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No Duty Of Care Owed By Correspondent Bank To Offshore Bank In Ponzi Scheme Case – Ontario Court Of Appeal – Financial Services

The Ontario Court of Appeal has released its highly anticipated
decision in McDonald v. Toronto-Dominion Bank,1
a case concerning the Ponzi scheme perpetrated by Robert Stanford.
The court noted that the scheme, through which Mr. Stanford and
others used Stanford International Bank (“SIB”) to
defraud customers of over seven billion dollars, was the second
largest Ponzi scheme in history.2

This case concerned a lawsuit brought by SIB’s liquidators
(the “Joint Liquidators”) against the Toronto Dominion
Bank (“TD”),3 which acted as SIB’s
“correspondent bank” from 1991 until SIB’s collapse
in 2009.4 The Joint Liquidators alleged that TD was
liable for US $5.5 billion for, among other things, negligent
performance of a service.5 As stated by the trial judge,
“[a]t its essence, the Joint Liquidators [sought] to impose a
duty of care to protect the bank’s customer from insider
abuse.”6 The trial judge concluded that such a duty
did not exist in this case and this finding was upheld by the Court
of Appeal.7

McDonald is noteworthy for professional services and
institutional audiences for two reasons:

  • It confirms that courts will look beyond the
    “mere identity” of the parties in determining whether a
    relationship has already been recognized as sufficiently proximate.
    This is significant because it provides parties greater flexibility
    in resisting a claim that a duty of care has already been
    established by case law.

  • The Court of Appeal confirmed that…

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