Evoy v. Doctura & Royal Bank of Canada Date:, 2011 BCPC 47

Citation: Evoy v. Doctura & Royal Bank of Canada Date: 20110204 2011 BCPC 0047 File No: 07-19003 Registry: Vancouver IN THE PROVINCIAL COURT OF BRITISH COLUMBIA BETWEEN: PATRICK EVOY CLAIMANT AND: SAMUEL DOCTURA AND ROYAL BANK OF CANADA DEFENDANTS REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE VALMOND ROMILLY Appearing in person: Patrick Evoy Counsel for the Defendant: Royal Bank of Canada: B. Harrison Appearing for Samuel Doctura : No one appearing Place of Hearing: Vancouver , B.C.

Date of Hearing: June 3, and July 13, 2010 Date of Judgment: February 4, 2011 [ 1 ] This is a claim by the Claimant for a refund of monies deducted from his account as a result of a dishonoured cheque deposited by him into his account and returned to the defendant bank as dishonoured. [ 2 ] On or about November 23, 2005 the Claimant agreed with someone calling himself Samuel Samonte to sell his motorbike to him for the sum of $7,100. Mr. Samonte was later on identified as Samuel Doctura against whom the Claimant was successful in obtaining a default judgment. The arrangement between the Claimant and Mr.

Doctura was that Mr. Doctura was to deposit a cheque in the amount of $7,100 into the joint account the Claimant held with his mother at the Royal Bank of Canada. The Claimant checked his account to confirm that the cheque was in fact deposited and he attended at the Insurance Corporation of British Columbia on November 29, 2005 to complete the transfer papers, thereby releasing the motorbike to Mr. Doctura. It turned out that Mr.

Doctura’s cheque was fraudulent and that he took possession of the Claimant's motorbike without paying for same and later crashed it. [ 3 ] The Claimant's evidence was that he met with the client care manager of the defendant bank, one Margaret Joseph, expecting to invest in a GIC savings bond and pay off the remainder of his student loan, but was told that there was a hold on the cheque for at least five days. He stated that Ms.

Joseph advised him that she would let him know when the cheque cleared, so that he could set up a GIC and pay off his student loan. [ 4 ] The Claimant stated that on or about December 3, 2005, five days after the cheque had been deposited he received a call from the said Margaret Joseph advising him that the hold on the check for $7,100 had been taken off, and that she was now able to complete the transactions that he required. He stated that later on the same day his mother advised him that there was an overdraft in the account, which meant that the cheque for $7,100 had not cleared. He stated that Ms.

Joseph confirmed to him that no identification was requested from Mr. Doctura when the cheque was accepted by the bank for deposit. He stated that another bank employee, Ms. Esmail, advised him that even if the bank had checked for identification they still would have accepted the cheque. The Claimant contended that the bank did not follow the procedures required to be followed by the bank in accordance with the Proceeds of Crime (Money Laundering)

and Terrorist Financing Act (the “ Proceeds of Crime Act ”), which requires the bank to verify the presenter’s identity for any cheque over $3,000. The claimant contends that the bank was negligent in informing him that the hold was taken off the cheque, thereby enabling him to purchase a GIC and pay off his student loan, only to have the entire transaction cancelled because the cheque was eventually returned dishonoured.

He contends that the bank wrongfully accepted the deposit and should be liable, being in breach of the said Act . [ 5 ] The Defendant argues that on November 20, 2005 a cheque for $7,100 was deposited into the Claimant's account and a five day hold was put on the deposit. The defendant stated that on or about December 3, 2005 the Royal Bank of Canada removed the five day hold that had been put on the deposit. It stated that between December 3 and December 5, 2005 the cheque for $7,100 was returned to the Royal Bank.

The Defendant stated that on or about December 5, 2005 the Royal Bank of Canada adjusted the deposit in the account. The Defendant argues that the Claimant signed a Royal Bank of Canada signature card on or about September 14, 1996 and that signature card provides that by signing the signature card the signor acknowledges receipt of the client services agreement and agrees to its terms. The Defendant referred to its current Royal Bank of Canada's client services agreement which provided that it replaced all prior agreements between a customer and the Royal Bank of Canada. It also referred to

section 5 of the current client agreement which provided that the Royal Bank of Canada has the right to hold the proceeds of any cheque deposited into a Royal Bank of Canada account and that if the item deposited is returned for any reason after the hold period expires the amount will be charged to the account of the account holder. [ 6 ] It also referred to

section 7 of the client agreement which provided that the Royal Bank of Canada may adjust a deposit to an account at any time [even if the adjustment creates an overdraft or results in an account being overdrawn in excess of the overdraft limits] if a payment instrument is dishonoured, not paid or paid but subsequently returned for any reason whatsoever. It refers to

section 23 of the current client agreement which provides that the Royal Bank of Canada is not liable, even as a result of negligence, for any loss or damage to a customer resulting from "….(

b) any failure, error, or delay by any third party”. It argues that the current client agreement is substantially the same as the client services agreement that was in place in 2005 when the Claimant signed the signature card. It argues that if the Claimant suffered any loss or damage, it was due solely to the failure or error of Mr. Doctura, a third party under the client agreement.

It further argues that even if the Royal Bank of Canada did not check for identification at the time of the deposit the failure to do so did not cause or contribute in any way to the loss or damage suffered by the claimant. [ 7 ] Margaret Joseph was called to give evidence and she stated that she was not aware of when the transaction took place and that she had never seen the cheque in question and denied having any conversation with the Claimant with regards to a hold on the account.

ANALYSIS AND DECISION [ 8 ] The first issue is to which client agreement the claimant was bound-the 2005 client agreement which was given when the signature card was signed, or the client agreement which states on the front page effective May 1, 2008. It is interesting to note that the agreement effective May 1, 2008 states in

section 23 as follows: "23. Liability for damages We will not be liable for any loss, damage, or inconveniences suffered by you except in a case where there has been negligence on our part, even if we have been advised of the possibility of such damages. We will not, under any circumstances [even if we are negligent] be liable for any indirect, consequential, special, aggravated, punitive or exemplary damages whatsoever caused to you, regardless of the cause of action. In no event, even if we are negligent, will we be liable to you for any loss or damage suffered by you resulting from:

a) any failure, error, malfunction, delay or inaccessibility of any machine, or equipment,

b) any failure, error or delay by any third party,

c) your failure to fulfill any of your obligations under this agreement, or

d) any circumstances beyond our control.” [ 9 ] However, the 2005 agreement states as follows: “2. General: This Agreement and the Disclosure Statement apply to each Account. They replace all prior agreements and disclosure statements between you and me for an Account. If I sign a signature card or make a transaction on an Account, it will mean that I have received and read this agreement and the Disclosure Statement. It will also mean that I have understood and agreed with you to everything written here, in the Disclosure Statement and on the Signature Card.

Unless you otherwise agree, I must make all payments under this Agreement in money which is legal tender at the time of payment………. 8. Hold on Funds/Restrictions: You have the right to hold the proceeds of any cheque, instrument or other item deposited to an Account, and to defer my right to withdraw funds represented by such a deposit, as set out in the Disclosure Statement. You also have the right to refuse to accept a deposit to an Account.

I acknowledge that nothing in this Agreement, the Disclosure Statement or any other Agreement between you and me will prevent you from either restricting access to an Account or refusing to release funds in an Account if you are required to do so or if, in your opinion, there is unusual or suspicious activity in the Account. 9. Adjustments: You may adjust the deposit to an Account at any time if a cheque, instrument or other item is dishonoured or not paid for

any reason whatsoever I waive presentment for payment, notice of dishonour, protest and notice of protest on all cheques, instrumentsand other items requiring such action.” [10] It is to be noted that the 2005 client agreement, to which I find the Claimant is bound, is totally different from the 2008agreement to which I find the Claimant is not bound, since no evidence has been presented to suggest that the Claimant was ever inreceipt of the 2008 client agreement. It is also to be noted that there is no mention in the 2005 agreement about any restrictions onliability of the Royal Bank of Canada.

It is to be noted that it also gives the bank the authority to restrict access to an Account or torefuse to release funds if in its opinion “there is unusual or suspicious activity in the Account”.

I find that in consequence, that one of thequestions that must be asked, is whether given the fact that under the Proceeds of Crime Act, the bank is required to verify the identity ofthe depositor for any deposit over $3,000.00, whether or not a failure to do so by the bank makes it impossible or unlikely that the bankcould detect an “unusual or suspicious activity”, and whether such failure amounts to negligence, and further whether this creates anexpectation on the part of the account holder that the bank would seek to guard against such activity by at least adhering to the provisionsof the said Act. [11] The Defendant has provided as one of its authorities to support its position, the case of CAROL STONE carrying on business asZita Holdings & Cloverdale Computers v.

ROYAL BANK OF CANADA, 2009 BCPC 256 , 2009 BCPC 0256, a decision whichdeals with several of the authorities on this particular subject. The case states from paragraph 14 as follows: “

(14) The Claimant provided the court with two cases, which although not strictly on point, set out an instructive analysis of how theissue of allegations of bank negligence should be viewed. The first case is Semac Industries Ltd. v. 1131426 Ontario Ltd. (Ont. SC). In paragraph 68 of the judgment, the court states as follows: “68. I am satisfied that the test in Barclays Bank and Silverman Jewellers Consultants Canada Inc. is an appropriate standard to raise theliability.

If a bank knows of the customer’s fraud in the use of its facilities or has reasonable grounds for believing or is put on its inquiryand fails to make a reasonable inquiry, the bank will be liable to those suffering a loss from the fraud. The bank should not be liableunless it is aware of the clear probability of fraud, that is the civil standard for finding fraud. A lesser standard would be unfair to thebank and possibly unfair to the customer.”

(15) In the case at bar, the fraudster was obviously not a customer, but the decision does suggests, in my opinion, that if a bank knows ofa fraud or has reasonable grounds for believing or is put on its inquiry that if fraud exists, the bank will be liable to those suffering in lossfrom the fraud. I suspect that the position put forward by the claimant basically, is that the return of the checks as “untraceable” , shouldhave placed the bank on its inquiry that if fraud existed, and advise the claimant accordingly.

(16) The second case submitted by the Claimant, is the case of Austral Imports Inc. v. Bank of Montreal 2006 ABQB 428 . Thecase states in the judgment as follows: “12. The relationship between a bank and its customer is governed mainly by contract. A bank must comply with any express contractprovisions and, in addition, a bank owes its customer a duty to act with reasonable care and skill in carrying out its part of the contract:239199 Alberta Ltd. v. Patel (1993), (AB CA), 145 A.R. 10 (C.A). This duty is an implied term of the contract thatgoverns the relationship between a banker and its customer………

(20) The Court states at paragraphs 17 and 20 of the judgment as follows: “17. In my opinion, this case, which involves the numerous legal issues, raises a practical one. A breach of contract or negligence doesnot automatically result in damages……. 20. In my opinion, the plaintiff has not suffered any prejudice as a result of the conduct of the defendants. Had the Bank of Montréalacted within the time limits, the plaintiff could not have recovered its money. I fail to see how, by breaching inter bank rules, theplaintiff becomes entitled to damages.

The plaintiff cannot say to the defendants: “Had you done what you were supposed to do, I wouldhave suffered no loss.” [12] I find that similarly in the case at bar, the Claimant cannot say to the Defendants: “Had you done what you were supposed to do,I would have suffered no loss”. I find that while it is questionable that the Defendant failed to make due inquiry regarding theidentification of the depositor of the fraudulent cheque, that failure to make due inquiry was not the cause of the loss suffered by theClaimant.

The Claimant in this case on his own volition decided to turn over the ownership of his motorbike to a total stranger on anunderstanding that that stranger would deposit a cheque for the purchase price into his account, and that once he had confirmation of thatdeposit, he would turn over the motorbike to him.

I find that the bank is correct when it states that even if it had checked theidentification of the depositor, it did not follow that either they would have been made aware that the cheque was fraudulent, given thesophistication demonstrated by fraudsters these days, or that the depositor was not the person entitled to deposit the cheque. In otherwords I find that the checking of identification by the bank would not necessarily have disclosed the fact that it was a fraudulent cheque.

As it turned out, after the “hold” period, the cheque was eventually returned dishonoured, and the bank in accordance with its clientagreement was entitled to cancel the deposit and withdraw the funds from the claimant's account. I find that under the circumstances,the Claimant was the author of his own misfortune, and was somewhat naïve, since he chose to rely on the undertakings of a completestranger to deposit a bona fide cheque into his account, rather than having the cheque, and the funds it purported to guarantee, properlycertified and/or held before deposit, and before turning over the motorbike.

I find that the Claimant’s claim is solely against thefraudster, against whom he seems to have obtained a default judgment. [13] The Claimant's claim therefore is hereby dismissed without costs. ___________________________

V. Romilly Provincial Court Judge