Law Times

Law Times • sepTember 3, 2018 Page 3 www.lawtimesnews.com COA dismisses appeal in Madoff-related case BY ANITA BALAKRISHNAN For Law Times J udges at the Court of Ap- peal for Ontario dismissed an appeal from liquida- tors of funds that invested with convicted fraudster Bernie Madoff, deferring to the sum- mary judgment decision that the funds did not suffer damages. In the August appeal deci- sion, Fairfield Sentry Limited v. PricewaterhouseCoopers LLP, 2018 ONCA 696, Justice David Brown focused on the level of evi- dence provided by the funds' liq- uidators, especially in response to PwC's expert witnesses. Alyssa Tomkins, a partner at Caza Saikaley LLP in Ot- tawa, who litigates corporate and commercial cases including bankruptcy and insolvency, says the decision shows the impor- tance of responding to the cri- tiques of expert witnesses, even if it means seeking leave to get more evidence in motions for summary judgment. "The emphasis is on 'putting your best foot forward' — some- thing that has been repeated by the court on summary judg- ment decisions. But I think this was quite a striking application of it," says Tomkins, who was not involved in the case. "It reminds us of how the court is going to apply this prin- ciple of putting your best foot forward — and it is going to be applied stringently." Justices Mary Lou Benotto and Bradley Miller concurred with Brown's appeal decision, which ordered the funds' liqui- dators to pay nearly $70,000 in costs to PwC. The decision is one of many stemming from the downfall of Bernard L. Madoff Investment Securities LLC, a U.S.-based "Ponzi"-scheme style fraud that lasted more than 20 years and was revealed by Madoff in a 2008 confession, as motion judge Justice Frank Newbould recounted in the original sum- mary judgment decision in June 2017, Fairfield Sentry Limited et al v. PwC et al, 2017 ONSC 3447, which awarded nearly $1.2 million in costs to PwC. In the 2018 Ontario case, the appellants, represented by Stike- man Elliott LLP, were Fairfield Sentry Limited, Fairfield Sigma Limited, Fairfield Lambda Lim- ited and Kenneth Krys, as liqui- dator for Fairfield Sentry Limited and Fairfield Sigma Limited and Fairfield Lambda Limited, based in the British Virgin Islands. The respondents listed in the August 2018 decision were PwC and Stephen Wall, a PwC partner, represented by Fasken Martineau DuMoulin LLP. The lawyers on both sides of the case did not provide comment prior to deadline. The 2018 appeal decision said it concerned the liability of Price- waterhouseCoopers, the compa- ny that audited the funds' finan- cial statements in 2006 and 2007. In the initial 2017 motion for summary judgment, PwC did not contest the negligence allega- tion, so the case before the court of appeal in 2018 was whether there was "a genuine issue" re- garding damages, Brown wrote in the 2018 appeal decision. In particular, the two sides disagreed on how to best calcu- late the losses sustained by the funds. The funds' liquidators used a calculation method that yielded a loss of $2.508 billion to the funds, while an expert for PwC calculated that the funds were better off by some $857.5 million, the 2017 summary judgment decision said. Had PwC discovered the fraud in 2007, the Fairfield funds would have been "economically much better off," the liquidators claimed in the 2017 summary judgment case. But M. Laurenti- us Marais, an expert witness for PwC, said that after April 2007 the Fairfield Funds withdrew $1.03 billion more from the Madoff fund than they put in, and thus, "the Fairfield Funds received a benefit by the fraud not being discovered at the time of the audit report of April 24, 2007," the 2017 summary judg- ment decision said. In his appeal decision, Brown wrote that the liquidators did not file evidence replying to critiques that expert witnesses had made to the liquidators' charts, did not question Marais on some aspects of the charts in cross-examination, did not question another expert witness about the settlements on cross examination and that the liqui- dators did not seek permission to file "sur-reply evidence." "[The summary judgment judge] described that as a failure to put their best foot forward on those issues," Brown wrote in the 2018 appeal decision. "From the submissions made at the hearing of the appeal, it is clear that the absence of such cross-examination was a tactical decision made by the Liquida- tors. . . . However, on a motion for summary judgment a respond- ing party runs significant litiga- tion risk if it leaves unchallenged key evidence of the moving party adduced to establish there is no genuine issue requiring a trial." Fraser McDonald, a partner at Allen McDonald Swartz LLP, who practises corporate law in Toronto, says the judge applied established law to measure the damages. He says the decision was in- teresting given the complexity of evidence provided at the motion level. "This was obviously a very important motion, because it was a motion to dismiss the ac- tion summarily. So, obviously if it succeeded, as it did, their en- tire cause of action disappears and they're out of luck," Fraser says. "This was the plaintiff 's one kick at the can. . . . You want to have the best evidence in front of the motion judge before he made his decision." LT NEWS Expanding capabilities to the Canadian legal market with Epiq acquires Crawford Class Action Services and Bruneau Group — offering unmatched expertise through major markets across Canada: • Class action settlements • Data breach response • Government and regulatory remediation matters • National and international legal notice programs Learn more at epiqglobal.com Business Process Solutions | Class Action & Mass Tort | Court Reporting | eDiscovery | Regulatory & Compliance | Restructuring & Bankruptcy People. Partnership. Performance. Untitled-6 1 2018-08-01 3:56 PM Alyssa Tomkins says a recent decision shows the importance of responding to the critiques of expert witnesses, even if it means seeking leave to get more evidence in motions for summary judgment.

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