07/09/2013 06:07 EDT | Updated 09/08/2013 05:12 EDT

Quebec Appeal Court upholds ruling that auditors negligent in Castor collapse

MONTREAL - The Quebec Court of Appeal has upheld a decision that found auditors Coopers & Lybrand liable for negligence in connection with their work for Castor Holdings Inc. before its $1.6-billion financial collapse.

The court sided with most of the April 2011 decision by the Quebec Superior Court, putting Castor creditors a step closer to having their losses repaid from the 1992 bankruptcy of the real estate investment company. Coopers had only appealed a portion of the earlier ruling.

Nearly 100 creditors, including major European banks, Chrysler Canada's pension fund and two Canadian credit unions, launched a lawsuit in 1994 claiming about $1 billion in damages.

The trial started in the fall of 1998 and lasted 12 years. It's considered one of Canada's longest-running lawsuits.

It was so long that two judges were required to complete the process. One accounting expert testified over the course of more than three years.

In a lengthy ruling, Justice Marie St-Pierre of the Quebec Superior Court said Coopers & Lybrand failed to perform its duties as auditors, in accordance with auditing and accounting standards.

She also said the firm issued "faulty opinions" about Castor's financial situation that prevented investors from evaluating its financial health.

In a 122-page ruling released Monday, the appeals court found that the trial judge had appropriately relied on experts in the trial.

"Our work on this file, before, during and after the hearing, convinces us that this conclusion of the judge doesn't constitute an error — far from it," wrote the three-judge panel.

The appeals court maintained the liability of Coopers and its individual partners across Canada.

They have been ordered to pay about $2.6 million including interest to the estate of former John Labatt CEO Peter Widdrington, who died in 2005, six years before the Quebec Superior Court issued its ruling.

Avram Fishman, who represented Widdrington, said the court's findings "are also applicable and binding on all pending cases against Coopers in the aggregate amount of well over $1 billion."

“We are hopeful that this Court of Appeal judgment will finally result in a substantial recovery in the very near future for the many creditors affected,” he said in a news release.

Coopers was subsequently merged with Pricewaterhouse to create PricewaterhouseCoopers (PwC).

An ongoing case launched by the Castor trustee is trying to make the large auditor responsible for a significant portion of Coopers' liabilities.

A lawyer for the auditors said they will seek leave to appeal to the Supreme Court of Canada.