COURT FILE NO.: CV-13-479658

DATE: 20130705

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: International Relief Fund for the Afflicted and Needy (Canada), (Plaintiff) and

Canadian Imperial Bank of Commerce, (Defendant)

BEFORE: Allen J.

COUNSEL:
Yavar Hameed and Akbar Mohamed, for the Plaintiff

Erica J. Baron and Keegan Boyd, for the Defendant

HEARD: June 28, 2013

ENDORSEMENT

BACKGROUND

[1] The plaintiff International Relief Fund for the Afflicted and Needy (Canada) (“IRFAN”) moves for an interlocutory injunction to restrain the defendant Canadian Imperial Bank of Commerce (“CIBC”) from ending its banking relationship with IRFAN pending the outcome of the underlying trial or alternatively the outcome of a decision by the Federal Court of Appeal, whichever occurs earlier.

[2] IRFAN is a not-for-profit organization incorporated in Ontario in 1997 which has had a banking relationship with CIBC since 2001. IRFAN has two accounts with CIBC. IRFAN’s activities involve providing financial support and other assistance to people in conflict torn areas of the Middle East. Through CIBC’s bank services, IRFAN receives funds from donations from individuals and NGOs.

[3] CIBC is a Schedule I bank that offers the type of services that meet IRFAN’s banking needs, one such service being electronic wiring services.

[4] In 2004 and 2010, Canada Revenue Agency (“CRA”) conducted audits of IRFAN. During the course of the second audit conducted in January 2010, CRA advised of its intention to suspend IRFAN’s receipting privileges. In about April 2011 pursuant to its authority under the Income Tax Act, CRA revoked IRFAN’s registration as a charity. That decision by CRA is currently under appeal by IRFAN before the Federal Court of Appeal.

[5] On March 15, 2013, CIBC sent a letter to IRFAN advising of its intention to terminate its banking services in 60 days, on May 15, 2013 (“the Termination Letter”). CIBC provides no reason for the termination. On April 8, 2013, CIBC granted an extension of the termination until June 15, 2013. The termination date has more recently been extended to July 15, 2013. This amounts to four months’ notice of termination.

[6] CRA’s decision to terminate the accounts was influenced by information it acquired from an investigation alleging involvement by IRFAN in supporting or funding Hamas, a Palestinian organization labeled as a terrorist organization by the US and Canadian governments.

ANALYSIS AND PARTIES’ ARGUMENTS

Reasonable Notice by a Bank

[7] Banks are entitled to terminate a banking relationship on reasonable notice. Banks are not required to provide an explanation for the termination so long as reasonable notice is given.

[8] Bradley Crawford’s text on banking in Canada makes the following comment:

As a general rule, the bank may terminate its relationship with any customers at any time by giving notice to that effect. A demand by a bank for repayment of all of its customer’s indebtedness to it does not necessarily qualify as such notice. It need not justify its actions by proving, or even alleging improper conduct by the customer.

… In absence of any provision in the agreement expressly or by necessary implication fixing a specific period of notice, or a fresh agreement between the parties to terminate as of a particular date, the bank must give a reasonable notice. What is reasonable is, of course, a question of fact to be determined upon all the circumstances of the case.

[Bradley Crawford, The Law of Banking and Payment in Canada, Vol. 2 (Toronto: Thomson Reuters, 2011) at 9-130.7 – 9-130.8]

[9] CIBC gave what in its view was reasonable notice but provided an explanation for termination on IRFAN’s request. CIBC advised that in making its decision it considered CRA’s decision to revoke IRFAN’s charitable status, CRA’s audit report findings and the information IRFAN provided CIBC about its operations.

[10] Courts have dealt with the issue of whether a bank is required to have a “commercially reasonable justification” to terminate a banking relationship. CIBC relies on a British Columbia Supreme Court case that addressed that issue. There are similarities between that case and the one before me.

[11] In the British Columbia case the plaintiff sought an interlocutory injunction to restrain the defendant bank from terminating its bank accounts until the trial of the action. The bank provided foreign exchange services. The bank learned the plaintiff exposed it to risks associated with money laundering and notified the plaintiff of its intention to close the accounts the following month. The bank provided extensions of the termination date but ultimately maintained its decision to close the accounts. The plaintiff brought an action alleging an implied term in the agreement with the bank that the bank would not close the account without a commercially viable reason. The court held:

The application does not require the court to carefully scrutinize the reasons for the bank’s decision to close RCG’s accounts. RCG has not raised any credible evidence tending to suggest that the decision is not a bona fide business decision made by the bank in its own interests. The question is whether there is a fair or serious question concerning RCG’s contention that HSBC is obliged to continue the relationship against HSBC’s wishes.

RCG’s primary argument is that HSBC is not entitled to close the accounts unless it establishes that it has a “commercially reasonable justification.” There is no support for this proposition in law. Such a term would be unreasonable in that it would require the court to impose a hopelessly vague and uncertain term upon parties.

… In summary there is no merit to RCB’s contention that HSBC may not terminate the banking relationship without “a commercially reasonable justification”

[RCG Forex Service Corp. v. HSBC Bank Canada, [2011] B.C.J. No. 436, at para. 23, 24, and 34, (B.C.S.C.)]

[12] The parties agree that CIBC is entitled to terminate the banking relation providing it does so on reasonable notice. They disagree whether the notice given by CIBC was reasonable and on what evidence the court should consider in determining reasonableness, that is, on how broad a factual context the court should consider.

[13] Reasonable notice in the termination of a banking relationship is to be determined by considering how long it should take for a similarly-situated organization to obtain comparable banking arrangements [Venture Capital USA Inc. et al. v. Yorkton Securities Inc. (2005), 2005 15708 (ON CA), 75 O.R. (3d) 325 (QL) (Ont. C.A.)]. What constitutes reasonable notice is to be decided based on the particular facts of the situation [Crawford, supra, at 9-130.8].

[14] IRFAN argues the facts the court should consider in looking at the length of the notice period should include CRA’s actions and the disastrous effect those actions have had on its operations. This should include, according to IRFAN, the impact of CRA’s decision on its reputation and finances and the resulting difficulty in obtaining the services of another bank. The period of notice should also take into account the particular type of services required of an international not-for-profit organization, the need for electronic wiring services and services that can accommodate continuous streams of donations into its accounts. IRFAN submits the court should also consider the further damage to its charitable operations that would result if CIBC terminated its services on July 15, 2013.

[15] CIBC argues the court should not take into account IRFAN’s particular circumstances with CRA, but rather should consider what would be reasonable in ordinary circumstances. CIBC cites Crawford who addressed a comparable circumstance:

During February 1983 certain trust and mortgage corporations, later taken into protective receivership by the Province of Ontario, were notified by their bankers that their accounts would be terminated on something greater than 30 days’ notice. According to some press reports at the time, as a result of the publicity attending the affairs of the corporation at the time, no other bank or trust company or provincial savings office would agree to act as their banker. Presumably that is of no concern to the banks serving notice of termination so long as the period of notice given by them would have been reasonable in ordinary circumstances not affected by the peculiar identity or reputation of that particular customer…

[Crawford, at 9-133]

[16] I find CIBC’s position makes legal and practical sense for a number of reasons.

[17] If the court were to consider IRFAN’s situation with CRA in deciding reasonable notice, this would be to take into account facts that could support termination with cause. This would tend to defeat the bank’s decision to terminate without cause on reasonable notice. CIBC decided to terminate the banking relationship without cause and in doing so was not required to give an explanation. CIBC did not give a reason in the Termination Letter and only explained its actions subsequently at IRFAN’s request and that explanation included concern about CRA’s actions and the results of CRA’s investigation.

[18] CRA’s action arose out of IRFAN’s relationship with CRA and hence is not a factor that is relevant to IRFAN’s relationship with CIBC and the assessment of reasonable notice.

[19] A practical problem with IRFAN’s position of course is that there is no finiteness to the notice period. Awaiting the outcome of the underlying action or the outcome of the Federal Court of Appeal proceedings would in the end allow IRFAN a notice period beyond what the common law allows.

[20] I find the notice period must be determined on the basis of what would be reasonable in ordinary circumstances not taking into consideration CRA’s actions. The parties have presented cases where courts have looked at notice periods in various circumstances such as the termination of distributorship agreements, brokerage agreements and banking services. The notice periods in the cases not dealing with banking are of less use because of the differing business contexts. The cases involving banking offer more guidance although the fact situations do differ from the case before me.

[21] In RCG Forex v. HSBC, supra, the plaintiff had seven bank accounts with HSBC in several national currencies. After learning of a risk associated with the plaintiff and money laundering, HSBC advised the plaintiff it would be closing the accounts the following month. The court did not grant injunctive relief.

[22] In B-Filer v. Bank of Nova Scotia the plaintiff had several bank accounts with the Bank of Nova Scotia. The plaintiff operated an internet banking payment service. In this case there was a written agreement that the bank could close the plaintiff’s accounts on 30 days’ notice for any reason. The bank became aware of the plaintiff’s involvement in fraudulent activities. The plaintiff sought an injunction to prevent the bank from terminating the banking relationship. The court refused to grant the injunction [B-Filer Inc. v. Bank of Nova Scotia, 2005 ABQB 704, [2005] A.J. No. 1240].

[23] In B-Filer Inc. TD Canada Trust the bank had a policy of not allowing accounts with businesses that accept payments for online gambling. The bank gave notice of intention to terminate the accounts and the plaintiff sought an injunction to prevent this. The court dismissed the application for an injunction [B-Filer Inc. TD Canada Trust, 2008 ABQB 749, [2008] A.J. No. 1397].

[24] In Sterling Rubber v. Canadian Bank of Commerce the bank terminated the plaintiff’s line of credit after a decline in the plaintiff’s financial circumstances. The plaintiff sought an injunction. With an extension, the bank gave the plaintiff three months’ notice to satisfy its indebtedness. The court denied the injunction and held that the notice period was exemplary [Sterling Rubber Ltd. v. Canadian Imperial Bank of Commerce (1991), O.J. No. 1022 (Ont. Gen. Div.)].

[25] CIBC makes a point I think is valid. That in looking at what is reasonable in the case before me, the court should note that the bank in Sterling Rubber found three months’ notice exemplary in circumstances where the bank terminated a line of credit and demanded a large sum be paid during the notice period. CIBC argues four months’ notice is generous given there is no demand for payment of money with the termination of services.

[26] It is IRFAN’s burden to show that in ordinary circumstances, not taking the CRA matter into account, a four-month notice period is not a reasonable period to allow it to organize its affairs and find a new bank.

On the Grant of an Injunction

The Tests

[27] Whether IRFAN succeeds depends on the extent to which it satisfies the tests required to obtain an injunction. The Supreme Court of Canada in R.J.R. MacDonald sets down a three-branch test for injunctive relief as follows:

(a) First a preliminary assessment must be made of the merits of the case to ensure that there is a serious question to be tried.

(b) Secondly, it must be determined whether the applicant would suffer irreparable harm if the application were refused.

(c) Finally, an assessment must be made as to which of the parties would suffer greater harm from the granting or refusal of the remedy pending a decision on the merits.

[R.J.R. MacDonald Inc. Canada (Attorney General), 1994 117 (SCC), [1994] S.C.J. No. 17, at para. 43, (S.C.C.)]

A Serious Question to be Tried

[28] The plaintiff has the burden to establish there is a serious issue to be tried. The test is more onerous depending on the nature of the injunction sought. A mandatory injunction carries a heavier burden than is the case with a prohibitory injunction. IRFAN submits the injunctive relief sought is prohibitory while CIBC submits it is mandatory.

[29] I agree with CIBC that the nature of the injunctive relief sought is mandatory. This is evident from the Statement of Claim where in the prayer for relief IRFAN seeks a permanent and interlocutory injunction, among other things, “to restrain CIBC from withdrawing services…” and “requiring CIBC to process, in the normal course of business, Canadian dollar wire transfers…”. I find the observations made by the Alberta and British Columbia courts are applicable to the case before me. RCG Forex v. HSBC, citing the findings of the Alberta Court of Queen’s Bench held:

Alberta authorities state that a customer of a bank seeking to prevent the bank from terminating the banking relationship by closing the customer’s accounts is seeking a mandatory injunction. I agree with that proposition. It applies in this case. In seeking to prevent HSBC from closing the accounts, RCG is seeking an order that compels HSBC to continue doing business with RCG against HSBC’s will.

[RCG Forex v. HSBC, supra, at para. 8, citing B-Filer Inc. v. Bank of Nova Scotia, supra, at para. 24 and B-Filer Inc. v. TD Canada Trust, supra, at para. 20]

[30] IRFAN has a more onerous test to meet than proving “a serious issue to be tried”. A plaintiff seeking mandatory injunctive relief must establish a strong prima facie case.

[31] CIBC makes the case that what IRFAN is actually seeking in requesting a permanent interlocutory injunction amounts to specific performance of a personal service contract, a form of relief courts are loathe to order because of the personal nature of the services. Specific performance is an equitable remedy ordered on rare occasions where damages would be inadequate to cover a loss. Damages are the appropriate remedy for a plaintiff claiming loss as a result of a bank failing to give sufficient notice before terminating services. Crawford addresses this point:

If the customer is able to establish that a bank acted too peremptorily in terminating a banking relationship with him, his recourse will be limited to a claim of damages. The measure in such a case would appear to be quite slight. No doubt in exceptional circumstances, a court might award a sum by way of exemplary damages to compensate the customer for embarrassment, inconvenience or foreseeable consequential damages where the bank acted other than in a good faith-effort to provide the customer with a reasonable opportunity to make alternative banking arrangements.

[Crawford, supra, at 9-134]

[32] A British text on banking law made the following comment:

However, where a banker closes an account without giving reasonable notice, an application by the customer for an injunction restraining closure pending the period of reasonable notice is unlikely to succeed. A customer’s application for such an injunction failed in Prosperity Ltd v. Lloyds Bank Ltd [(1923) 39 TLR 372] on the grounds, inter alia, that (a) an order would have amounted to specific performance of a contract to provide services of a most confidential character, and would have been a direction to the bank to constitute itself a borrower of the customer’s money as and when paid in; and (b) damages were an inadequate. In modern banking, personal services have been so far superseded by computerization that the first ground may no longer carry weight. But damages remain as adequate a remedy as they ever were, and this ground of the decision represents a substantial hurdle to a successful application for an injunction.

[Mark Hapgood, Paget’s Law of Banking (Bath, U.K.: LexisNexis Butterworths, 2007, at 153-154.]

[33] For all the reason set out above, I find IRFAN has failed to provide the court with evidence to fulfill the strong prima facie case test. It follows therefore that the less stringent test, a serious issue to be tried, has not been satisfied. I have not been persuaded that four months’ notice is not reasonable.

Irreparable Harm

[34] IRFAN has failed to meet the first test and I am not required to consider whether irreparable harm will result if an injunction is not granted. However, in the event I am incorrect in my determination on the first test, I will consider the second test.

[35] The two affidavits by Sami A. Kaoud, a member of the Board of Directors of IRFAN, contain a great deal of information. But on a motion on a paper record the information is only as valuable as the underlying support for the information. Sworn written assertions have limited value without supporting documentation. As well, the motion record contains an abundance of information that is not germane to the issue that the court has to decide.

[36] IRFAN alleges for instance that irreparable harm will result from the termination of the banking relationship because: IRFAN will default on its obligations; the donor base will be eroded; harm will come to its reputation; demise will come to the organization. The test for irreparable harm is also a weighty one. IRFAN has provided little or no support for those assertions.

[37] The Federal Court of Appeal has spoken on this and has described the type of evidentiary support for irreparable harm a plaintiff is expected to adduce when seeking the extraordinary authority of the court. General assertions are not enough; evidence must be at a convincing level of particularity that demonstrates a real probability that unavoidable irreparable harm will result; and assumptions and speculation, hypothetical and arguable assertions, unsupported by evidence have no evidentiary value [Gateway City Church v. The Minister of National Revenue, 2013 FCA 126, at paras 13-14, (F.D.C.); and Glooscap Heritage Society v. The Minister of National Revenue, 2012 FCA 255, at para. 31, (F.C.A.). See also Boehringer Ingelheim (Canada) Inc. v. Bristol-Meyers Squibb Canada Inc., 1998 14794 (ON SC), [1998] O.J. No. 4007, at para. 56, (Ont. Gen. Div.)].

[38] IRFAN has also to establish that it will suffer harm that cannot be quantified or remedied in damages [RJR-MacDonald, supra, at para. 59; B-Filer v. Bank of Nova Scotia, supra, at para 37; B-Filer v. TD Canada Trust, supra, at paras. 33 – 34]. IRFAN’s argument is that it will have difficulty obtaining alternate banking services that meet its needs if CIBC is allowed to close its accounts. Apart from assertions in that regard and lists of banks IRFAN indicates it has approached, there is insufficient particularity to the evidence to substantiate the difficulty. Even if IRFAN were able to establish the difficulty, this is not evidence of irreparable harm that would necessarily support a mandatory injunction.

[39] The court in B-Filer v. Bank of Nova Scotia was met with a similar argument:

TD submits that this type of harm is self-inflicted and cannot be used as evidence of irreparable harm that could justify a mandatory injunction. I agree. The argument that GPAY would go out of business if a mandatory injunction is not granted since other banks have successfully been able to terminate GPAY as a customer and that this is irreparable harm that should support GPAY’s application implies that GPAY has a right to banking services no matter the nature of its banking practices and the concerns and risks they may cause a bank, and that the last bank standing in a series of litigation must provide these services. This is clearly not sustainable.

[40] IRFAN points particularly to its inability to obtain services to wire funds to the Palestinian territories in Canadian dollars and the increased cost that would result from having to wire funds in another currency. IRFAN has provided no proof of that assertion but putting that aside for a moment, as CIBC points out, this evidence suggests a monetary loss that could be compensated in damages.

[41] While it is not unforeseeable that with CRA’s actions IRFAN would have difficulty obtaining other banking services, that is a matter as between IRFAN and CRA and should not be laid at the feet of CIBC through seeking injunctive relief. The irreparable harm must have been caused by CIBC.

[42] In conclusion I find IRFAN has not established that by CIBC’s conduct it has caused unavoidable irreparable harm that cannot be compensated in damages.

Balance of Convenience

[43] Again, since I have found IRFAN has not met the first and second tests it is not necessary to make a finding on the third test. For completeness I will address this test briefly.

[44] On the first test, I have found there is little merit to IRFAN’s claim against CIBC. The court in RGC Forex v. HSBC reached a conclusion that I will adopt as applicable to the facts before me:

In deciding the question of balance of convenience, I am influenced by the lack of any apparent merit in the case of the applicant, as contrasted with the extraordinary nature of the remedy sought, where the case of the applicant for irreparable harm is at best weak. I therefore, conclude that the balance of convenience is against granting the injunction sought.

[RCG Forex v. HSBC, supra, at para. 61]

[45] On the third test, the balance of convenience does not favour granting the injunction.

CONCLUSION

[46] In all the circumstances, I find this is not an appropriate case for the exercise of the court’s extraordinary equitable powers. I decline to grant the injunctive relief IRFAN seeks.

COSTS

[47] As requested, counsel delivered Costs Outlines.

[48] Pursuant to s. 131 of the Courts of Justice Act, Rule 57.01 of the Rules of Civil Procedure grants the court discretion to determine which party will be required to pay costs and the extent to which costs are required to be paid. CIBC was wholly successful at trial. In accordance with the principle that costs should follow the cause, I award costs against IRFAN. The question of the quantum of costs is then left to be decided.

[49] The factors set out under Rule 57.01 of the Rules of Civil Procedure assist the court to determine quantum, those factors include: the complexity of the proceeding; the importance of the issues; the conduct of any party that tended to unnecessarily lengthen or shorten the proceeding; whether any step in the process was improper or vexatious; and the experience of the lawyers.

[50] The Court of Appeal set down the principle that the objective of a determination on costs is to fix an amount the unsuccessful party is required to pay that is fair and reasonable rather than an amount reflecting the actual costs of the successful party [Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (Ont. C.A.)]. Fixing costs does not require the court to undertake a line-by-line analysis of a bill of costs. A balance must be made between the successful party recovering a fair and reasonable amount for services rendered and disbursements incurred and the reasonable expectations of the unsuccessful party.

[51] CIBC seeks total partial indemnity costs of $18,574.51, comprising $13,882.00 for legal fees; $1,600 for lawyers’ appearance fee; $955.62 for disbursements, together with the associated taxes of $2,136.89. IRFAN seeks total partial indemnity costs of $10,825.50 comprising $8,460 in legal fees; a $550 lawyers’ appearance fee; $1,300 for disbursements; and $515.50 in associated taxes.

[52] Considering the complexity of the motion, I find it was not especially complex although there is a dearth of case law from Ontario courts addressing a request for injunctive relief in relation to a bank terminating a banking relationship. So in that sense the issue is not common place. There was no conduct by the parties that tended to lengthen the proceedings. In fact both lawyers were amenable to my suggestions to focus their submissions on the heart of their argument rather than repeating the contents of their materials. I complimented both counsel for their able presentations.

[53] On the importance of the issue, I find from different perspectives the issues raised on this motion had critical implications for both parties. For IRFAN, the loss of its 12-year banking relationship with CIBC is of critical significance to the continuation of its charitable operations in the Middle East. For CIBC, the grant of an injunction in the circumstances would have had the effect of forcing CIBC to remain in a personal service relationship with a customer it no longer wished to serve. CIBC has a concern about the potential of adverse effects on its business of a continued relationship with IRFAN.

[54] In the circumstances, I find it appropriate to fix costs at $10,000 inclusive of disbursements and appropriate taxes. The quantum of costs is fair and reasonable and in accord with the principles set down in Boucher. Costs shall be paid within 30 days of this Order.

ORDER

[55] Order accordingly.

Allen J.

Date: July 5, 2013