CIBC World Markets Inc. has lost a bid to have a negligence action against it dismissed. The case concerns a suit brought last fall by Proprietary Industries Inc., a merchant bank based in Calgary, against CIBC World Markets Inc.

Proprietary alleged that the investment bank was negligent in preparing a fairness opinion for the board of directors of eDispatch.com Wireless Data Inc. regarding a proposed takeover of eDispatch by AirIQ.

Propriety said that CIBC’s opinion calling the deal fair from a financial point of view was a negligent misrepresentation.

CIBC brought an interim application seeking to strike out Proprietary’s claim because Proprietary didn’t rely on the impugned fairness opinion. CIBC noted that Proprietary got its own fairness opinion and didn’t rely on CIBC’s opinion because it voted against the deal. Reliance is a necessary element for a negligence action to succeed.

The Supreme Court of British Columbia found that Proprietary did not rely on CIBC’s fairness opinion. But it also found that Proprietary’s alleged loss resulted from a majority of eDispatch shareholders approving the AirIQ takeover bid after relying on the CIBC fairness opinion.

“The allegation is that, if CIBC had not negligently prepared its Fairness Opinion, the takeover by AirIQ would never have been approved by the shareholders. There would have then been no consequent loss of share value and dilution of holdings,” said the Honourable Mr. Justice R.B. Harvey

On July 3, the court ruled in Proprietary’s favour and dismissed CIBC’s interim application allowing Proprietary’s claim to proceed to trial.