CITATION:
Meridian
          Credit Union Limited v. Grenville-Wood Estate
2011 ONCA 512

DATE: 20110712

DOCKET: C51739

COURT OF APPEAL FOR ONTARIO

OConnor A.C.J.O., Cronk and Rouleau JJ.A.

BETWEEN

Meridian Credit Union Limited

Plaintiff (Respondent)

and

(The Estate of) Geoffrey Grenville-Wood

Defendant (Appellant)

Paul Champ, for the appellant

Kelly Charlebois, for the respondent

Heard:
July 5, 2011

On appeal from the judgment of Justice W.J. Loyd Brennan of
          the Superior Court of Justice dated January 19, 2010, with reasons reported
          at
2010 ONSC 485
.
[1]

By the Court:

[1]

This is an appeal from a judgment finding the appellant
    liable for a loss sustained by his bank when the appellant unknowingly
    deposited a materially altered cheque that was then dishonoured by the payor.

[2]

The appellant, the late Mr. Geoffrey Grenville-Wood,
    agreed to facilitate a transfer of funds on behalf of a Taiwanese businessman
    whom he did not know in return for a 5% commission on the transfer.  In accordance with this arrangement, the
    appellant received a cheque payable to him for $57,000.13 in March 2005.  He deposited $2,850 (representing his
    commission) into an existing account at the respondent credit union and the
    remaining $54,150.13 into another account he had just opened with the
    respondent.  As per the instructions he
    received from the Taiwanese businessman, the appellant ordered a wire transfer
    of $41,989.14 US to a company in Tokyo.

[3]

In fact, the cheque was doctored.  It was drawn on the Royal Bank of Canada
    account of Polstar Construction Ltd., a corporation located in Brampton.  The cheque was originally made payable to
    DeMelos Construction in the amount of $355.12 but someone had altered the
    cheque to show the appellant as the payee in the amount of $57,000.13.

[4]

The alteration was discovered and the cheque was
    returned as dishonoured on June 9, 2005.  The respondent reimbursed the Royal Bank of Canada (the drawee bank) and
    then charged the amount back to the appellant.  The respondent seized $12,658.03 from the appellants accounts and
    brought an action against him for the balance of $44,342.10.  The appellant counterclaimed in negligence
    and breach of contract.  In his pleadings
    and during trial, the appellant argued that he was a victim of fraud who did
    not know that the cheque had been altered and so he should not be liable for
    the loss.

[5]

The trial judge found that the cheque had been
    materially altered and, thus, that it was void. Although there was no
    suggestion that the appellant was complicit in the forgery, the respondent had the
    right of charge-back with respect to the materially altered cheque.  As a result, the respondent was entitled to
    reverse the provisional credit given to the appellant upon deposit of the
    fraudulent cheque, debit all the appellants accounts for the full amount of
    the fraudulent cheque, and bring an action for the unrecovered balance.  Although in his reasons the trial judge refers
    to the appellants claim in negligence, he provided no reasons for dismissing
    the claim.

[6]

The appellant argues that the trial judge erred in
    finding that there had only been a provisional credit made to the appellants
    account.  In the appellants view, the credit
    to his account had become final because payment on the cheque had been made to
    the respondent (the collecting bank) by the drawee bank.  The appellant argues that once a drawee bank
    has made the payment and the collecting bank has received the funds, the collecting
    banks right of charge-back is extinguished.

[7]

In particular, The appellant submits that the Supreme
    Court of Canadas decision in
B.M.P.
    Global Distribution
Inc. v. Bank of Nova Scotia
,
    [2009] 1 S.C.R. 504, stands for the proposition that, when the funds are paid
    to the collecting bank and the hold on a cheque is lifted, the credit to the
    account becomes final and the collecting banks right of charge-back is
    extinguished.  Thereafter, the
    respondents only remedy is to sue on the basis of mistake of fact.  In an action based on mistake of fact, the
    appellant can raise the defence of change of position, a defence that,
    according to the appellant, would succeed on the facts of this case.

[8]

We disagree.  In
    our view,
B.M.P.
has no application
    to the present case.
B.M.P.
did not involve the collecting
    banks right of charge-back.  In
B.M.P.
, the drawee bank had no recourse
    against the collecting bank, yet the collecting bank still voluntarily assisted
    the drawee bank in collecting the funds from the payees account. In defending
    the payees action, both banks relied on the payment having been made to the
    payee in mistake of fact.

[9]

The scenario in
    the present case is quite different.  The
    drawee bank dishonoured the cheque the appellant had deposited on the basis
    that it had been materially altered.  The
    drawee bank returned the cheque as dishonoured to the respondent.  The respondent then exercised its right of charge-back
    against the appellants account.

[10]

Charge-back refers to a collecting banks common law
    right to reverse a credit made to a customers account because of some defect
    in the bill of exchange.  This right has
    been recognized by Canadian courts since at least the 1870s; see e.g.
Owens v. The Quebec Bank
(1870), 30 U.C.R.
    382 (Q.B.).

[11]

Although many banks simply provide for this right in
    their contract with the customer, it appears that the respondent had not.  In
Bank
    of Nova Scotia v. Sharp
(1975), 57 D.L.R. (3d) 260 (B.C.C.A.), the British
    Columbia Court of Appeal confirmed that, even absent a provision in the banks agreement
    with its customer, the bank retained the right of charge-back as it was
    inherent in its role as a collecting bank.  A collecting bank acts as a mere agent or
    conduit pipe to receive payment of the cheque from the banker on whom it is
    drawn [i.e. the drawee bank] and holds the proceeds at the disposal of his
    customer:
Sharp
at p. 263, citing
2 Hals., 3rd ed., at pp. 176-8
.

[12]

In our view, the fact that a collecting bank has
    received payment on a cheque from the drawee bank does not mean that the credit
    made to the payees account becomes final in the sense that the collecting bank
    loses its right of charge-back.  The
    collecting bank, in acting as the payees agent, assumes no liability with
    respect to the validity of the bill of exchange.  The collecting bank does not become a
    guarantor of the cheque by virtue of receiving the funds from the drawee bank
    and removing the hold on the payees account.  Although most reported cases involving charge-back are cases of NSF
    cheques where the collecting bank had not yet received the funds from the
    drawee bank, there are nonetheless numerous reported cases involving a
    dishonoured cheque and a charge-back by a collecting bank after the collecting
    bank had received payment from the drawee bank.  See e.g.
National Slag v. Canadian
    Imperial Bank of Commerce et al.
(1982), 140 D.L.R. (3d) 473 (Ont. H.C.),
    affirmed (1985), 19 D.L.R. (4th) 383 (Ont. C.A.); and
Royal Bank of Canada v. Malfara Importing & Exporting Inc.
,
    [2005] O.J. No. 1066 (S.C.).

[13]

As stated by M.H. Ogilvie in her text,
Bank and Customer Law in Canada
(Toronto:
    Irwin Law, 2007), at p. 291:

There would appear to
    be no limitation on the time period within which a charge-back can be made, but
    it should probably be within a reasonable period of time as a matter of equity
    to the customer in knowing the state of the account.

Further, as held by this court in
National Slag
, at p. 383, a delay by the
    collecting bank in notifying the customer does not turn a worthless cheque, by
    some legal legerdemain, into a good one.  It is not suggested in the present case that there was a delay by the
    respondent in advising the appellant once the respondent received notice that
    the cheque had been dishonoured.

[14]

The appellant further submits that the trial judge
    erred in law by failing to allow the appellants counterclaim in negligence.  Specifically, the appellant argues that the respondent
    owed a general duty of care to its customer to exercise the skill and care of a
    reasonable banker, and that it breached this duty.  The appellant argues that the respondent had
    been told of the circumstances surrounding the appellants receipt of the
    cheque as well as the fact that the bulk of the funds would be sent by the
    appellant to Japan.  As a result, the
    appellant maintains that the respondent had a duty to advise the appellant that
    although the cheque had cleared, the credit could not be considered final and might
    later be reversed if the cheque was dishonoured by the drawee bank.

[15]

Unfortunately, the trial judge did not give any reasons
    for dismissing the negligence claim.  However, as noted by the respondent, the focus of the negligence claim
    in the pleadings and at trial was not as the appellant now argues, i.e. the
    duty to advise him of the possibility of a later reversal of the credit.  Rather, the focus in the pleadings and at
    trial was on the respondents failure to discover the material alteration and
    the respondents conduct after it was advised that the cheque had been
    dishonoured.

[16]

In our view, this ground of appeal has no merit.  The respondent had no duty to warn the
    appellant in the circumstances of this case.  The appellant was the person best situated to prevent the loss and to
    make inquiries as to the validity of the cheque purportedly issued to him.  At the appellants request, the respondent
    advised him as to whether there were sufficient funds in the payors
    account.  The respondent did not and
    could not have given further assurances with respect to the validity of the
    cheque nor could it reasonably have known that the cheque would be later
    dishonoured.  There was, therefore, no
    breach of a duty of care by the respondent.

[17]

For these reasons, the appeal is dismissed.  The parties have indicated that they would
    likely be in a position to reach an agreement on costs.  If they are unable to agree, the respondent shall
    submit brief submissions within two weeks hereof and the appellant shall submit
    a brief response two weeks thereafter.

D. OConnor A.C.J.O.

E.A. Cronk J.A.

Paul Rouleau J.A.

RELEASED: July 12, 2011

[1]
The
    style of cause in the proceeding below was
Desjardins
    Credit Union Inc. v. (The Estate of) Geoffrey Grenville-Wood
. By order of
    the Deputy Registrar of the Court of Appeal dated June 28, 2011, the style of
    cause has been changed to
Meridian Credit
    Union Limited v. (The Estate of) Geoffrey Grenville-Wood
by virtue of a
    recent amalgamation agreement between Desjardins Credit Union Inc. and Meridian
    Credit Union Limited.


CITATION:
Mull v. National
          Bank of Canada, 2011 ONCA 488

DATE: 20110705

DOCKET: C53213

COURT OF APPEAL FOR ONTARIO

MacPherson, Juriansz and Karakatsanis JJ.A.

BETWEEN

John Mull

Plaintiff (Appellant) (Respondent by
          Cross-Appeal)

and

National Bank of Canada and National Bank Financial
          Inc.

Defendants (Respondents in Appeal) (Appellants
          by Cross-Appeal)

Raymond M. Slattery and Catherine Francis, for the appellant
          John Mull

Linda Plumpton and Justin Necpal, for the respondents

Heard:  June 29, 2011

On appeal from the order of Justice Colin Campbell of the
          Superior Court of Justice dated December 17, 2010.

ENDORSEMENT

[1]

This is an appeal by the appellant, Dr.
    John Mull, from the Order of Campbell J. staying and dismissing his action
    pursuant to s 106 of the
Courts of
    Justice Act
, R.S.O. 1990, c. C-43 and Rule 21.01(3
)(
d)
    of the
Rules of Civil Procedure
.

[2]

Campbell J. found that to permit this
    claim, well known to the appellant at the time of the restructuring, to proceed
    would operate as a manifest unfairness to the other market participants,
    including the respondents, who compromised their claims as part of the Plan of
    Compromise and Arrangement under the CCAA that restructured the Canadian market
    for ABCP.

[3]

The appellant submits that the motion judge
    erred in principle by not accepting the facts pleaded as proven, by making
    findings of prejudice without evidence, and in not properly articulating or
    applying the test for granting a stay.

[4]

We reject these grounds of appeal.

[5]

To the extent that the motion judge
    referred to any significant facts or circumstances not part of the pleadings,
    they were reasonable inferences available to him from the pleadings, the record
    and the circumstances of the prior proceedings.

[6]

The motion judge exercised his discretion
    to stay the appellants claim as an abuse of process on the basis of the
    Release that formed part of the Plan. He considered the purpose of the Plan,
    the context and language of the Release and concluded that the Release clearly
    applied to bar the claims asserted in this action. It is implicit in his
    decision that he considered that it was the clearest of cases, or plain and
    obvious and beyond doubt that the Release disposed of this claim.

[7]

The appellant argues that it is not plain
    and obvious that the Release bars this claim, which is founded in contract and
    arises from the respondents publicly announced re-purchase program, or
    alternatively based upon the way the respondents set up his account. He submits
    that the claim does not relate to the ABCP market claims and the Release was
    not intended to relieve the respondents of their contractual obligations
    outside the provision of the Plan.

[8]

We do not accept the appellants
    submissions that this claim could be characterized as unrelated to the Plan or
    falling outside the scope of the Release; that on a purposive approach, the
    Release could be construed as limited only to tort or similar claims that would
    give rise to third party proceedings; or that such a determination could be
    made only at trial, with a full factual matrix.

[9]

As noted by this court in the previous
    appeal, in the context of these CCAA proceedings, the Release was a necessary
    component of the Plan and is very broadly drafted and bars all claims relating
    to ABCP, including those against the respondents, except for claims for fraud
    which were specifically carved out. The language of the Release itself clearly
    captures any claims whether in tort or contract ... relating to or otherwise
    in connection with the ABCP market in Canada, the business and affairs of any
    of the Released Parties relating to or otherwise in connection with the
    Affected ABCP and arising out of any activities undertaken as a result of the
    Standstill, in anticipation of or preparation for the restructuring of the Affected
    ABCP or CCAA Proceedings.

[10]

Finally, the appellant argues that the motion judge
    erred by relying upon estoppel principles in the absence of a full record. In
    particular, the appellant submits that he could not have changed the market
    restructuring, could not have opted out of the Plan, and that it was not
    appropriate to have raised his claim in the sanction hearing because the
    Monitor had advised him that it was not relevant to the matters before the
    court in the CCAA proceeding.

[11]

The circumstances surrounding the appellants
    participation in the CCAA proceedings were relevant to the motion judges
    exercise of discretion in this case. The motion judge noted the appellants
    active participation in the CCAA proceedings and in the challenge to the scope of
    the Release through his legal counsel, as part of the Ad Hoc Committee of
    Investors. Further, the court was specifically advised of the general nature of
    the appellants claim for the purpose of adjudicating on the scope and fairness
    of the release in the sanction hearing.

[12]

The motion judge concluded that it would be unjust for
    the appellant to proceed with his claims for the full value of his original
    ABCP notes, when the other note holders had received only a portion of the
    value of their notes under the Plan. He noted that the appellant had voted in
    favour of the Plan and had not brought a motion to carve out his claim, nor
    sought any determination that his claim was not caught by the release, nor
    joined in the appeal relating to the scope of the Release.

[13]

We agree with the motion judge that it is not
    appropriate for this claim to proceed in isolation. We see no error in
    principle in the exercise of his discretion. The appeal is dismissed.

[14]

The cost award in this case was unusual. However, the
    motion judge was aware of all the circumstances, not only in this motion but in
    the underlying CCAA proceedings. He was in the best position to weigh the
    competing factors and to determine what was fair and reasonable in these
    particular circumstances. We defer to the exercise of his discretion in this
    case.

[15]

The appeal and cross-appeal are dismissed. The
    respondents shall have costs fixed in the amount of $20,000, inclusive of
    disbursements and HST.

J.C.
    MacPherson J.A.

R.G.
    Juriansz J.A.

Karakatsanis
    J.A.


CITATION:
Muskoka Fuels v. Hassan Steel
          Fabricators Limited, 2011 ONCA 495

DATE: 20110706

DOCKET: C51518

COURT OF APPEAL FOR ONTARIO

Rosenberg, Feldman and Juriansz JJ.A.

BETWEEN

Muskoka Fuels

Plaintiff (Respondent)

and

Hassan Steel Fabricators Limited

Defendant (Appellant)

Shannon Puddister and Louise Moher, for the appellant

David Zuber and Karim Hirani, for the respondent

Heard: February 1, 2011

On appeal from
          the judgment of Justice Susan E. Healey of the Superior Court of Justice
          dated December 11, 2009, with reasons for judgment reported at 2009 CanLII
          78887 (ON S.C.) and reasons for costs reported at 2010 ONSC 1221.

COSTS ENDORSEMENT

[1]

We
    dismissed this appeal and allowed the respondents cross-appeal of the trial
    judges costs decision on May 6, 2011, and asked for written submissions on
    costs of the trial and the appeal.

[2]

The
    parties have agreed on costs of the appeal and cross-appeal in the amount of
    $10,000 inclusive of disbursements and applicable taxes.

[3]

The
    respondent has submitted a Bill of Costs seeking a total of $76,244.00 in trial
    fees. Several factors are particularly relevant in determining the costs of the
    trial.

[4]

Before
    trial, the respondent made a Rule 49 offer to settle dated September 4, 2008.
    However, departure from the normal operation of the rule is warranted because
    the statement of claim was amended in April 2009 to add a claim for breach of
    s. 15 of the
Sale of Goods Act
,
    R.S.O. 1990,
c
. S-1. That claim was the basis on which
    this court dismissed the appeal. We would not award the respondent substantial
    indemnity costs before the date of the amendment.

[5]

We
    also consider that the preparation time of the action, and to some extent the
    trial time, were unduly lengthened by causes of action that ultimately played
    no role in the appellants liability.

[6]

As
    well, the amount the respondent seeks for costs is disproportionate to the
    amount recovered at trial: $66,380.39 plus prejudgment interest. For example,
    the amount included in the Bill of Costs for time travelling and $4,100 for the
    preparation of the Bill of Costs is disproportionate to the size and recovery
    of the claim.

[7]

Considering
    these factors, we fix the respondents costs of the trial in the amount of
    $35,000 plus disbursements in the agreed upon amount of $24,607.01, plus
    applicable taxes.

M. Rosenberg J.A.

K. Feldman J.A.

R.G. Juriansz J.A.