COURT OF APPEAL FOR ONTARIO
CITATION: Bunan v. Toronto-Dominion Bank, 2015 ONCA 226
DATE: 20150407
DOCKET: C58212
Sharpe, Pepall and van Rensburg JJ.A.
BETWEEN
Moshe Bunan
Plaintiff (Appellant)
and
The Toronto-Dominion Bank
Defendant (Respondent)
Jonathan L. Rosenstein, for the appellant
Duncan C. Boswell, for the respondent
Heard: March 26, 2015
On appeal from the judgment of Justice Kevin W. Whitaker of the Superior Court of Justice, dated December 23, 2013, with reasons reported at 2013 ONSC 7928 and from the costs endorsement dated January 27, 2014, with reasons reported at 2014 ONSC 599.
By the Court:
Background
[1] The appellant was defrauded by his cousins. He agreed to lend over $1 million to a partnership owned and controlled by them. They were able to perpetrate their fraud by making withdrawals from a bank account the appellant had established with the respondent.
[2] The appellant sued his cousins on personal guarantees and promissory notes they signed guaranteeing the debts of their partnership. He sued the respondent for, among other things, breach of contract and negligence arising from the withdrawals from his account.
[3] The respondent defended the action on the basis that, when opening the account in issue, the appellant had signed a Financial Services Agreement (“FSA”), and its provisions barred the appellant’s claim.
[4] Specifically, the FSA contained an account-verification provision which, in the absence of 30 days’ written notice of errors, released the respondent from liability. The respondent could not locate the FSA but asserted that such an agreement had been signed by the appellant in 2003 and that he had failed to provide timely notice. Written notice of the 2004 to 2008 impugned transactions was provided to the respondent on May 31, 2011. The appellant neither admitted nor denied the execution of such an FSA.
[5] The relevant provisions of the FSA are:
Responsibility for use of your cheques – You are in the best position to discover a forged or unauthorized cheque or other Instrument or a material alteration to a cheque or other Instrument drawn by you. All transactions with your cheques will be reflected in your account, even if you did not perform or authorize the transaction. You are responsible for all use, including any forgery, of your cheques or other Instruments, and we will have no responsibility for such use, including any forgery, unless you prove that you took reasonable precautions to protect them and that you exercised reasonable care in examining your statement, passbook update or transaction information. You must promptly notify us of any forged or unauthorized Instrument or material alteration as soon as you discover it.
Recordkeeping – We may send you statements by ordinary mail – or other means at your direction and risk – to the most recent address you have given to us… You may also choose to view your transaction information exclusively through any electronic method that we permit and if so, you will review it on a monthly basis.
Examining your transaction information – You will promptly and carefully examine your account transaction information in your statement or passbook or through any electronic method that we permit. You will notify us in writing of any errors in the account, transaction, information or the Instruments. If we don’t receive notice from you within 30 days of the statement date, passbook update date or, for electronic method, the transaction date, you accept the statement, update, transaction information and Instruments as valid and correct, and we will be released from:
Any claim with respect to any and every item or Instrument on or in the statement for statement customers or on or in the update for passbook customers; or
From any claim with respect to any and every transaction for customers who choose an electronic recordkeeping option;
And from any other claim for negligence, conversion, breach of trust, breach of fiduciary duty or otherwise.
[Emphasis in original]
[6] The respondent claimed contribution and indemnity in third party proceedings against the appellant’s cousins.
Trial Judge’s Decision
[7] The trial judge found in favour of the appellant in his action against his cousins and awarded him approximately $1 million.
[8] The trial judge dismissed the appellant’s action against the respondent. He found that the appellant had signed the FSA. He wrote:
[T]he appellant] has not suggested that he recalls signing [the FSA]. The then Manager of Customer Service actually recalls [the appellant] signing the Agreement. There is a second bank employee who did vouch for the execution of the document as is standard procedure. A third check would have occurred before the account could be opened (again according to standard practice.)
[9] The trial judge noted that it was not seriously disputed that the verification provisions applied if the FSA was signed, and further, that it was not contested that the appellant did not comply with those provisions. He therefore concluded that the respondent was relieved of liability. He also dismissed the third party claim.
[10] The trial judge ordered that costs submissions be made in writing within three weeks of his December 23, 2013, reasons for decision. On January 27, 2014, (i.e. five weeks later) he ordered that the respondent’s costs be paid by the cousins fixed in the amount of $22,000. The next day, counsel for the appellant provided his client’s costs submissions stating that the respondent was presumptively entitled to its costs on a partial indemnity basis and that there was no particular reason to depart from that rule in this case. He invited the trial judge to fix the respondent’s costs of the action at $39,000, inclusive of disbursements and HST.
[11] Pursuant to an April 18, 2013 order, the appellant had paid $33,900 into court to the credit of the respondent as security for costs.
Grounds of Appeal
[12] The appellant appeals from the dismissal of his action against the respondent. He advances two grounds of appeal.
[13] First, he submits that the judgment should be set aside on the basis of insufficiency of reasons. Secondly, he argues that the FSA did not provide the respondent with a defence in the circumstances of this case.
[14] The appellant argues that judgment should be granted in his favour and that a new trial is not required.
[15] The respondent cross-appeals, arguing that the costs award should be varied to reflect the position advanced in the appellant’s costs submissions.
Analysis
(a) Insufficiency of Reasons
[16] The trial judge made an express finding of fact that the respondent’s Customer Services Manager actually recalled the appellant signing the FSA. The appellant submits that the trial judge erred when he failed to explain why he found as a fact that the FSA had been signed. He argues that the Manager gave conflicting evidence about the FSA at trial and on her examination for discovery and that her memory about the FSA at trial was inconsistent with her inability to recall that the appellant spoke no English. The appellant states that it was incumbent on the trial judge to address these internal inconsistencies in the Manager’s evidence.
[17] The Manager’s trial and discovery testimony was not actually in conflict. At trial, the Manager testified that she was present when the documents were executed; she had a distinct memory of the appellant signing the FSA; and it was the normal thing that the respondent would have done. She also testified that she had a memory of taking the documents and having them vouched for by another bank representative.
[18] At discovery, the Manager was asked why she thought a copy of the executed FSA existed. She indicated that an account opening number would only be generated if an FSA had been completed. She did not say that a signed FSA existed because she had seen it executed. She was not asked whether she was present when the documents were executed or whether she had witnessed or had any recollection of the appellant having signed the FSA. Furthermore, the Manager’s discovery evidence on this issue was never put to her at trial.
[19] As for the secondary vouch, the appellant argues that at trial the Manager testified that the additional signature by the respondent’s administrator reflected verification of identity, the signature’s authenticity, and the existence of a signed FSA whereas on discovery, she had not mentioned the FSA. The Manager acknowledged this at trial, but no further explanation was offered by or requested of her.
[20] Undoubtedly, it would have been preferable had the trial judge elaborated on his reasoning. However, the test on appeal is whether any deficiency in the reasons “has occasioned prejudice to the exercise of [the appellant’s] legal right to an appeal…”: R. v. Sheppard, 2002 SCC 26 at para. 33.
[21] There was ample evidence in the record to support the trial judge’s conclusion that the appellant executed the FSA. The evidence included the following:
the practices and standard procedure of the respondent suggested that a FSA had been signed. A second employee of the respondent vouched for the execution of the FSA consistent with the respondent’s standard procedures and, based on standard procedures, a third check would have occurred before the account could be opened. Additionally, based on standard procedures, an account number would be unavailable in the absence of an executed FSA.
the signature card for the account stated: “You have received a copy of the information detailing our account and related service charges and your completed copy of the Financial Services Agreement”(Emphasis added). The appellant placed his signature immediately below this acknowledgement. While the appellant did not speak English, one of his cousins translated for him. No defence of non es factum was advanced.
one of the cousins testified that he had seen the appellant sign the agreements. His evidence on this issue did not appear to be challenged.
the appellant did not deny signing the FSA; he simply could not remember.
the appellant had opened bank accounts in Switzerland, Spain and Israel and knew there were terms associated with bank accounts. He opened another account at the respondent bank on the same day as the account in issue and signed a FSA for it.
[22] In the context of the other available evidence, the absence of an actual conflict in the Manager’s evidence, the failure to put what the appellant now claims to be an inconsistency in the discovery evidence to the Manager at trial, and the appellant’s admission that he could neither confirm nor deny that he signed the FSA, the appeal should not be allowed on the basis of insufficiency of reasons. It is clear from the reasons, when read in the context of this record, what the trial judge decided and why he decided as he did.
[23] We would not give effect to this ground of appeal.
(b) Interpretation of the FSA
[24] The appellant submits that a properly drafted verification agreement may provide the respondent with a complete defence, but in this case, the trial judge misconstrued the FSA and erred in finding that the FSA protected the respondent from liability regardless of whether the appellant had acted reasonably.
[25] While there is no reference to reasonable care in clause 12, the appellant argues that clause 5 of the FSA restricts the scope of clause 12 by adding a reasonableness requirement. According to the appellant, the 30 day verification obligation created by clause 12 (and the consequent release from liability) is only available to the bank if the customer has failed to take reasonable care with respect to his account.
[26] On the issue of reasonable care, the appellant maintains that he was not permitted any means to review his account, as the respondent did not send him account statements and he did not have online access to his account. Furthermore, it must be recognized that this was a savings account, not an account from which withdrawals were expected. He submits that he satisfied the reasonable care requirement and the 30-day written verification provision did not apply.
[27] The trial judge did not provide much detail on his interpretation of the FSA. He clearly was of the view that if he found that the appellant had signed the FSA, the appellant did not seriously dispute that the verification provision applied and that the appellant had not been in compliance. Assuming without deciding that that concession was not made by the appellant, we nonetheless agree with the trial judge’s conclusion.
[28] Courts have repeatedly held that verification agreements may constitute a complete defence to a claim of unauthorized transactions: Arrow Transfer Co. v. Royal Bank of Canada, 1972 CanLII 135 (SCC), [1972] S.C.R. 845; and Don Bodkin Leasing Ltd. v. Toronto-Dominion Bank, 1998 CanLII 1101 (ON CA), 40 O.R. (3d) 262 (C.A.).
[29] Clause 11 of the FSA imposed a contractual obligation on the appellant to review his transaction information monthly. Clause 12 required the appellant to examine his account transactions and to notify the respondent in writing of any errors. In the absence of written notification within 30 days, the appellant accepted the transaction information as valid and correct and provided a release to the respondent with regard to those transactions.
[30] Construing the FSA as a whole, there is no suggestion that clause 5 adds to or varies the provisions of clause 12. Clause 12 contains no reference to clause 5. Nor are the two clauses directed to the same activity. Clause 5 recognizes the responsibility of the appellant and imposes a requirement that the appellant take reasonable care with his cheques or other instruments. This is an entirely separate requirement from the 30 day written notice provision contained in clause 12.
[31] However, even if the appellant were correct and reasonableness was a factor to consider, we would not accede to the appellant’s submissions.
[32] The trial judge made no express finding as to the reasonableness of the appellant’s conduct. This was unnecessary given his treatment of the FSA.
[33] The appellant argued that based on the record before us, this court could determine the reasonableness of his conduct. We agree.
[34] While the account was a savings account in nature, the appellant opened the account to facilitate the loan to his cousins and to periodically receive loan payments from them. The respondent offered three account review options: a passbook, statements by mail or electronic access. When he opened his account with the respondent, the appellant wished to access his account electronically. This required him to review his account monthly as described in clause 11 of the FSA and to exercise reasonable care in examining his transaction information under clause 5 of the FSA. The characterization of an account as a savings account does not permit an account holder to abdicate his responsibility to examine.
[35] Initially, the appellant accessed his account using his password. He subsequently forgot his password. He understood from his sister-in-law (who was not called as a witness) that he had to attend at the respondent. However, even though he was in Canada in 2004 and in the summer of 2005, he did not do so.
[36] His brother e-mailed the respondent about the password in 2010 and received an immediate response that included explicit instructions together with an international toll-free number. Only on June 3, 2010 did the appellant attend at the respondent and obtain a print out of his account statement. In spite of this, the appellant did not provide written notification to the respondent until one year later when, on May 31, 2011, he challenged five transactions in his account that had occurred between 2004 and 2008. One of the transactions arose from a blank cheque the appellant had provided to his cousins.
[37] By any measure, the appellant’s conduct did not reflect reasonable care. We would not give effect to this ground of appeal.
[38] In our view, the trial judge was correct in dismissing the appellant’s claim against the respondent. There is therefore no need to address the respondent’s additional defence based on the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B.
Respondent’s Cross-Appeal
[39] The respondent seeks leave to cross-appeal the trial judge’s costs order. Even though the respondent had been successful against the appellant and security for costs had been paid to its credit, the trial judge proceeded to award the respondent costs fixed in the amount of $22,000 as against the third party cousins.
[40] In our view, the trial judge erred in the exercise of his discretion. In his costs award, the trial judge wrote that he had considered the parties’ submissions on costs. However, this was not the case, since the appellant’s submissions had not been provided at that time. The trial judge might have indicated that the parties had failed to meet the time limits established in his reasons for submissions on costs and that therefore he was fixing costs in the absence of all submissions. However, he did not do that. Rather, he stated that he had considered them when, in fact, the appellant’s submissions had not yet been filed. As a result, he did not consider a concession contained in the appellant’s submissions.
[41] In these circumstances, the award of costs should be set aside. The award will be replaced with that proposed by the appellant in his costs submissions, which in our view is the only reasonable result. Accordingly, the appellant is to pay the respondent’s costs fixed in the amount of $39,000 inclusive of disbursements and HST.
Disposition
[42] The appeal is therefore dismissed. Leave to appeal the costs award is granted and the cross-appeal is allowed. The appellant is to pay the costs of the trial fixed in favour of the respondent in the amount of $39,000 inclusive of disbursements. Costs of the appeal and the cross-appeal are fixed in favour of the respondent in the amounts of $12,500 and $2,000 respectively, both amounts being inclusive of disbursements and HST.
Released:
“RJS” “Robert J. Sharpe J.A.”
“APR -7 2015” “S.E. Pepall J.A.”
“R. van Rensburg J.A.”