Financial Institutions - Banks - Garnishment. Royal Bank of Canada v. Rastogi
In Royal Bank of Canada v. Rastogi (Ont CA, 2020) the Court of Appeal considered and dismissed an appeal by two banks that had seized funds (effectively an 'illegal garnishment') of an account-holder without authorization (they had only started a lawsuit). The underlying motion was brought under CJA 104(1) [recovery of possession of personal property], but the court converted the motion to one for summary judgment and granted the account-holder's sought relief:
The Nature of the Motion
 Rastogi’s motion was brought under Rule 44. That rule applies to a motion for an “interim order” made under s. 104(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43. That section provides:
In an action in which the recovery of possession of personal property is claimed and it is alleged that the property, Section 104 and Rule 44 speak of recovery of possession of “personal property”. That phrase is not defined in the Act or in Rule 44.
(a) was unlawfully taken from the possession of the plaintiff; or
(b) is unlawfully detained by the defendant,
the court, on motion, may make an interim order for recovery of possession of the property. [Emphasis added.]
 A credit in a customer’s bank account is treated as a debt owed by the banker to the account holder. The relationship between the bank and the account holder is one of debtor and creditor: BMP Global Distributions Inc. v. Bank of Nova Scotia, 2009 SCC 15 (CanLII),  1 S.C.R. 504, at para. 63. Although RBC Direct is not a bank, I see no reason to treat credits in the RBC Direct accounts any differently. Those credits represented a debt owed by RBC Direct to Rastogi.
 The language of s. 104 of the Courts of Justice Act and, even more so, the language of Rule 44, suggest that “personal property” means property that is tangible and capable of physical description. The security requirements addressed in rule 44.03 suggest the same interpretation. On this interpretation a debt would not constitute “personal property” for the purpose of Rule 44.
 It is unnecessary for me to come to any firm conclusion as to whether a debt is included within the phrase “personal property” in s. 104 and Rule 44. Even if the section and the rule could have application to a debt, Rastogi was not seeking an interim order for possession of property, and was not offering to post any security. Rastogi wanted the release of his funds plain and simple. The order made by the motion judge reflects the nature of the relief sought. There is nothing interim about the relief ordered by the motion judge. The relief granted was not available under Rule 44.
Should Summary Judgment be Granted on Rastogi’s Claim to the Funds held by RBC Direct and TD?
 Rastogi’s claim to the funds in RBC Direct and TD is straightforward. The credit in those accounts represents debts owed to him by RBC Direct and TD. He has demanded payment. Neither RBC Direct nor TD advanced any claim against Rastogi, much less a claim that would give rise to any right of set off. Counsel for Rastogi submits that RBC does not, merely by commencing a lawsuit in which it claims a right to the funds, acquire any right to unilaterally prevent Rastogi from obtaining those funds. Counsel contends that, absent a court order, RBC was not entitled to preemptively interfere with Rastogi’s rights in respect of his accounts at RBC Direct and TD.
 RBC’s claim that the funds should not be released to Rastogi rests on the assertion that the material filed on the motion demonstrates that RBC has an arguable claim to a restitution order with respect to the funds. RBC asserts that its remedy goes beyond damages and that the funds in those accounts in fact belong to RBC. The restitutionary claim is based on either a constructive trust flowing from Rastogi’s breach of his duties to RBC, or on RBC’s mistaken payment of the funds into Rastogi’s accounts at RBC. RBC maintains that its arguable restitutionary claim, combined with the uncontroverted evidence that some of the proceeds of the currency trading are in the accounts in issue, is enough to give RBC a valid interest in those funds and create what counsel called a “interpleader situation” as between RBC and Rastogi.
 RBC’s position confuses its undenied right to pursue its restitutionary claims and any right it has to unilaterally deprive Rastogi of his property while RBC pursues its restitutionary claim. The fact that RBC has an arguable case would certainly preclude Rastogi from obtaining summary judgment on RBC’s restitutionary claim. The mere fact that RBC has an arguable restitutionary claim, however, does not give it any right to interfere with Rastogi’s property pending a determination of the merits of that claim.
 RBC’s restitutionary claim comes down to the assertion that the funds in Rastogi’s accounts at RBC Direct and TD belong to RBC and not to Rastogi. If RBC had concerns about the disputed property disappearing before trial, it could have sought an interlocutory injunction. Had RBC chosen to do so, however, it would have been required to show more than an arguable case before it could obtain an order freezing those accounts. Under the well-known tripartite test in RJR MacDonald Inc. v. Canada (Attorney General), 1994 CanLII 117 (SCC),  1 S.C.R. 311, RBC would have been required to show:
• An arguable case (serious issue to be tried); RBC cannot escape the tripartite test for injunctive relief because the nature of the property in issue has permitted RBC to unilaterally achieve a de facto injunction without a court order. Surely RBC would not argue that it was entitled to go into Rastogi’s garage and unilaterally seize his vehicles and hold them until trial if it had an arguable case that the vehicles were purchased with the proceeds of the currency trading. I do not see how RBC’s legal position is improved because the assets in issue are debts owed to Rastogi by another bank and an affiliate of RBC.
• Irreparable harm if injunctive relief was not granted;
• The balance of convenience favoured injunctive relief.
 For whatever reason, RBC has not sought an interlocutory injunction in the two years since it started this action. RBC is not entitled to what would effectively be an interlocutory injunction merely by showing that its allegations, including those related to his restitutionary claims raise arguable issues. On the motion record, Rastogi’s entitlement to the funds vis-à-vis RBC Direct and TD is undeniable. He is their creditor. RBC’s entitlement to the funds is contingent upon RBC establishing the merits of its claim.
 Any entitlement RBC has to freeze Rastogi’s accounts pending trial is not improved merely because RBC Direct is a subsidiary of RBC. RBC accepts that the credit in Rastogi’s RBC Direct accounts constituted a debt owed by RBC Direct. While the relationship between RBC Direct and RBC permitted the latter to freeze Rastogi’s accounts by what counsel for RBC referred to as an “internal demand”, the subsidiary status does not make the debts of RBC Direct debts of RBC. The two are separate corporate entities. RBC cannot claim any right to set off of a debt owed by RBC Direct to Rastogi against a debt owed by Rastogi to RBC.
 I also agree with the motion judge’s interpretation of s. 437(2) of the Bank Act. That section gives TD the right to hold the funds in Rastogi’s account that it would otherwise be obligated to pay on demand to Rastogi. That right is triggered by RBC’s claim in which it names TD as a defendant. Section 437(2) does not give RBC any rights in respect of the funds in Rastogi’s TD account or inhibit the court’s power to make orders directing payment of funds out of those accounts.
 For the reasons set out above, RBC has offered no legal basis upon which either RBC Direct or TD can withhold the funds held by them to the credit of Rastogi. There are no issues requiring a trial in respect of Rastogi’s entitlement to those funds. Rastogi is entitled to summary judgment on his counterclaim to the extent that the claim seeks judgment directing the return to him of all funds held in Rastogi’s accounts at RBC Direct. He is similarly entitled to judgment on the crossclaim to the extent that he seeks judgment directing that TD release all funds in Rastogi’s joint account to him.