Can I Sue My Accountant for Negligence?

We trust specially trained professionals with incredibly important things, such as our livelihood. If you relied on a professional who overlooked something vital, and you suffered a loss, this is professional negligence. In this article, we’ll look at whether you can sue your accountant and what you should keep in mind.

What Is Considered Negligence for Accountants?

Accountant negligence follows the same legal tests as negligence for other professions (such as medical malpractice), although the specific details may differ. The key test is whether they failed to perform their duties to the standard expected of a reasonably competent accountant. To determine this, the court will consider things like the Chartered Professional Accountants of Ontario’s CPA Code of Professional Conduct and other relevant accounting standards.

Common Examples of Accountant Negligence

It might be accountant malpractice if you suffer a financial loss because they:

• Miscalculated your taxes

• Failed to file your tax return

• Gave you incorrect financial advice

Can You Sue Your Accountant?

Humans make mistakes, but when these mistakes are things that reasonably competent accountants wouldn’t make, you may want to start an accountant lawsuit. Did this accountant:

• Breach their contract with you — such as failing to provide services in the stipulated time period?

• Breach their fiduciary duties — committing fraud or failing to work for their client’s interests?

• Misrepresent a material fact or situation — leading to your financial loss, or otherwise?

• Demonstrate negligence — by not adhering to Generally Accepted Accounting Principles (GAAP), not keeping up with legal developments/continuing education, or missing a deadline because of inadequate office protocols, for example?

Why You Might Sue Your Accountant

There are two main reasons people choose to take legal action against accountants:

• Compensation — for potential recovery of significant financial losses suffered due to the accountant’s professional negligence

• Accountability — to hold this accountant responsible for this financial loss

A successful professional negligence claim against an accountant may have a broader impact than simply making a complaint to the regulatory body.

Statute of Limitations

With few exceptions, you must start the legal claim for professional negligence within two years of the date the negligence is discovered — not necessarily when it occurred. For example, you may not be aware until you receive your Notice of Assessment or other CRA correspondence. 

The clock starts running when you discover the negligence or ought to have discovered it if you were being reasonably diligent. This way, you can’t circumvent the proper statute of limitations through wilful blindness or denial. If the accountant committed fraud, it might take a reasonably diligent client more time to discover it — the court will consider that. 

How to Get Started with a Lawsuit

To establish professional negligence, you need to prove that:

• Your accountant committed an act or omission that a reasonably competent accountant would not have in similar circumstances; and

• This act or omission caused your financial loss.

Proving negligence may come in the form of:

• Testimony  —  about the circumstances of the case and the financial impact

• Expert testimony — about the professional standards, etc.

• Documentary evidence — correspondence from the CRA, notes in your file, and banking records, etc.

It is essential to consult a lawyer experienced in professional negligence for several reasons, including:

• Legal knowledge — not only of general law but also the specifics of professional negligence

• Experience with the legal system — the ability to effectively and efficiently navigate the processes

Bring your case to a professional negligence lawyer as early as practicable. It’s not just at trial time that your lawyer is useful — sometimes it is in your best interest to obtain a settlement because it can be resolved earlier and the result may be more satisfactory than what a court would award. Lawyers can also negotiate with the CRA for you.

The Legal Process

Here are the major steps to expect:

• Statement of claim: This outlines your case and what damages (compensation) you are seeking. It must be filed with the court and served on the other party.

• Investigation and evidence gathering: Some of this would have been done before filing the action. Your lawyer may want more information from the CRA, banks, and other parties to strengthen your case.

• Document discovery/pre-trial motions and other matters: In civil cases, the parties are required to hand over relevant documents whether they help or hurt their cases. If there is disagreement about what is relevant or appropriate to share, they may bring the issue to a judge. There may also be pre-trial conferences or other administrative hearings.

• Settlement negotiations: Most civil cases settle — usually after serious negotiation between the parties through their lawyers. Each side wants what is best for them, so it can be tricky to come to an agreement. Trials are costly and have no guarantee in terms of outcome, so settlements are often preferable.

• Alternative dispute resolution: The parties may agree to try mediation or arbitration (or it may be something they had agreed to in their engagement contract) — again to avoid the cost and risk of going to trial. Note that mediation is mandatory for certain cases in some Ontario jurisdictions.

• Trial: Apart from immense preparation work (investigation, legal research, preparing witnesses, etc.), there is the trial itself, which can span days or weeks — even months. The lawyer will have to be on the ball — not only about procedural rules but to get as much supporting evidence on the record as possible.

• Appeals: If a party is not satisfied with the court’s decision in terms of fault or compensation, they can appeal — sometimes all the way to the Supreme Court of Canada.

The legal process is daunting, expensive, and exhausting — and the issues can be complex. That’s why my clients put their trust in me, Allan Rouben. With over 35 years of experience at all stages of the legal process, I bring extensive civil law and professional negligence knowledge, dedication, compassion, and excellence together. If you need legal advice for accountant negligence, I am here for you.

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