The former auditor of Garth Drabinsky's Livent has been ordered to pay $85 million in damages to creditors of the defunct Toronto theatre company.
An Ontario Superior Court judge ruled Friday that Deloitte & Touche was negligent in its audit of Livent's 1997 financial statements.
Ontario Superior Court Justice Arthur Gans said he believed that Deloitte auditors breached their "duty of care" to investors and "turned a blind eye" to practices that were unusual and later found to be fraudulent.
"I am at a loss to understand how Deloitte could have signed a clean audit opinion for 1997," Justice Gans wrote in his decision.
Deloitte said it is studying the decision to decide what steps to take next.
It is rare in Canada for auditors to be found negligent or to be ordered to compensate creditors. While a company can sue its own auditors for failing to uncover faults in the books, earlier legal precedents have established that creditors are usually not permitted to sue.
In this case, it was the receiver that sued, filing a case in 2002, about four years after Livent, producer of popular Toronto shows such as Phantom of the Opera and Miss Saigon, went bankrupt.
The civil suit was put on hold while the criminal case against Drabinsky and Myron Gottlieb wound its way through the courts. The Livent founders were convicted of fraud in Ontario in 2009.
Drabinsky received full parole earlier this year.
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