



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 appellants 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:

5.
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
.

11.
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.

12.
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 dont 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 appellants cousins.

Trial Judges 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 appellants 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 respondents costs be paid by the
    cousins fixed in the amount of $22,000. The next day, counsel for the appellant
    provided his clients 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 respondents 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 appellants costs submissions.

Analysis

(a)

Insufficiency of Reasons

[16]

The
    trial judge made an express finding of fact that the respondents 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 Managers
    evidence.

[17]

The
    Managers 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 Managers 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 respondents administrator
    reflected verification of identity, the signatures 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 appellants] 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 judges 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 respondents 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 Managers 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
    appellants 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 judges 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] S.C.R. 845; and
Don Bodkin Leasing Ltd.
    v. Toronto-Dominion Bank
, 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 appellants submissions.

[32]

The
    trial judge made no express finding as to the reasonableness of the appellants
    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 appellants 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 appellants claim
    against the respondent. There is therefore no need to address the respondents
    additional defence based on the
Limitations Act, 2002
, S.O. 2002, c. 24, Sch. B
.

Respondents Cross-Appeal

[39]

The
    respondent seeks leave to cross-appeal the trial judges 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 appellants 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 appellants submissions had not yet been
    filed. As a result, he did not consider a concession contained in the
    appellants 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 respondents 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.


