Felty – BC Court of Appeal finds that an engagement agreement for accounting firm tax advice which limited liability to the fee was not contrary to public policy

The BC Court of Appeal found that exclusion clause in an engagement agreement between a BC client and E&Y which limited E&Y liability to its fee was binding. Although the engagement agreement had been entered into by the client’s BC family law firm with E&Y rather than by her directly, the Court applied the principle “that as a general rule, solicitors will be taken to be contracting on behalf of their clients in the course of their practice.” Furthermore, giving negligent U.S. tax advice is not “so reprehensible that it would be contrary to the public interest to allow [the defendant] to avoid liability.”

Law firms may be prohibited from limiting liability for negligence, e.g., in Ontario and B.C.

Neal Armstrong. Summaries of Felty v. Ernst & Young LLP, 2015 BCCA 445 under General Concepts – Negligence and General Concepts – Agency, and summary of Bernstein, Jack, "Accountants Limit Liability for Negligence", Canadian Tax Highlights, Vol. 24, No. 6, June 2016, p. 11 under General Concepts – Negligence.