditions that proved to be crucial in the disposition of this matter:

1. This report is prepared at the request of the client and for the specific use referred to herein. It is not reasonable for any other party to rely on this appraisal without first obtaining written authorization from the client, the author and any supervisory appraiser, subject to the qualification in paragraph 11 below. Liability is expressly denied to any person other than the client and those who obtain written consent and, accordingly, no responsibility is accepted for any damage suffered by any such person as a result of decisions made or actions based on this report. Diligence by all intended users is assumed.

13. Written consent from the author and supervisory appraiser, if applicable, must be obtained before any part of the appraisal report can be used for any purpose by anyone except the client and other intended users identified in the report. Where the client is the mortgagee and the loan is insured, liability is extended to the mortgage insurer. Liability to any other party or for any other use is expressly denied regardless of who pays the appraisal fee. Written consent and approval must also be obtained before the appraisal (or any part of it) can be altered or conveyed to other parties, including mortgagees (other than the client) and the public through prospectus, offering memoranda, advertising, public relations, news, sales or other media.

Importantly, FNFC was listed as the client and intended user on the Appraisal Report, and the appraiser was not aware of the other Plaintiffs, nor did they request permission to use and rely upon the Appraisal Report. Previous guidance had been provided to the appraiser by FNFC that all reports be made out to their name, and at some point in time, unbeknownst to the appraiser, FNF GP Corp. became the entity that started to extend mortgages.

The Court canvassed the law across Canada, which has developed into a fairly cohesive set of rules and principles. FNFC argued that they were a party close enough in the proximity analysis to be able to rely on the Appraisal Report. The trouble is that FNFC never lent any of their own money, and as such were not able to prove reliance. FNF GP Corp. never sought permission from the appraiser to use and rely upon the Appraisal Report and as such were not held to have reasonably relied on it, given that they had notice of the clear exclusionary language within the Appraisal Report disclaiming liability to anyone who was not the client, intended user or authorized recipient.

In keeping with well-established principles from a number of cases, including Kokanee Mortgage M.I.C. Ltd. v Burrell, 2018 BCCA 151, the Capital Direct line of cases culminating in Capital Direct Lending Corp. v Howard & Co. Real Estate Appraisers and Consultants Inc., 2018 ABCA 26, Nussbaum v Hall, 2022 ABQB 388, and 0694841 BC Ltd. v Alara Environmental Health and Safety Limited, 2022 BCCA 67, the Court held that where a party relies on a report, where they are not the client or intended user, and that report contains clear exclusionary language, their reliance on that report cannot be held to be reasonable, which causes any claim for negligent misrepresentation to fail. This rule has been enforced across a number of provinces, even where the client and the eventual user of a report are closely connected, either as subsidiaries or business affiliates.

Conclusion

This Decision serves as an important reminder to professionals and users of reporting across Canada. Whether you are an appraiser, engineer, environmental consultant, or a whole host of other professionals, the inclusion of clear disclaimer clauses can be very useful in limiting the class of persons who can reasonably rely on your reporting, which has a significant bearing on risk and liability exposure.

For users of reports, it is of utmost importance that they are legally entitled to rely on whatever they are reviewing, as failure to obtain permission can be fatal to a claim for negligent misrepresentation, even where the client of the report is a closely held company, partner, subsidiary or affiliate.

Please feel free to reach out to Joel Franz, who acted as counsel to the Defendants in this matter should you have any questions arising from this article.