Scam victim sues Richmond bank for lack of fraud warning

Scam victim sues bank

A woman who got scammed just got a second chance to hold the bank that authorized the transaction somewhat responsible.

Li Zheng decided to sue the Richmond branch of Bank of China (Canada) after losing almost $70,000 to a scammer. She turned to the Court of Appeal after her civil suit was dismissed in the Supreme Court.

Zheng had received a call from someone back in May 2018 who claimed to be with the Chinese consulate. The caller, who had Zheng’s driver’s licence number, told her she was being investigated for an international money laundering case.

She was given the option to either fly back to China and stay in jail during the investigation or transfer a deposit of funds to Hong Kong that would be returned after the investigation.

Zheng, who said she was “terrified to death” by the threats, went to the Richmond branch of the Bank of China (Canada) and asked a teller to help her transfer $69,000 to another person’s account in Hong Kong.

She claimed employees of the bank did not ask her security questions about the transfer, but the bank’s compliance officer told the court he had asked Zheng about her relationship with the Hong Kong recipient. Although he did not get a response, he said he “did not notice anything out of the ordinary.”

She also signed an application for remittance during the process, which included an exclusion-of-liability clause that absolves the bank of any responsibilities for incorrect or improper payment unless caused “solely by the negligence or wilful misconduct of the bank.”

The transfer had “practically emptied” Zheng’s account, wrote Court of Appeal judge Honourable Justice Susan Griffin in her written reasons for judgment.

Zheng realized one month later that she had fallen victim to a common scam, which was reported by the local media, and claimed the bank knew of the type of fraud at the time. She filed a civil claim against the Bank of China (Canada) in August 2020.

According to court documents, Zheng said she relied on the bank’s knowledge about financial frauds and “would have expected to be warned about such serious crimes happening in Canada.”

Her civil suit was subsequently dismissed in 2021 by a Supreme Court master, who decided there was no genuine issue for trial. When she appealed the dismissal, it was upheld by a Supreme Court judge who agreed that the bank’s duty to warn Zheng should be tried in court, but said the claim was bound to fail because Zheng can’t prove her losses were caused solely by the bank’s negligence or wilful misconduct.

Victim’s appeal allowed

Upon Zheng’s appeal, the Court of Appeal judges decided to revive her claim.

In her written reasons, Griffin rejected the bank’s claim that Zheng would have made the transaction regardless of any questions from the bank and pointed out that the bank did not file any evidence to prove whether it knew of a common scam like the one Zheng fell victim to.

“There is no evidence that the Bank warned Ms. Zheng that there was a prevailing fraud of this sort. Had it done so, Ms. Zheng may well have realized she was being duped and halted the transaction,” she wrote.

She added that the bank’s knowledge of scams of the sort and “the unusual nature of (Zheng’s) transaction” could form a basis for the bank to owing Zheng a duty to warn her about the potential scam.

Griffin also agreed with Zheng that signing the application for remittance with a clause to exclude the bank’s liability should not stop her from suing the bank. According to Griffin, Zheng can argue in a trial that the bank made a mistake before processing the transfer instructions.

“The claim, seen this way, is not based on an error in processing the transfer once the Bank accepted the Application for Remittance, but rather, it is based on the Bank not warning Ms. Zheng about the fraud when it first learned she wished to make such a transfer,” Griffin wrote.

She added that if the bank knew of the common scam and didn’t warn Zheng, the enforceability and unconscionability of the bank’s exclusion clause would also a genuine issue for trial.

“The Application for Remittance is a standard form contract, one which Ms. Zheng had no ability to negotiate,” she wrote.

“The question of whether there was substantial unfairness in the bargain will depend on the findings of fact at trial, especially the findings having to do with the Bank’s knowledge about the type of fraud at issue.”

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