Bank says $343-K error was city law firm’s, asks court to dismiss lawsuit

One of Canada’s major banks has asked a Manitoba court to toss a lawsuit in which it was accused of breaching its duty of care, after nearly $350,000 was transferred into the wrong account and then never recovered.

The Canadian Imperial Bank of Commerce was named in a lawsuit by Taylor McCaffrey LLP and the Law Society of Manitoba — the legal profession’s provincial regulator — in February. The law firm said it was acting for a client who had purchased a home when it requisitioned $343,335 from the mortgagee, the Royal Bank of Canada, on July 31, 2024.

The funds were intended to be deposited into a CIBC trust account held by the firm, but never arrived.

In a statement of defence filed in Court of King’s Bench on March 24, CIBC said the money was deposited into the wrong account “due to the incorrect transit number provided by the firm.”

CIBC took “immediate action to trace the funds” and discovered they were instead sent to an account registered by M2A Petroleum Inc. on Aug. 2, 2024, it said.

Three days later, approximately $270,000 was wired out of the M2A account in two transactions; $150,000 went to a Moroccan bank account held by a man identified as M2A’s representative, while $120,00 went to a different account in the United Arab Emirates, the statement of defence said.

Another $25,000 was wired to a third account in the UAE on Aug. 8, 2024, at which point CIBC placed a hold on the M2A account to prevent further transfers. By then, only about $4,800 was remaining, the statement said.

CIBC sent four recalls in an attempt to recover the funds, but “these recall attempts were unsuccessful.” It also tried to reach M2A’s representative directly, including via letter, to demand the money be returned, it said.

“CIBC made all reasonable attempts to recover and return the initial funds to the firm but was unable to do so for reasons outside of its control,” it said.

The law firm claimed CIBC had a duty to verify the account details matched the intended recipient before completing the transfer, but the bank has denied this.

Its defence cites the Canadian Payments Act, which states that when a payment includes both a name and account number, financial institutions are not required to identify discrepancies between them.

“CIBC had no duty to ensure that the account information matched the name of the account holder,” the statement of defence said. “CIBC complied with its obligations for processing the wire transfer that was received by RBC.”

In the initial statement of claim, the firm notes it sent a new requisition to RBC to deliver replacement funds to its CIBC trust account, which RBC did, allowing the real estate deal to go through.

In addition to suing CIBC, the statement of claim names the individual whose account the funds were transferred to, identifying them as “John Doe.”

The court papers claim that John Doe knew or should have known he wasn’t entitled to the money that had been wrongly transferred into his account.

CIBC’s statement of defence said the same, accusing the account holder of “wrongfully and unlawfully absconding with the initial funds when they knew or ought to have known they were not legally entitled to the funds.”

It said the funds were moved outside of Canada in a deliberate attempt to prevent CIBC from recovering them.

It has asked the court to dismiss the lawsuit, with costs.

tyler.searle@freepress.mb.ca