Pardhan v. Bank of Montreal, (2013) 303 O.A.C. 45 (DC)

• Jurisdiction: Ontario
• Judge: Lederer, J.
• Court: Superior Court of Justice of Ontario (Canada)
• Citation: (2013), 303 O.A.C. 45 (DC),2013 ONSC 355
• Date: 16 October 2012

Pardhan v. Bk. of Mtrl. (2013), 303 O.A.C. 45 (DC)

MLB headnote and full text

Temp. Cite: [2013] O.A.C. TBEd. MR.015

Alnasir Pardhan (plaintiff) v. Bank of Montreal (defendant)

(410/12; 08-CV-350772 CP)

Inayet Kherani (plaintiff) v. Bank of Montreal (defendant)

(409/12; CV-08-00353703-00CP; 2013 ONSC 355)

Indexed As: Pardhan v. Bank of Montreal

Court of Ontario

Superior Court of Justice

Divisional Court

Lederer, J.

January 21, 2013.

Summary:

Damji defrauded investors of more than $77,000,000, more than $54,000,000 of which were deposited in corporate and personal bank accounts. The funds, given to Damji in trust, were either deposited into a corporate account, then into his personal account, or directly into his personal account (which was not a trust account). The funds were then dispersed to offshore gambling establishments. At one point, the bank, based on concerns arising from its monitoring of account transactions, closed the accounts. Damji was arrested, pleaded guilty to fraud, and was sentenced to 7.5 years' imprisonment. Investors commenced two related class actions (one respecting each account).

The Ontario Superior Court, in judgments reported [2012] O.T.C. Uned. 2229 and [2012] O.T.C. Uned. 2230, certified class actions against the bank for "knowing receipt", "knowing assistance" and "negligence". The bank moved for leave to appeal the certification orders, arguing that the last two claims ("knowing assistance" and "negligence") were foreclosed by s. 437(3) of the Bank Act, which provided that "a bank is not bound to see to the execution of any trust to which any deposit made under authority of this Act is subject".

The Ontario Divisional Court, per Lederer, J., denied leave to appeal. It was not plain and obvious that s. 437(3) foreclosed a "knowing assistance" claim. Respecting the negligence claim, it was also "not plain and obvious that earlier cases have determined that there can be no duty of care attributed to a bank based on constructive, as opposed to actual knowledge".

Banks and Banking - Topic 3124

Bank deposits - Duties of bank respecting deposits - Duty of inquiry - Damji defrauded investors of more than $77,000,000, more than $54,000,000 of which were deposited in corporate and personal bank accounts - The funds, given to Damji in trust, were either deposited into a corporate account, then into his personal account, or directly into his personal account (which was not a trust account) - The funds were then dispersed to offshore gambling establishments - At one point, the bank, based on concerns arising from its monitoring of account transactions, closed the accounts - Damji was arrested, pleaded guilty to fraud, and was sentenced to 7.5 years' imprisonment - Investors commenced two related class actions (one respecting each account) - The bank sought leave to appeal court orders certifying the class actions, which claimed that the bank was liable for "knowing receipt", "knowing assistance" and "negligence" - The bank argued that the last two claims ("knowing assistance" and "negligence") were foreclosed by s. 437(3) of the Bank Act, which provided that "a bank is not bound to see to the execution of any trust to which any deposit made under authority of this Act is subject" - The Ontario Divisional Court, per Lederer, J., denied leave to appeal - It was not plain and obvious that s. 437(3) foreclosed a "knowing assistance" claim - Respecting the negligence claim, it was also "not plain and obvious that earlier cases have determined that there can be no duty of care attributed to a bank based on constructive, as opposed to actual knowledge" and not plain and obvious that any prima facie duty of care should be negatived by policy considerations - See paragraphs 1 to 65.

Practice - Topic 209.3

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class or representative actions - Certification - Considerations (incl. when class action appropriate) - [See Banks and Banking - Topic 3124 ].

Practice - Topic 209.9

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class actions - Appeals (incl. leave to appeal) - [See Banks and Banking - Topic 3124 ].

Cases Noticed:

1176560 Ontario Ltd. et al. v. Great Atlantic & Pacific Co. of Canada Ltd. (2003), 169 O.A.C. 343; 2003 CarswellOnt 998 (Div. Ct.), refd to. [para. 9, footnote 2].

Heward et al. v. Eli Lilly & Co. et al., [2007] O.T.C. 1530; 2007 CarswellOnt 4363 (Sup. Ct.), refd to. [para. 9, footnote 2].

Hunt v. Carey Canada Inc. - see Hunt v. T & N plc et al.

Hunt v. T & N plc et al., [1990] 2 S.C.R. 959; 117 N.R. 321, refd to. [para. 12, footnote 5].

Labourers' Pension Fund of Central and Eastern Canada et al. v. Sino-Forest Corp. et al., [2012] O.T.C. Uned. 1924; 2012 ONSC 1924, refd to. [para. 12, footnote 5].

Spina et al. v. Shoppers Drug Mart Inc. et al., [2012] O.T.C. Uned. 5563; 2012 ONSC 5563, refd to. [para. 12, footnote 5].

Fonthill Lumber Ltd. v. Bank of Montreal, 1959 CarswellOnt 169 (C.A.), refd to. [para. 14, footnote 6].

Andersen (Arthur) Inc. v. Toronto-Dominion Bank et al. (1994), 71 O.A.C. 1; 1994 CarswellOnt 233 (C.A.), refd to. [para. 14, footnote 6].

Hill et al. v. Hamilton-Wentworth Regional Police Services Board et al., [2007] 3 S.C.R. 129; 368 N.R. 1; 230 O.A.C. 260; 2007 SCC 41, refd to. [para. 20, footnote 13].

Cooper v. Registrar of Mortgage Brokers (B.C.) et al., [2001] 3 S.C.R. 537; 277 N.R. 113; 160 B.C.A.C. 268; 261 W.A.C. 268; 2001 SCC 79, refd to. [para. 21, footnote 14].

Cooper v. Hobart - see Cooper v. Registrar of Mortgage Brokers (B.C.) et al.

Dynasty Furniture Manufacturing Ltd. et al. v. Toronto-Dominion Bank, 2010 CarswellOnt 1241 (Sup. Ct.), affd. [2010] O.A.C. Uned. 339; 2012 CarswellOnt 169 (C.A.), refd to. [para. 21, footnote 15].

Ramias v. Johnson et al., [2009] A.W.L.D. 3266; 475 A.R. 387; 2009 ABQB 386, refd to. [para. 21, footnote 16].

Semac Industries Ltd. et al. v. 1131426 Ontario Ltd. et al., [2001] O.T.C. 649; 12 B.L.R.(3d) 88 (Sup. Ct.), refd to. [para. 27, footnote 22].

B.D. et al. v. Children's Aid Society of Halton Region et al. (2007), 365 N.R. 302; 227 O.A.C. 161; 2007 SCC 38, refd to. [para. 33, footnote 34].

Williams v. Toronto (City) (2011), 287 O.A.C. 41; 2011 CarswellOnt 14735; 2011 ONSC 6987, refd to. [para. 38, footnote 39].

Haskett v. Trans Union of Canada Inc. (2003), 169 O.A.C. 201; 63 O.R.(3d) 577; 2003 CarswellOnt 692 (C.A.), refd to. [para. 39, footnote 42].

Glover et al. v. Toronto (City) et al., [2009] O.T.C. Uned. 932; 2009 CarswellOnt 1985 (Sup. Ct.), refd to. [para. 48, footnote 63].

Fulawka v. Bank of Nova Scotia, [2010] O.T.C. Uned. 1148; 2010 ONSC 1148, refd to. [para. 50, footnote 69].

Fulawka v. Bank of Nova Scotia (2012), 293 O.A.C. 204; 2012 CarswellOnt 7951 (C.A.), refd to. [para. 51, footnote 70].

Hollick v. Metropolitan Toronto (Municipality) et al., [2001] 3 S.C.R. 158; 277 N.R. 51; 153 O.A.C. 279; 2001 SCC 68, refd to. [para. 51, footnote 71].

Singer v. Schering-Plough Canada Inc., [2010] O.T.C. Uned. 42; 2010 CarswellOnt 79; 2010 ONSC 42, refd to. [para. 52, footnote 72].

Authors and Works Noticed:

Waters, Donovan W.M., The Law of Trusts in Canada (3rd Ed. 2005), p. 499 [para. 16, footnote 10].

Counsel:

Maurice J. Neirinck and Michael McQuade, for the plaintiffs in both actions;

Irving Marks and Barbara Green, for the defendant in both actions.

These motions for leave to appeal were heard on October 16, 2012, before Lederer, J., of the Ontario Divisional Court, who released the following judgment on January 21, 2013.