Court File and Parties

COURT FILE NO.: 14-60343 DATE: 20170420 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Yunsheng Du Plaintiff – and – Jameson Bank Defendant

COUNSEL: Haiyan Zhang, for the Plaintiff Gavin Tighe, for the Defendant

HEARD: February 20, 2017

REASONS FOR DECISION

Beaudoin J.

[1] The Plaintiff, Yonsheng Du (“Du”), was a victim of fraud in connection with two wire transfers conducted by the Defendant, Jameson Bank (“Jameson”). This fraud occurred when someone hacked into Du’s personal email account. Du now seeks to recover damages from Jameson who seeks an order dismissing the claim of the Plaintiff on the grounds that there is no genuine issue requiring a trial.

[2] At the same time, Du seeks to amend his Statement of Claim to add new parties and to assert new causes of action. While he also sought the production of additional documents, that part of his motion has been adjourned on consent.

The Facts

[3] The evidentiary record before me is extensive and includes affidavits, transcripts from the cross-examination on the affidavits, transcripts from the examinations for discovery and numerous exhibits. The following facts are not materially in dispute.

[4] Du is an Ottawa resident. He and his wife have operated a business in Canada for 16 years. Du has operated bank and brokerage accounts and has signed many agreements with financial institutions. At the relevant times, Jameson was a Schedule 1 Bank pursuant to the Bank Act, S.C. 1991, c. 46 and it operated a foreign exchange and payment service to small and medium businesses and individuals.

[5] In December, 2011, Du was referred to Jameson by a friend for the purposes of opening an account for foreign currency exchange. From the outset, Du communicated with Jameson by email from this email address: duwang888@hotmail.com. Du was advised that this was not an on-line account.

[6] On January 5, 2012, Du completed and signed a “Client Application Form” in order to open his account with Jameson. Just above Du’s signature, the application provided as follows:

By signing below you certify that the information provided as part of this application is accurate and complete. You authorize those individuals as listed above to provide Jameson Bank with the information required in future dealings with Jameson Bank. You acknowledge that you were provided with the terms and conditions and privacy policy (also available on the website at www.JamesonBank.com).

[7] At that time, Du indicated that his possible beneficiaries may be located in the United States or China. This information was used solely by Jameson for the creation of a “Client Risk Profile” and for assessing its own risk in relation to the account.

[8] Du acknowledged that he received a copy of the account’s Terms and Conditions, but claimed that he did not bother reading them and stated that, as a matter of practice, he never read bank contracts because he trusts the banks. Du never advised Jameson that he had not read the account agreement and application or that he disagreed with their terms until after this litigation commenced.

[9] The relevant terms of the application and account agreements are as follows:

2.2 Reliance on Instructions . Jameson may rely and act upon telephone, facsimile transmission and any other electronically transmitted instructions from or purporting to be from you (including an authorized person) and which Jameson believes in good faith to be genuine.

5. Wire transfers d) Absent gross negligence or wilful misconduct by Jameson or any of its employees, Jameson shall not be responsible or liable for any damages, losses, expenses or the like that you may directly or indirectly incur or arising from or in connection with any wire transfer. Jameson shall not be responsible for any failure, unavailability or malfunction of communications, electronic or other equipment which may result in misdelivery, nondelivery or delays in delivery of the funds transferred nor shall it be held responsible for the insolvency, neglect, conduct, mistake, default, delay, misappropriation, negligence or breach of contract by any other bank, entity or person, in connection with the wire transfer, without regard to any agency relationship those persons or entities may have with Jameson.

6. Limitation of Liability 7.3 Your Responsibility . (A) You are responsible to ensure the accuracy of settlement and delivery instructions in respect of each and every Deal (including, but not limited to, any wire instructions). Jameson shall not, in the absence of gross negligence or wilful misconduct on the part or that of its employees, be responsible for failure, delays or errors in the receipt of such instructions and Jameson shall have no liability for consequential or special damages. (B) You agree to maintain security systems, procedures and controls to prevent and detect (i) the theft of funds; ii) forged, fraudulent and unauthorized instructions and electronic transfer of funds by anyone who is not an Authorized Person; (iii) losses due to fraud or unauthorized access to the service by anyone who is not an Authorized Person.

(D) …You agree to keep any keys, access codes, security devices and verification procedures safe and confidential, and change them at least as often as the service materials specify. We may establish a routine to verify the source and authenticity of instructions you give us and may verify an instruction before acting on it. We may act on instructions that contain the verification routine without checking the authority.

8.6 Electronic Communications . Jameson may maintain a database in respect of all of your instructions, including recordings of telephone conversations. Jameson’s records will be conclusive and binding on you in any dispute, including in any legal proceeding, as the best evidence of your Deals, in the absence of clear proof that Jameson’s records are erroneous or incomplete. … You agree with Jameson that notwithstanding the risks associated with electronic communications, you hereby authorize Jameson to provide such services in compliance with the procedures established by Jameson from time to time. Any electronic communication that Jameson receives from you or in your name will be considered to be duly authorized and binding upon you. Jameson will be authorized to rely and act upon any signature appearing on a facsimile transmission that purports to be the signature of an Authorized Person.

[10] Du listed duwang888@hotmail.com as his means of electronic communication. He admits that the email address belongs to him and that his first contact with Jameson was from this email address.

[11] In his cross-examination, Du admitted he was aware of the risk of electronic communications from the outset. He also admitted that he alone could impose security protocols on his electronic communications and that he was solely responsible to protect the integrity of his email account. At that time, he said he accessed his email account on three computers and an iPad, and entered the same password for the email account all four devices. On his examination for discovery, Du changed this answer to two computers and an iPad.

[12] On discovery, Du’s evidence was that he changed the password for his email account only after the discovery of the alleged fraud. He now states in his affidavit in response to the motion, that he changed his Hotmail address password regularly.

The History of the Transactions

[13] Shortly after opening the account, Du began communicating with Jameson by email regarding a future requirement for the purchase of US currency. Between January 6, 2012 and February 6, 2012, a number of emails were exchanged between Du and Jameson. On or about February 6, 2012, Du sent instructions via email to Jameson to transfer $32,414 USD to Blandford Homes LLC in Arizona as a down payment for the purchase of a residential property. Du also requested that Lawrence Wood, a senior trader at Jameson, call him to discuss the best rate and the purchase procedure. During that call, Du advised Wood that the purchase transaction in Arizona was scheduled to close in May 2012 and that he intended to transfer the purchase funds to the account for exchange to US currency at or about that time.

[14] The transfer purchase of $32,414 USD was completed on February 6, 2012 in reliance on Du’s email instructions. An electronic confirmation of the wire transfer was sent to Du’s email address which he acknowledges receiving along with the associated terms and conditions.

[15] Between March and April 2012, Du and Jameson exchanged more emails. No concerns were raised by Du in connection with this form of communication.

[16] On May 2, 2012, there were a number of emails exchanged. An email from duwang888@hotmail.com advised that Du could only be in touch through email since he was at his best friend’s funeral service. He sought the balance of his account so that Jameson could handle some financial transactions that day. Jameson advised by email that he had a balance of $2,463.93 USD.

[17] A subsequent email from duwang888@hotmail.com advised that Du needed to send out an international wire transfer for $45,000 that day. Jameson responded by email that it could wire that amount once it had received the CAD funds to cover it. Emails were exchanged wherein Jameson offered to pick up a cheque from Du and have it certified by Du’s bank.

[18] An email from duwang888@hotmail.com advised Jameson that Du’s bank was going to wire the money. Jameson sought further clarification by email and sent the wiring instructions to Du at his email address but no transaction resulted from that exchange.

[19] On May 4, 2012, Du advised Jameson by telephone that he had a cheque for $142,000 USD ready for pickup from his home. Jameson received an email from duwang888@hotmail.com that advised that Du was not ready yet and added that his bank had already taken care of the wire transfer for him and that he would have another transfer to send on Tuesday of the following week.

[20] On May 7, 2012, a subsequent email from duwang888@hotmail.com to Jameson advised that Du had spoken to “Julie at Scotia Bank” and the cheque would be ready on Wednesday. A Jameson driver did attend at Du’s residence to pick up the cheque later that day, but the driver was unable to have the cheque certified at the Bank of Nova Scotia (BNS) where Du does his banking.

[21] The next day, Du was informed by Jameson via email that the driver would get the cheque certified at BNS. In response, Jameson received an email from duwang888@hotmail.com advising that Du had spoken to “Julie” at his bank and that everything would be ready for May 10, 2012. Julie Mariani is the name of Du’s financial advisor at BNS.

[22] On May 8, 2012, Jameson received more emails from duwang888@hotmail.com advising that he had spoken with “Julie” at BNS and that the certified cheque could be picked up from Du’s bank on Thursday.

[23] On May 10, 2012, Jameson received a further email from duwang888@hotmail.com reporting that Du had spoken to “Julie” at Scotia Bank and that the cheque was ready. Jameson reported that it already had the cheque but needed it to be certified. Jameson inquired if a new cheque was required and sought Julie’s phone number. A response from duwang888@hotmail.com provided Jameson with a phone number for “Julie” in the event there were any issues with the cheque certification. A subsequent email from duwang888@hotmail.com advised that Du’s cell phone was not working as he was in the USA. There were no issues and the funds were subsequently deposited to Du’s account.

[24] Later that day, on May 10, Jameson received an email from duwang888@hotmail.com requesting that a wire transfer of $45,000 USD be sent to EBS Bank Singapore – Account name Anthony Gee Wai Khit - which Jameson complied with. Jameson subsequently received an email from duwang888@hotmail.com acknowledging receipt of Jameson’s electronic confirmation of the wire transfer. This email further advised Jameson that a separate second wire transfer would be required and seeking the available cash balance. Jameson complied with that request.

[25] On May 11, 2012 at 12:13 a.m., Du instructed Jameson via email to wire $138,888.88 USD to “Old Republic Title Agency” in Arizona for the purchase of the Property. Approximately 40 minutes later, Du sent a second email request to wire $3000 USD to his Wells Fargo Bank account in Florida.

[26] Jameson replied by email at 8:19 a.m. to advise that it would complete the transfers but there was only $99,463.93 USD in the account because of the $45,000 USD transfer that had been made the day before. Despite Du being at home at the time this email was sent by Jameson, Du denies that he saw it.

[27] Less than 20 minutes later, at 8:34 a.m., Jameson received instructions from duwang888@hotmail.com to transfer $90,000 USD to the DBS Bank Singapore and advising that the $138,000 USD would be sent the next week, but that the $3000 USD should be sent to his Wells Fargo account in Florida. Jameson complied with these instructions and the funds were transferred as requested.

[28] Du denies having sent the reply email, but acknowledges that he did receive the $3000 USD transfer into his Wells Fargo account. Apparently Du also received an email purporting to be from Jameson later that day although this was from a slightly altered email address (eric.thompson@ jameson s bank .com). That email confirmed that the requested funds had been transferred and that the beneficiary should have the funds the following day. Jameson denies sending that email.

[29] On May 14, 2012, Jameson learned of an alleged fraud in connection with the transfers to the DBS Bank Singapore when Du contacted Jameson for confirmation that the transfer to Arizona had occurred.

[30] According to Du, his email account was hacked and the instructions provided to Jameson regarding the $45,000 USD or $90,000 USD wire transfers were unauthorized and part of an alleged fraud. However, in cross-examination, Du could not explain how the alleged fraudster would have known the details regarding the amount and timing of his cheque, when it would be ready to be picked up from him (which was communicated by telephone); the name of his financial advisor at BNS; the advisor’s phone number; the particulars of his communications with that advisor or the particulars of his Well Fargo account.

[31] Criminal charges were pursued against various individuals in Singapore who were implicit in the fraud. Du has not received any restitution from the criminal process.

[32] At the time of the impugned wire transfers, Jameson’s internal policy required Jameson to contact a client by telephone to confirm transactions in excess of $150,000 CAD; neither of the wire transfers reached this level.

[33] In June 2012, within weeks of discovering the alleged fraud, Du filed a complaint against Jameson with the Ombudsman for Banking Services and Investments (“OBSI”). On January 31, 2013, the OBSI dismissed Du’s complaint and determined that there was no basis for Jameson to compensate Du in the circumstances of the case.

[34] In April, 2014, Associated Foreign Exchange Inc. (AFEX) acquired substantially all of the business of Jameson Bank. This was reported publicly in the media.

[35] On May 30, 2014, Jameson was granted approval by the Minister of Finance to apply for continuance as a corporation under the Canada Business Corporations Act, RSC 1985, c C-44 (CBCA). On June 12, 2014, Jameson was granted a certificate of continuance to continue as Jameson International Foreign Exchange Corporation (JIFEC).

The Proposed Amendments

[36] The original Statement of Claim pled allegations of negligence only. The proposed amended Statement of Claim seeks to add claims for fundamental breach of contract, or conversion, or breach of fiduciary duty, or negligence, or gross negligence. Du also seeks an oppression remedy and damages for breach of Guideline 6 under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, S.C. 2000, c. 17 (the Act ). In addition, Du seeks to add two new defendants to his action.

[37] Jameson consents to the amendment of Du’s Statement of Claim insofar as they relate to pleading breach of contract, breach of fiduciary duty, conversion, and bad faith and to substituting JIFEC, the corporate successor of Jameson as a defendant, but Jameson does so on the basis that such a substitution does not give rise to any new or additional documentary or other disclosure obligations.

[38] Jameson opposes the proposed amendments relating to the claim for an oppression remedy, breach of Guideline 6 under the Act and the addition AFEX as a Defendant. Jameson submits that these amendments are untenable at law. It is accordingly necessary to consider all of the amendments before deciding whether there is an issue requiring trial.

[39] In Marks v. Ottawa (City), 2011 ONCA 248, 2011 CarswellOnt 2165 (C.A.), the Court of Appeal stated that, in general, amendments are presumptively approved. However, there is no absolute right to amend pleadings. Where a proposed amendment would be struck if originally pleaded, the amendment should be disallowed.

The Addition of JIFEC

[40] Jameson has already admitted in a Response to Request to Admit that JIFEC is the successor corporation of Jameson and that JIFEC shall be bound by any order and/or damages as may be awarded against Jameson. Jameson maintains that the only legal successor of Jameson is JIFEC as evidenced by federal government records; namely the approval of an application for a Certificate of Continuance, dated May 30, 2014 and the Certificate of Continuance dated June 16, 2014. I conclude that it is not necessary to add JIFEC as a separate party. The only necessary amendment as it concerns JIFEC would be to substitute its name for Jameson in the title of proceedings.

The Addition of AFEX

[41] Du alleges that AFEX is the successor to Jameson and this appears untenable given that government records clearly establish that JIFEC is the successor of Jameson. Du’s counsel has produced a recent decision of the Ontario Securities Commission: Associated Foreign Exchange, ULC, RE , 39 O.S.C.B dated February 5, 2016, wherein AFEX applied for exemptions from dealer registration and prospectus requirements with respect to the trade in and/or distribution of derivatives. It was granted that relief.

[42] The decision refers to certain facts represented by AFEX at that time:

4. The Filer acquired substantially all of the business of Jameson Bank in June, 2014. As a result of this transaction, many of the clients and Jameson Bank became clients of the filer. Many of the individuals who previously had senior roles with Jameson Bank became senior executives of the Filer.

5. The acquisition transaction was structured so that the Filer as the successor entity is not licensed or authorized to carry on the business of banking in Canada and is not subject to oversight or regulation by the Office of the Superintendent of Financial Institutions (OSFI).

6. As a result, the Filer is no longer able to rely on the provisions contained in section 35.1 of the legislation which permits certain OSFI – regulated financial institutions to enter into OTC Derivative transactions with Permitted Counterparties. The Filer carries on limited activity trading in foreign currencies with its customers.

7. The Filer is a subsidiary of associated Foreign Exchange Holdings, Inc. (AFEX Holdco). AFEX Holdco is privately owned. Through its subsidiaries, AFEX Holdco has operations around the world, including offices throughout the United States and in United Kingdom, Australia, New Zealand, Israel, Indonesia, Switzerland, Italy, Singapore, Mexico and Chile.

8. The Filer is not in default of securities legislation in any jurisdiction Canada.

[43] While there is contradictory evidence as to whether AFEX or JIFEC is the successor to Jameson, it is far from clear that AFEX should be added as a necessary party pursuant to rule 5.03 (4) having regard to JIFEC’s admission that it shall be bound by any order and/or damages as may be awarded against Jameson. If AFEX were to be added, this could only be in the context of the proposed claim for an oppression remedy which I consider next.

The Claim for an Oppression Remedy

[44] Du proposes adding a claim for an oppression remedy in the amount of $375,000. The proposed amendments are as follows:

(d) Oppression remedy

61. The Plaintiffs state that he stands to obtain a judgment in this action, and as such is a creditor, and therefore a complainant, of Jameson/ Jameson International/ AFEX under section 241.(1) of Canada Business Corporations Act and/or section 248 of the Business Corporations Act, R.S.O. 1990, c. B. 6.

62. The Plaintiff states that he reasonably expected that, should he be successful, the Jameson and/or its admitted successor Jameson International would have sufficient assets to pay for damages.

63. The Plaintiff states that, by rendering Jameson and Jameson International inoperative and non-functioning, the Defendant has been involved in self-dealing and/or has improvidently transferred and/or depleted the assets of Jameson and/or Jameson International, rendering it incapable to pay damages.

64. As such, the Plaintiff further claims, in the alternative, that Jameson/Jameson International/AFEX has conducted its business affairs in a manner which is oppressive or unfairly prejudicial to or that unfairly disregards the Plaintiff’s interests. The Plaintiff claims, as an alternative to the above (a), (b) and (c) as oppression remedy of $375,000, an amount equal to the June 2016 value of that which he lost, in addition to the general and punitive damages he claims.

[45] Jameson was neither an OBCA nor a CBA corporation at any time. It was a Schedule 1 Bank pursuant to the Bank Act, S.C. 1991, c. 46. JIFEC and AFEX are CBCA corporations. Any reference to a claim for oppression based on the OBCA is untenable.

[46] The Plaintiff’s allegation that Jameson’s sale of assets to AFEX was accomplished solely to prevent him recovering on his claim for damages is contradicted by the Ontario Securities Commission decision that he relies on. In that case, the Commission determined that this transaction was structured so that AFEX would not be subject to oversight or regulation by the Office of the Superintendent of Financial Institutions. Since AFEX could no longer rely on the provisions that permitted it to enter into OTC Derivative transactions with Permitted Counterparties, it sought and was given permission form the OSC to do so.

[47] Du admitted at his cross-examination that Jameson closed his account in January, 2014. [1] As a result, Du is neither a “complainant” nor a “creditor” within the meaning of s. 241 of the CBCA . At best, Du is a potential or contingent creditor. His success is dependent on the facts and the terms of the contract that governed the relationship between the parties. Having regard to the findings I have made, I conclude that any underlying cause of action against Jameson has no chance of success and this claim for an oppression remedy is untenable.

The Claim under the ACT

[48] Section 54 of Act requires every financial entity to ascertain the identity of a person who opens an account before conducting a foreign currency exchange transaction of $3,000 or more. This requirement does not apply where that person has signed “a signature card in respect of an account, other than a credit card, that the financial entity opens.”

[49] The interpretation section of the regulations sets out the definitions applicable to the Act and the regulations. A “signature card” is defined in s.1 as:

“signature card”, in respect of an account, means any record that is signed by person was authorized to give instructions in respect of the account.

[50] I am satisfied that the rectangular space at the bottom of the application form containing Du’s signature satisfies the definition of the signature card. Given that the transactions in issue did not arise from an opening of an account and the presence of the signature card, the Act has no application to the facts of this case. The pleading of the breach of the Act is untenable at law.

The Motion for Summary Judgment

[51] Pursuant to rule 20.04(2)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, the court is mandated to grant summary judgment if it is satisfied that there is no genuine issue requiring a trial in connection with the claim or defence.

[52] The Supreme Court of Canada determined at paras. 4 and 5 of Hryniak v. Maudlin, 2014 SCC 7 the following:

4. In interpreting these provisions, the Ontario Court of Appeal placed too high a premium on the “full appreciation” of evidence that can be gained at a conventional trial, given that such a trial is not a realistic alternative for most litigants. In my view, a trial is not required if a summary judgment motion can achieve a fair and just adjudication, if it provides a process that allows the judge to make the necessary findings of fact, apply the law to those facts, and is a proportionate, more expeditious and less expensive means to achieve a just result than going to trial.

5. To that end, I conclude that summary judgment rules must be interpreted broadly, favouring proportionality and fair access to the affordable, timely and just adjudication of claims.

[53] As a matter of public policy, where a fair and just adjudication can be achieved in a summary judgment motion, a trial is not required.

[54] In Sweda Farms v. Egg Farmers of Ontario, 2014 ONSC 1200 at para. 33 , this Court has concluded that the following analysis is required:

33. As I read Hryniak , the court on a motion for summary judgment should undertake the following analysis:

1. The court will assume that the parties have placed before it, in some form, all of the evidence that will be available for trial;

2. On the basis of this record, the court decides whether it can make the necessary findings of fact, apply the law to the facts, and thereby achieve a fair and just adjudication of the case on the merits;

3. If the court cannot grant judgment on the motion, the court should: a. Decide those issues that can be decided in accordance with the principles described in 2), above; b. Identify the additional steps that will be required to complete the record to enable the court to decide any remaining issues; c. In the absence of compelling reasons to the contrary, the court should seize itself of the further steps required to bring the matter to a conclusion.

The Breach of Contract

[55] At the time of the critical events in issue; namely May 2012, Jameson had a contractual relationship with Du which can be best described as a creditor and debtor relationship. [2] Jameson was not in any type of advisory relationship with Du. Du opened a foreign exchange account with Jameson which specifically permitted him to give instructions electronically to Jameson through a specific email address controlled solely by Du.

[56] Jameson had a common law and contractual obligation to honour its customers’ instructions and was entitled to treat its customer’s mandate at its face value. Jameson was required to act on its customers instructions so long as he or she had sufficient credit. Pursuant to the terms of the agreement, Jameson was not obligated to question any transaction which was in accordance with its mandate and was not required to question the instructions received for Du’s account. [3]

[57] In this case, Jameson was merely complying with the instructions received from Du via the email address provided by him in his application. This is the same email address subsequently used for the purposes of communicating instructions for an authorized transfer on February 6, 2012. Jameson had no reason to believe the instructions to wire transfer money from Du’s foreign exchange account to beneficiaries located in Singapore, received just over two months later, were fraudulent. The emails made reference to Du’s personal banker “Julie” at BNS and to a cheque that had been delivered to BNS for certification and disclosed other details that could only be known to Du.

[58] Moreover, Jameson was acting in accordance with the contract that governed the relations between it and Du. Du executed a contract acknowledging that he received the terms and conditions of the account agreement. The law is clear that a person is bound by an agreement to which they put their signature whether they have read the agreement’s contents or have chosen to leave then unread. Our Court of Appeal has held in Fraser Fraser Jewellers (1982) Ltd. v. Dominion Electric Protection Co. (1997), 34 O.R. (3d) 1 that failure to read a contract before signing it is not a legally acceptable basis for refusing to abide by it:

As a general proposition, in the absence of fraud or misrepresentation, a person is bound by an agreement to which he has put his signature whether he has read its contents or has chosen to leave them unread: Cheshire, Fifoot & Furmston's Law of Contract, 13th ed. (1996) at p. 168. Failure to read a contract before signing it is not a legally acceptable basis for refusing to abide by it. A businessman executing an agreement on behalf of a company must be presumed to be aware of its terms and to have intended that the company would be bound by them. The fact that Mr. Gordon chose not to read the contract can place him in no better position than a person who has. Nor is the fact that the clause is in a standard pre- printed form and was not a subject of negotiations sufficient in itself to vitiate the clause: L’Estrange v. F. Graucob Ltd ., [1934] 2 K.B. 394 at p. 403, [1934] All E.R. Rep. 16 (D.C.) ; Craven v. Strand Holidays (Canada) Ltd. (1982), 40 O.R. (2d) 186 at p. 194, 142 D.L.R. (3d) 31 (C.A.).

[59] In this case, Du admitted that he does not read agreements with banks as a matter of practice. In his affidavit filed in response, he attempted to argue that the signed application was not a contract but conceded in cross-examination, however, that he did not see the difference between the contract and an application form. [4]

[60] In the absence of fraud or misrepresentation, the signature of a party who signs a contract is irrefutable evidence of the signers’ assent to the whole contract. [5] There is no evidence that Jameson made any misrepresentation or acted fraudulently in connection with the opening of Du’s foreign exchange account or the execution of the application and account agreement.

[61] When a customer executes an agreement and confirms having received the terms and conditions, our courts have determined that customers are bound by those terms. [6] Du executed the contract acknowledging that he received a copy of the account terms and conditions at that time. By those terms, Du was made aware of the risks associated with providing instructions via email and knew that he was obligated to protect the integrity of his email account.

[62] The terms of the application and the account agreement are clear. Du was entitled to provide instructions to Jameson by email address and he did so without complaint to effect a wire transfer to a US account shortly after his opening of the foreign exchange account. Jameson was contractually entitled to rely on those instructions. Du had the sole ability and responsibility to control the security of the email account which was the source of the impugned transactions.

[63] There was no obligation in law for Jameson to question the purported transfer. Jameson’s compliance with the instructions received from Du’s email address did not breach any internal policy or any term of the agreement. The money value of the wire transfers did not require Jameson to obtain his further authorization and confirmation.

[64] In addition, there is no liability because of the contractual exclusion contained in the agreement. Du has failed to establish that Jameson was “grossly negligent” or that it acted with “wilful misconduct.” Jameson complied with the instructions received from Du’s email address; an email address he included in the application and which he had used to communicate with Jameson from the time his account was opened. The questioned email communications contained information with respect to Du’s personal banker and the delivery of a certified cheque, and as such, Jameson had no reason to doubt the authenticity of the email communications. The fact that a customer is a victim of fraud does not result in an automatic transfer of liability to the customer’s bank.

Breach of Fiduciary Duties

[65] In the absence of special facts or circumstances, the relationship between a bank and its customer is one of debtor/creditor and does not give rise to a fiduciary duty on the part of the bank. [7]

[66] In this case, s. 2.2 of the Terms and Conditions clearly states that Jameson could rely and act upon telephone, facsimile transmission and any other electronically transmitted instructions from or purporting to be from Du. Section 7.3 clearly assigned responsibilities for the accuracy of settlement and delivery instructions with respect to each and every deal to Du. Section 8.6 identified the risks associated with electronic communications and assigned responsibility for those risks to Du.

[67] Jameson did not have any unfettered or any discretion over the amounts held in Du’s account. Jameson and its agents agreed only to act on the instructions of Du or his authorized representative as clearly established by the applicable agreement from the very outset of their relationship with Du. Jameson and it agents did not provide any advice or make any representations to Du. This was not an investment account. In making the wire transfers in issue, Jameson was simply complying with the electronic instructions received from Du’s email address as it was entitled to. The facts of this case do not give rise to a fiduciary duty.

Negligence and Gross Negligence

[68] The agreement between the parties identified the risks associated with this account, namely operating on the basis of electronic communications. The agreement made it clear that Du assumed the duty of care in relation to that risk. Furthermore, the agreement established standard of care by which Jameson could be held responsible; namely “gross negligence” or “wilful misconduct.”

[69] The facts and the evidence establish that the alleged loss suffered by Du was caused by a purported fraud committed against Du by an unknown fraudster using Du’s email address to give instructions to Jameson. This is the email address used by Du in his initial contact with Jameson. Jameson had historically used that address to communicate with Du and had successfully completed a transaction while relying on that email address.

[70] There is nothing on the face of those instructions that should have alerted Jameson to a fraud or that Jameson should have rejected the instructions it had duly received from Du’s authorized email address. Those emails contain information that could only be known to Du; knowledge of a cheque to be certified and its amount, the reference to “Julie” at BNS, a reference to her phone number, and the knowledge of a Wells Fargo account in Florida.

[71] “Gross negligence” has been described as “very great negligence.” The phrase implies conduct represents the remarked departure from standards expected of responsible and competent people. [8] Du has provided no evidence on this motion of a purported industry standard of care. There is no evidence of simple negligence, let alone gross negligence.

[72] “Wilful misconduct” - “Wilful” has been accepted as meaning conduct to which is intentional as opposed to accidental. “Misconduct” means “an acceptable or improper behaviour”. [9] Jameson cannot be found to have acted unacceptably or improperly in complying with the instructions it had received.

[73] In Chriss v. The TD Bank Financial Group, 2013 ONSC 7508, the Plaintiff made a mortgage loan to an arm’s length mortgagor through his self-directed RSP account with the defendant Bank. The plaintiff’s lawyer misappropriated the funds and the plaintiff sought recovery from the defendant banks. As in this case, there was an exclusion of liability clause. The court dealt with that issue as follows at paras. 235 -238:

Exclusion of Liability

235. By executing the Mortgage Agreement and the applicable account agreement, Mr. Chriss expressly excluded TD Waterhouse and TD Canada Trust from any liability associated with the mortgage transaction and any of his associated alleged losses, save and except for such loss, damage or injury arising from gross negligence or wilful misconduct. (See Arm’s Length Mortgage Agreement Term 16 Release) Mr. Chriss has not adduced any evidence to suggest that the conduct of TD Waterhouse and/or TD Canada Trust amounts to gross negligence or wilful misconduct.

236. The terms of the applicable Account Agreements are clear and unambiguous and Mr. Chris has admitted their applicability in the circumstances. The law in Ontario is clear that where the language of a written contract is unambiguous, extrinsic evidence is not admissible to alter, vary, interpret or contradict the words used in the contract.

237. I find that in the circumstances, there is no basis in law that would preclude the defendants from relying upon the exclusion of liability clauses, in particular, where Mr. Chriss was represented by counsel at the time that the Mortgage Agreement was signed.

238. For all of these reasons, Mr. Chriss fails in establishing negligence on the part of these defendants.

[74] Similarly, I find no basis in law that would preclude the Defendant from relying on the exclusion of liability clause.

Conversion

[75] The Plaintiff relies on the decision of the Supreme Court of Canada in Boma Manufacturing Ltd. v. Canadian Imperial Bank of Commerce, [1996] 3 S.C.R. 727. The court defined conversion as follows:

31. The tort of conversion involves a wrongful interference with the goods of another, such as taking, using or destroying these goods in a manner inconsistent with the owner's right of possession. The tort is one of strict liability, and accordingly, it is no defence that the wrongful act was committed in all innocence. Diplock L.J. asserted this principle in Marfani & Co. v. Midland Bank, Ltd. , [1968] 2 All E.R. 573, at pp. 577-78 :

. . . the moral concept of fault in the sense of either knowledge by the doer of an act that is likely to cause injury, loss or damage to another, or lack of reasonable care to avoid causing injury, loss or damage to another, plays no part.

If the customer is not entitled to the cheque which he delivers to his banker for collection, the banker, however, innocent and careful he might have been, would at common law be liable to the true owner of the cheque for the amount of which he receives payment, either as damages for conversion or under the cognate cause of action, based historically on assumpsit, for money had and received.

[76] The Plaintiff argues that the fraudulent emails instructing the Defendant Jameson to transfer funds out from the Plaintiff’s account are analogous to a fraudulent cheque. In concluding that the tort of conversion applied to a cheque, the Supreme Court relied on the law applicable to Bills of Exchange and added at para 36:

The seminal discussion of conversion of cheques is found in Crawford and Falconbridge, Banking and Bills of Exchange (8th ed. 1986), vol. 2, at p. 1386:

Conversion is the remedy of the lawful possessor of chattels to have their value paid to him by a wrongful dispossessor. It is normally applied to goods and there might appear to be some difficulty in holding that a bank that has paid part of what it owes to a customer to some other person not entitled to receive it is guilty of a conversion of the customer's chattel. But any such apparent difficulty has been surmounted by treating the conversion as being of the instrument itself, that is, of the piece of paper in respect of which the payment is made. Similarly a bank that collects a sum of money under an instrument for a person not entitled to it is treated as having converted the instrument. It has been repeatedly held that a bank converts an instrument by dealing with it under the direction of one not authorized, either by collecting it or, semble (although this has not yet actually been decided) by paying it and in either case, making the proceeds available to someone other than the person rightfully entitled to possession.

[77] An email is not analogous to a cheque nor is it a Bill of Exchange, which was critical to the findings of the Court in Boma . An email is not a chattel “that can be negotiated from party to party”. There can be no liability on the part of Jameson for conversion.

Conclusion

[78] There is no doubt that that the Plaintiff is convinced that Jameson should be held responsible for his loss. His counsel has attempted to present every possible argument to support that conclusion. Regrettably, the facts and the law do not support him. The agreement he signed with Jameson is complete bar to his claims. Du and Jameson were the unfortunate victims of a fraudster who hacked Du’s email account. It was Du’s failure to secure that account that led to the loss. He assumed that responsibility and I am satisfied on the record before me that there is no genuine issue requiring a trial and that summary judgment should be granted in favour of the Defendant.

[79] The Parties are to make their brief submission as to costs, not exceeding 5 pages in length, within 20 days of the release of this Decision.

Mr. Justice Robert N. Beaudoin

Released: April 20, 2017

Footnotes

[1] Cross examination, January 11, 2017 at. P,106 Q. 462

[2] Baldwin v. Daubney (2006), 83 O.R. (3d) 308, (C.A.) at para.12

[3] Semac Industries Ltd. v. 1131426 Ontario Ltd ., 2001 CarswellOnt 3010 (S.C.J.) at paras. 52 and 53 . Aff’d 2002 CarswellOnt 2190 ; B.M.P. Global Distribution Inc. v. Bank of Nova Scotia, 2009 SCC 15, [2009] 1 S.C.R. 504 , at para. 59

[4] Cross-examination Q. 33 and 37-38

[5] Ballard v. Gaskill, [1955] 2 D.L.R. 219 (BC CA) at para. 12 , citing Lord Denning in Curtis v. Chemical Cleaning & Dyeing Co ., [K.B.} 805

[6] TD Waterhouse Canada Inc. v. Chee , 2009 CarswellOnt 991 (S.C.J.) at paras. 31 and 32

[7] Alfano v. KPMG Inc., 2000 CarswellOnt 1579 at para. 36

[8] Mcculloch v. Murray, [1942] S.C.R. 141

[9] Stetson Oil & Gas Ltd. v. Stifel Nicolaus Canada Inc., 2013 ONSC 1300 at para. 150