Duty of Care of Financial Institutions to its Customers

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On October 22, 2020, the Ontario Court of Appeal released its decision in Foodinvest Limited v The Royal Bank of Canada, 2020 ONCA 665.

The case involved a contract between Foodinvest and RBC for the use of RBC Express, a self-service transfer facility. Foodinvest alleged that RBC failed to advise Foodinvest that a Polish bank had informed RBC that there was a suspected fraud in relation to two transactions in which Foodinvest had used RBC Express to transfer funds to that Polish bank.

The Motion Judge at first instance (2018 ONSC 7742) held that RBC did not have a duty of care to advise Foodinvest of the messages it received from the Polish bank. Given that establishing a duty of care is a prerequisite for establishing negligence, the Motion Judge granted RBC’s summary judgment motion. Foodinvest appealed and the Court of Appeal has now dismissed the appeal. 

The Court of Appeal agreed with the motion judge’s duty of care analysis, relying on the principles from the Supreme Court of Canada decision in Deloitte & Touche v Livent Inc. (Receiver of), [2017] 2 SCR 855 in holding that the scope of a service provider’s duty of care to its customer depends on the nature of the services it was providing and the terms of the contractual relationship governing that service. This analysis led both the Motion Judge and the Court of Appeal to conclude that RBC’s duty to Foodinvest was limited to taking reasonable steps to ensure the transfers were properly authorized and properly carried out in accordance with the instructions provided. RBC’s duty did not extend to RBC concerning itself with the specifics or bona fides of the underlying transactions giving rise to the transfers.

This decision is helpful for clarifying to service providers, such as financial institutions, the lengths they have to go to properly execute their legal obligations. It makes commercial sense that a service provider should not be responsible for ensuring that a customer’s underlying business decisions are appropriate if this is not part of the agreed upon scope of services to be provided to the customer. The key takeaway for both service providers and customers is to ensure that the extent of the services to be provided is clearly defined in their governing contracts.

Case Information

Foodinvest Limited v The Royal Bank of Canada, 2020 ONCA 665

Docket: C66522

Date of Decision: October 22, 2020

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