A look at key pandemic-era banking litigation cases

6 minute read
03 February 2022


Gowling WLG's Canadian Banking Litigation Group is pleased to present a recap of decisions rendered in 2020 and 2021 in the area of banking litigation. This year's annual report is truly comprehensive, so we've carefully curated a selection of key decisions, listed below, we thought would be of particular interest to you.

As one of the strongest and most diverse teams of its kind in Canada, Gowling WLG's Banking Litigation Group has a long and distinguished history of successfully litigating cases on behalf of the majority of Canada's Schedule I banks, as well as Canada's top corporations and other financial industry participants.

We trust you will find this resource both in-depth and insightful, and should you have any queries about the cases or our practice group, please contact any member of our team.

Click here to download the full annual report

Noteworthy banking litigation cases

A payment order for an electronic transfer of funds (wire transfer) is not a bill of exchange and is not governed by the Bills of Exchange Act but rather constitute a mandate from the account holder to its bank.

In 2020, the Supreme Court dismissed an appeal of a 2019 decision by the Québec Court of Appeal. The judgment involved a case of phishing against Coop fédérée who issued a payment order authorizing its financial institution, the National Bank of Canada, to carry out a transfer of funds in the amount of $4.9 M USD to the account of a designated beneficiary in a Hong Kong SAR, China (hereinafter referred to as "Hong Kong") bank. When Coop fédérée realized the scam, the funds had already been depleted and thus, Coop fédérée filed a suit against its insurers.

Bank does not owe a general duty of care to customers to prevent fraud by an insider of the client.

This case sets out the scope of a bank's obligations to a client who has been defrauded by an insider of the client. Banks do not owe a general duty of care to customers to prevent insider abuse. Even if a duty of care existed in this case, TD Bank did not fall below the standard of care of a reasonable banker. This case also serves as a reminder that the court should consider facts as they were known at the relevant time. Hindsight should not be used to impose liability on financial institutions based on years of after-the-fact forensic examination and tracing of funds by a third party.

Cases that impacted the financial services industry

Bank does not need to provide any explanation to its customers prior to closing their account, but it must provide a reasonable notice and needs to maintain its services during said notice period.

Bank may also be allowed to close the account without notice for a default stipulated in the banking agreement, but must raise the default at the time of the closing of the account and not after.

Class action cases worth noting

Bank's practice to charge over-the-limit fees to credit cardholders is valid.

Pilon is appealing a judgment dismissing her request for authorization to institute a class action. The respondent's banks issue credit cards with a credit limit that the cardholders are not permitted to exceed. However, occasionally, banks allow the cardholders to make one or more transactions that result in them exceeding the credit limit. Pilon argues that this practice is in breach of Section 6 of the Credit Business Practices Regulations and Section 128 of the Québec Consumer Protection Act, which prohibit lenders from increasing a credit card limit without the express consent of the consumer.

Certification granted in class action alleging the Bank had actual knowledge of fraud committed by client and owed third parties a duty to take reasonable steps to stop the fraud which might include an obligation to warn other financial institutions of the fraud.

More banking litigation cases

Download the full case summary here

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