Dynasty Furniture Manufacturing Ltd. v. Toronto-Dominion Bank

CITATION: Dynasty Furniture Manufacturing Ltd. v. Toronto-Dominion Bank, 2010 ONCA 514

DATE: 20100720

DOCKET: C51698

COURT OF APPEAL FOR ONTARIO

O’Connor A.C.J.O., Rouleau and Epstein JJ.A.

BETWEEN

Dynasty Furniture Manufacturing Ltd., Shafiq Hirani, Hanif Asaria, Dinmohamed Sunderji and 2645-1252 Quebec Inc.

Appellants

and

Toronto-Dominion Bank

Respondent

COUNSEL:

Lincoln Caylor and Albert Pelletier, for the appellants

Geoff R. Hall and Junior Sirivar, for the respondent

HEARD: July 12, 2010

On appeal from the order of Justice Wilton-Siegel of the Superior Court of Justice dated January 21, 2010.

ENDORSEMENT

[1] On a Rule 21 motion, the motion judge struck out those portions of the appellants’ statement of claim that were based on a claim that the respondent bank owed a duty to the appellants, who were not its customers. The alleged duty was to make inquiries into the activities of its customer with whom the appellants had dealings in order to ensure that its customer was not using the bank to further fraudulent activity.

[2] The motion judge gave extensive reasons in which he analyzed the current law as well as whether this was a situation in which a new duty of care should be recognized pursuant to the principles from the Anns/Kamloops cases. He concluded that the bank has a duty to a non-customer only where it has actual knowledge (including wilful blindness or recklessness) of its customer’s fraudulent conduct.

[3] Counsel for both parties presented very effective arguments; however, we are able to dispose of this appeal by way of this brief endorsement.

[4] In general terms, the struck portions of the statement of claim allege that in opening its customer’s accounts, the respondent owed a duty to the appellants, who were not customers of the bank, to ensure that the accounts would not be used for an unlawful purpose. Further, the struck portions of the statement of claim allege that the bank owed a duty to the appellants to inquire into its customer’s activities because it ought to have known that those activities were suspicious, unusual, or fraudulent in nature.

[5] We are of the view that the facts, as pleaded, do not give arise to the duties relied upon in the struck portions of the statement of claim. Although in some cases trial courts have, on motion to strike, allowed claims alleging a duty to ensure that a bank’s customers did not use their accounts for fraudulent purposes to proceed to trial, we were not referred to any trial or appellate decision in Canada holding that a bank has those duties to a non-customer. Thus the impugned claims do not fall within a category of cases that has been recognized by the courts.

[6] Moreover, we do not consider this to be a case where this court should recognize a new duty of care under the Anns/Kamloops principles. We agree generally with the motion judge’s analysis of those principles. Based on that analysis, we are of the view that the facts, as pleaded in this case, are not sufficient to warrant recognizing a new duty of care by a bank to a non-customer.

[7] The appellants rely on Semac Industries Ltd. v. 1131426 Ontario Ltd. (2001), 2001 CanLII 28375 (ON SC), 16 B.L.R. (3d) 88 (Ont. S.C.) to support the position that the struck portions of this claim should proceed to trial so that the question as to whether the court should recognize a duty be decided with the benefit of a full evidentiary record. In Semac the motion judge identified particular circumstances of the claim that, in his view, ought to be dealt with at a trial. These included allegations that the bank had already raised concerns internally about suspicious conduct on the part of its customer, and that the non-customer had subsequently alerted the bank to its allegation of fraud.

[8] No such allegations were pleaded in the appellants’ statement of claim and in our view, there are no circumstances disclosed in the claim that warrant the issue going to trial. We would, therefore, not give effect to this submission.

[9] In these circumstances, we do not find it necessary to decide whether a bank may ever be found to have a duty to a non-customer in circumstances where it does not have actual knowledge (wilful blindness or recklessness) of the fraudulent activities being conducted through an account of its customer. We leave the question of whether such a duty exists and, if so, in what circumstances, to another day.

[10] Thus, we are of the view that it is plain and obvious that the claims made in the struck portions of the statement of claim cannot succeed.

[11] The appeal is, therefore, dismissed. Costs are awarded to the respondent fixed in the agreed-upon amount of $29,700, inclusive of applicable GST, HST and disbursements.

“D.R. O’Connor A.C.J.O.”

“Paul Rouleau J.A.”

“Gloria Epstein J.A.”