Canada: Summary of "Ramias v. Johnson et al."


What duties do financial institutions potentially owe to third-party investors when their banking systems are used in an allegedly fraudulent scheme? Why can it be problematic to attempt to add a defendant on the basis of similar, if not the same, facts and claims as asserted against previously named defendants?

The decision of the Alberta Court of Queen's Bench in Ramias, as Representative Plaintiff v. Jerry Johnson et al. addresses two applications in the context of a proposed class action: (1) an application by a financial institution defendant to strike the claims against it; and (2) an application by the plaintiff to add three financial institutions to the action on the basis of the same claims made against the defendant and other previously named defendants. In determining these applications, the court considered the issue of the duties that financial institutions may owe third-party investors when their clients use their banking systems in a fraudulent scheme.

The two applications were brought pursuant to two different rules of civil procedure — Rules 129 and 132. Each rule imposes a separate legal standard, evidentiary requirement and burden of proof. The defendant's failure to have the claims against it struck and the plaintiff's failure to have the financial institutions added are partially attributable to the differences between these two rules.


This case involved allegations of securities investment fraud against the individual defendant Jerry Johnson. It was alleged that Johnson had solicited and received money from the plaintiff and the proposed class for investment purposes between June 2004 and July 2006, but that Johnson was actually operating a Ponzi-type scheme and had unlawfully converted the funds for his own use. Johnson entered into a settlement agreement with the plaintiff.

The Statement of Claim alleged that Johnson had used the defendant's (and other named financials institutions') banking services to carry out his fraudulent investment scheme.

With respect to the defendant and the claim sought to be advanced against the financial institutions by way of amendment to the Statement of Claim, the plaintiff alleged that the pattern of Johnson's banking activities constituted suspicious circumstances that ought to have led the financial institutions to make reasonable investigations regarding Johnson's activities, and that such investigations would have disclosed Johnson's fraudulent scheme and prevented the loss to the plaintiff and the members of the proposed class. The plaintiff also alleged that the financial institutions were negligent, or knowingly assisted or participated in Johnson's dishonest breach of fiduciary duties on a number of enumerated grounds, including providing banking services to Johnson for compensation and failing to notify authorities of Johnson's suspicious banking activities in violation of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, SC 2007 c. 17.

McCarthy Tétrault Notes

With respect to the defendant's application to strike the claim against it, the test to be met was whether it was "plain and obvious" that the pleadings failed to disclose a cause of action. There were two claims against the defendant: (1) the claim of knowing assistance; and (2) the claim of negligence.

In considering the claim of knowing assistance against the defendant as pled, Martin J. held that the requisite elements had been pled and that it was not plain and obvious that the claim would fail.

Martin J. held that the claim of negligence ought to be considered as two separate claims: one that alleged the defendant's actual knowledge of Johnson's fraudulent scheme and one that alleged the defendant ought to have known that Johnson was conducting fraudulent activities. She also held that the claim that a financial institution had actual knowledge of a client's fraudulent scheme and was thereby potentially negligent was a novel cause of action that is not obviously doomed to fail, as actual knowledge of a client's fraudulent activities may create a relationship of sufficient proximity to give rise to a duty of care and actual knowledge may also change the policy considerations. As such, the determination of whether a financial institution's actual knowledge of a customer's fraudulent scheme was sufficient to warrant a finding of a duty in favour of third parties was left to be determined at trial. Martin J. reached the contrary conclusion with respect to the claim that the defendant ought to have known that Johnson was conducting fraudulent activities, as it is impossible to claim that financial institutions owe a general duty of care to their clients' third-party investors, and struck that claim.

The plaintiff's proposed amendment to the Statement of Claim was simply to add the financial institutions on the basis of the allegations in regard to knowing assistance and negligence, as asserted against the defendant and the other defendant financial institutions. As it was the plaintiff's application, the burden was on the plaintiff to meet the legal test set out in Hunter Financial Group Ltd. v. Maritime Life Assurance Company, 2007 ABQB 263, which requires, inter alia, some evidence to support any new facts of substance alleged.

The claim against the financial institutions based on negligence arising from what the financial institutions ought to have known was not held to disclose a triable issue on the same grounds that led to it being struck out as a claim against the defendant.

An essential element of the remaining proposed claims against the financial Institutions of knowing assistance and the novel claim of negligence was the financial institutions' actual knowledge of Johnson's fraudulent activities. On an application to amend a Statement of Claim, the applicant must lead evidence to demonstrate a reasonable cause of action. In this case, the plaintiff was unable to satisfy that requirement, as the evidence presented, even on the lowest evidentiary standard, failed to establish any actual knowledge of the financial institutions. Martin J. refused to add the financial institutions as defendants.

Martin J.'s decision not to add the financial institutions is in contrast to her decision not to strike the same claims against the defendant. The difference in her decisions on essentially the same issue — whether the facts supported the claims against the financial institutions of knowing assistance and negligence — can be partially attributed to the different evidentiary requirements of the two rules pursuant to which the applications were made. In the application to strike the claim, there was an assumption that the facts as pled were true, while in the application to amend the Statement of Claim, the applicant had to lead evidence to demonstrate a reasonable cause of action.

This decision illustrates the importance of identifying all possible defendants prior to the commencement of litigation. Further, this decision reinforces the position that a financial institution does not have a general duty of care to third parties.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.