Attacking Expert Preference: Cooperatieve Centrale Raiffeisen-Boerenleenbank BA v Stout & Company LLP, 2019 ABCA 455

By Don Dear, Q.C., Marco Baldasaro, and Michelle Terris

A recent Alberta Court of Appeal decision regarding standard of care, negligent misrepresentation, and auditor’s liability involved a rare successful attack on the trial judge’s reasoning for preferring the evidence of one expert over another.  

Factual Background

Beginning in 2001, Rabobank agreed to finance Agra by purchasing its receivables. By 2004 the parties had entered into an agreement requiring Agra to provide audited financial statements to Rabobank. The respondent here was an accounting firm, Stout & Company LLP, which performed the audits from 2007 to 2010. Agra began to provide false purchase and sale agreements in 2009, distorting their sales and costs of sales for 2009 and 2010 by at least 25 percent and 40 percent respectively. As a result of the fraud, Rabobank suffered a loss of over $36 million.

While performing the audits, Stout assessed the fraud risk as low and the fraud continued undiscovered. Rabobank sued for negligent misrepresentation alleging it had relied on Stout’s audit opinions in continuing to provide financing to Agra. It argued that if the risk had been properly assessed as high, the fraud would have been identified. Rabobank’s expert, Mr. Henry, opined that Stout’s failure to assess Agra’s fraud risk as high was negligent. Both parties agreed that the audit procedures were appropriate if the fraud risk had actually been low.

King's Bench Decision

The initial Statement of Claim named a multi-national accounting firm as a co-defendant. That firm had purchased Stout assets after the Agra audits had been concluded. The multi-national accounting firm, represented by McLennan Ross LLP, successfully applied for summary judgment and had the case against it dismissed.[1]

At trial, the judge preferred the opinion of Stout’s expert, Mr. Muccilli, over Rabobank’s expert based on the belief that Mr. Muccilli had conducted a broader review of the available information, and that Mr. Henry was influenced by his knowledge of the fraud and the benefit of hindsight. Based on this preference, the trial judge found that Stout had met the standard of care expected of an auditor. On a provisional basis only, the trial judge also found that reliance and damages had been proven by Rabobank. 

Court of Appeal

While there were three grounds of appeal, the Court of Appeal focused on the trial judge’s alleged error in preferring Stout’s expert on the standard of care. Stout cross-appealed the trial judge’s assessment of damages and failure to address Rabobank’s contributory negligence.  

The Court of Appeal found that the trial judge erred in concluding that Stout’s expert had conducted a broader review of the available information. After reviewing the evidence, it found there was no justification for inferring a significant difference between the files reviewed by the experts, particularly with respect to the relevant documents. This error was found to be a palpable and overriding error of fact.

As this was the only reason the trial judge gave for rejecting Mr. Henry’s assertion that Stout should have set the risk of fraud at high, the Court of Appeal concluded that there was no rational basis to accept the opinion of one expert over the other. The Court of Appeal was unable to determine on the evidence whether to accept one expert’s opinion over the other and directed a new trial.  

There was a brief discussion of the recent Supreme Court decision of Deloitte & Touche v Livent Inc. (Receiver of), 2017 SCC 63, which expanded the duty of care framework owed by an auditor. Livent was released after the trial judge gave her decision and whether it alters the trial judge’s conclusion that a duty of care exists will be determined in a new trial.


This case provides us with an important lesson in dealing with experts in accountants professional liability cases. Namely, it is extremely important that you control/identify clearly what documents your independent expert is reviewing and which he or she is relying upon for the purposes of his or her expert opinion. Unfortunately both parties are heading towards a new trial, absent settlement.

[1] Cooperatieve Centrale Raiffeisen-BoerenleenBank BA (Rabobank International) v Liebig & Keown LLP, 2016 ABQB 417 (