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Ontario Court Of Appeal Dismisses $5B Negligence Claim Relating To Stanford Ponzi Scheme – Trials & Appeals & Compensation


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Between 1991 and 2009, The Toronto-Dominion Bank
(“TD Bank“) provided correspondent
banking services to Stanford International Bank
(“SIB“), an offshore bank in Antigua,
run by Allen Stanford. SIB sold certificates of deposit (CDs) to
investors around the world. In February 2009, at the height of the
financial crisis, SIB collapsed and was revealed to have been a
Ponzi scheme – likely the second largest in history after the
Bernie Madoff Ponzi scheme. Court appointed liquidators of SIB (the
Joint Liquidators“) sued TD Bank
alleging knowing assistance and negligence, stating that TD Bank
should be responsible for essentially all of the losses of the CD
investors – an amount in excess of US$5 billion.

Ontario Superior Court of Justice’s

The case went to trial in January 2021, and proceeded virtually
for 43 days with 29 witnesses and thousands of documents. On June
8, 2021, Justice Barbara Conway of the Ontario Superior Court of
Justice (Commercial List) dismissed the action, finding:

  1. There had been no knowing assistance: The Joint Liquidators
    admitted that TD Bank had no actual knowledge of the fraud
    perpetrated by Mr. Stanford. The question was therefore whether TD
    Bank was reckless or willfully blind to Mr. Stanford’s breach
    of his fiduciary duty. The trial judge found that there was no
    basis to conclude that TD Bank knew or suspected that Mr. Stanford
    was breaching his fiduciary duty to SIB or that TD Bank became
    aware of the need to inquire about whether Mr. Stanford was
    defrauding SIB.

  2. A duty of care in negligence did not arise as the Joint
    Liquidators failed to establish the required proximity to give rise
    to the novel duty of care proposed in the case.

  3. Even if a duty of care did arise, TD Bank did not breach the
    standard of care of a reasonable banker.

The Joint Liquidators appealed the trial judge’s

Ontario Court of Appeal’s Decision2

On November 17, 2022, the Court of Appeal released its decision,
unanimously dismissing the Joint Liquidators’ appeal.

The Court of Appeal considered three issues on appeal:

  1. Did the trial judge err in her duty of care analysis?

  2. Did the trial judge err in finding that if there was a duty of
    care, there would not have been a breach of the standard of

  3. Did the trial judge err in the interpretation and application
    of Rule 53.07 of the Rules of Civil Procedure?

Duty of Care

The duty of care analysis was divided into two parts: (i) did
the relationship between TD and SIB fall within an established or
analogous category in which a duty of care has been recognized?;
and (ii) was there sufficient proximity to ground a duty of

i. No Established or Analogous Category

The Court of Appeal confirmed that under
the Anns/Cooper  framework, establishing a duty
of care requires a two-step analysis. At the first stage, the court
asks whether the defendant owes the plaintiff a prima
 duty of care by considering proximity and
foreseeability. If a prima facie duty is
established, the analysis then moves to the second stage where the
question is whether there are residual policy considerations that
negate the imposition of a duty of care.

Under the first stage, if a relationship falls within a
previously established category, or within an analogous one,
proximity will be shown. In these circumstances, so long as the
injury is reasonably foreseeable, the first stage of the duty of
care analysis will be complete.3

Citing the Supreme Court of Canada’s decisions
in Livent  and Maple Leaf Foods,
the Court of Appeal emphasized that broad categories based merely
on the identity of the parties are insufficient to ground a
proximity relationship. Rather, courts must take a more
particularized approach, looking at both the analogous relationship
and analogous circumstances, especially where it comes to cases of
pure economic loss.

The Court of Appeal found that in this case, the trial judge
correctly recognized that the mere fact that proximity has been
recognized as existing in a bank-customer relationship in other
cases, for other purposes, was insufficient to conclude that
proximity exists for all purposes.

The Court of Appeal explained:

“like the trial judge, I disagree with the Joint
Liquidators that there is an all-encompassing category of proximity
between banks and their customers in relation to “banking
services”. This broad characterization is at odds with the
Supreme Court’s admonition
in Livent and Maple Leaf to
look beyond the mere identity of the parties.

To accept such a broad category would be to ignore that banks
undertake an extremely broad range of different activities for very
different purposes:… Therefore, to define the relationship of
proximity as simply that of a “bank-customer”
relationship is to ignore the reality that banks and their
customers are not engaged in a one-size-fits-all

As a result, the Court of Appeal concluded that the trial judge
was correct in finding that the relationship between TD Bank and
SIB did not fall into an analogous category, and therefore a fully
proximity analysis was required.

ii. Proximity Analysis

The Court of Appeal found that the trial judge did not err in
concluding that the Joint Liquidators failed to establish the
required proximity.

The Court of Appeal confirmed that in cases of pure economic
loss arising from negligent performance of a service, the proximity
analysis is driven by two factors: the defendant’s undertaking
and the plaintiff’s reliance.5

The Court accepted the trial judge’s finding that the
purpose of TD Bank’s undertaking was to act as SIB’s agent
for the purpose of transferring funds to and from SIB and its

The Court of Appeal conversely rejected the Joint
Liquidators’ position that a bank should have a duty of care to
protect its customers from insider abuse. According to the Court,
finding such a duty of care would “expand TD Bank’s
responsibilities well beyond what it undertook as a correspondent
bank. It agreed to provide correspondent banking services; it did
not, in the words of the trial judge, ‘assume the role of a
regulator, auditor or insurer’.”6

As such, the Court concluded that given the scope of TD
Bank’s undertaking, “it is simply not believable that SIB
detrimentally relied on TD Bank to effectively protect SIB from
itself.” 7  

Standard of Care

On the standard of care issue, the Court of Appeal went through
each of the Joint Liquidators’ alleged legal and factual errors
that were made by the trial judge. The Court found that the trial
judge carefully assessed the evidence, including the expert
evidence as to what a reasonable bank ought to have done, made
findings of fact, and ultimately concluded that TD Bank, in its
capacity as a correspondent bank, acted reasonably in the

In rejecting the Joint Liquidator’s arguments, the Court of
Appeal emphasized that a trial judge is entitled to reject a
witness’ evidence on certain issues and accept it on others,
stating: “This is the very work of a trial judge and it does
not lie to an appeal court to redo that work. It lies to an appeal
court to defer to those reasoned factual

The Court concluded their analysis on the standard of care issue
by affirming that the Court of Appeal “is not the forum in
which to try the case. That has already

Rule 53.07

The Joint Liquidators appealed a procedural ruling made by the
trial judge which had allowed TD Bank to recall a number of
witnesses to testify, despite the fact that they had already been
cross-examined by the Joint Liquidators under Rule 53.07 of
the Rules of Civil Procedure, R.R.O. 1990, Reg.

Rule 53.07 allows a party to summons an adverse party who has
not been called or been undertaken to be called as a witness. That
witness may be cross-examined by the party who called them or by
any other adverse party and re-examined by a party who is not
entitled to cross-examine.

At trial, the Joint Liquidators sought an undertaking from TD
Bank to call ten of its current and former employees. TD Bank would
not provide the undertaking, and so the Joint Liquidators sought to
summon and cross-examine those witnesses pursuant to Rule

The trial judge it was in the interests of justice to permit the
Joint Liquidators to cross-examine these witnesses pursuant to Rule
53.07 and to allow TD Bank to re-examine them.

Once the Joint Liquidators closed their case, TD Bank sought to
recall three of the witnesses who had already testified pursuant to
the first procedural ruling, which the Joint Liquidators opposed.
The trial judge allowed the recall of the witnesses while at the
same time directing TD Bank not to duplicate evidence that the
recall witnesses had previously given.

The Court of Appeal rejected the Joint Liquidator’s appeal
on this issue, providing the following reasons:

  1. There is nothing in the wording of Rule 53.07 that precludes a
    party from recalling a witness after refusing to undertake to call
    that witness in the first place.

  2. Pursuant to Rule 1.04(1), all rules, including Rule 53.07 are
    to be construed liberally in order to secure “the just, most
    expeditious and least expensive determination” of every
    proceeding based on its merits. To adopt the Joint Liquidators’
    interpretation would, be at odds with Rule 1.04(1), as it would
    undermine the truth-seeking function of the trial.

  3. The trial judge’s direction allowed Rule 53.07 to fulfill
    its clear purpose: it allowed the Joint Liquidators to elicit
    evidence through cross-examination from adverse witnesses in
    building their case.

  4. The trial judge’s interpretation prevents strategic
    behaviour that could deprive the finder of fact of relevant
    evidence. For instance, if the Joint Liquidators were correct in
    their interpretation of the rule, there would be nothing to stop a
    plaintiff from strategically summoning a witness, asking a single
    question, and then having that witness effectively prevented from
    giving their evidence on cross-examination or on the subsequent

The Authors acted for TD Bank at both the Ontario Superior
Court of Justice and Ontario Court of Appeal.


1 McDonald v. The Toronto-Dominion Bank
2021 ONSC 3872

2 McDonald v. The Toronto-Dominion Bank
2022 ONCA 788

3 Para. 35

4 Para 47-48

5 Para 55

6 Para. 63.

7 Para. 64.

8 Para 85

9 Para 98

10 Para. 120.

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