Hercules+Management+v.+Ernst+&+Young


 * Hercules v. Ernst & Young [1997] (SCC)**


 * FACTS:** The PL’s were shareholders in a corporation who allege that they made investments and lost money based on negligently prepared financial audit reports.


 * ISSUE:** Do the accountants who prepared the audit reports owe a duty of care to the plaintiffs?


 * HOLDING:** Nope.


 * REASONING:** While the Anns test still properly governs incidences of negligent misrepresentation, one has to remember the caveats of reasonability. It must have been reasonable to foresee the PL’s reliance on the products, and part of what forms the “reasoners make decisions on how to steer the company as a **group** of shareholders, not to aid them to make individual investment decisions. Thus, no duty of care owed.


 * RATIO:** Incidents of negligent misrepresentation may still be subject to a duty of care as per the Anns test, but only in certain circumstances.


 * NOTE:** There is also discussion in this case of coping with the nature of the loss as purely economic. The court finds no hurdle there.