Financial Institutions - Banks - Negligence Duty of Care
. Foodinvest Limited v. The Royal Bank of Canada
In Foodinvest Limited v. The Royal Bank of Canada (Ont CA, 2020) the Court of Appeal held that a bank had no negligence duty of care to report to the customer when they learned of fraud concerns with respect to transactions the customer was involved with:
[1] The appellant (“Foodinvest”) contracted with the respondent (“RBC”) for the use of a self-service transfer facility (“RBC Express”) provided by RBC. That service allowed customers to personally transfer and receive funds from other financial institutions.
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[9] We cannot accept this submission. We agree with the motion judge’s duty of care analysis. The scope of RBC’s duty of care to Foodinvest depended on the nature of the service it provided and the terms of the contractual relationship governing that service.
[10] The service provided by RBC consisted of a self-service portal allowing Foodinvest to make and receive bank transfer on its own without the assistance or supervision of any bank personnel. The relevant agreement set out in exhaustive terms the nature and scope of RBC’s potential liability in respect of the services it offered to Foodinvest. Like the motion judge, we conclude RBC’s duty of care related specifically to the execution of the transfers made using the service provided by RBC. RBC’s duty of care extended to taking reasonable steps to ensure the transfers were properly authorized and properly carried out in accordance with the instructions provided. That duty did not require RBC to concern itself with the specifics or bona fides of the underlying transactions giving rise to the transfers.
[11] The transfers in issue were all authorized by Foodinvest. They were carried out in accordance with the intentions of Foodinvest and the instructions provided by it. If Foodinvest was cheated, its loss flows not from any failure of the service provided by RBC, but from the dishonesty of the entities Foodinvest chose to do business with.
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