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Facts of the case
Kenneth James, a practicing lawyer, opened personal and commercial accounts — including a trust account — with HSBC Bank of Canada, and investment accounts with HSBC Securities (Canada) Inc., less than six months before trouble arose. In May 2012, a bank employee detected suspicious large cash deposits into James's trust account. On June 7, 2012, James and his employee at the time were charged with possession of the proceeds of crime, money laundering, and fraud. HSBC froze James's accounts, and in October 2012, his personal accounts became subject to a restraint order under the Criminal Code, R.S.C. 1985, c. C-46. The Law Society of Ontario also obtained an order suspending his licence to practice law.
During this period, James held options in Google Inc. and Priceline.com through HSBC Securities. HSBC Securities advised him to close these options by end of day on June 13, 2012. James failed to respond, and HSBC Securities sold the options on June 15, generating a profit of $86,551 for him. James was eventually acquitted of all criminal charges, the restraint order was vacated, and HSBC lifted the holds on his accounts — allowing him to access all remaining funds and accrued interest. He commenced an action against HSBC on August 9, 2012, claiming damages for wrongful conversion of funds, intentional interference with economic relations, and other causes of action, including a claim related to his HSBC Hong Kong account.
Account agreements and contractual terms at issue
At his discovery, James admitted that the parties were bound by the HSBC account agreements, that those agreements governed the operation of the accounts, and that HSBC had the right to freeze his accounts under certain circumstances. He further admitted that he had recovered all funds listed in Schedule "A" of the statement of claim, and that HSBC Hong Kong was not a party to the proceeding and is a separate legal entity from HSBC Bank of Canada and HSBC Securities (Canada) Inc. These admissions formed a significant part of the evidentiary record on which the motion judge relied.
Court's reasoning and analysis
At the summary judgment stage, Justice John R. McCarthy of the Superior Court of Justice found no genuine issue for trial on any of James's claims — conspiracy and collusion, wrongful interference with economic interests, conversion, and defamation. He determined that the personal and commercial account agreements were unambiguous and authorized the preventative action HSBC took, which was also consistent with James's bail conditions and the Criminal Code restraint order. On the HSBC Hong Kong claim, the motion judge found there was "not a shred of evidence" that the respondents ever accessed, transferred, controlled, or held those funds, a finding supported by James's own affidavit dated May 7, 2024, in which he acknowledged that his funds never left Hong Kong.
On appeal, James argued that the motion judge failed to address the respondents' delay in bringing their summary judgment motion and misapprehended the evidence. The Court of Appeal acknowledged that delay can, in some circumstances, warrant the dismissal of a summary judgment motion, particularly when a trial has been scheduled. Although the matter had been set down for trial some 13 months before the respondents served their motion materials on February 1, 2024, no trial date was actually scheduled at the time the motion was heard. The court agreed the motion judge should have addressed the delay issue but found that summary judgment was nonetheless appropriate — this was not a case where the procedure was used to derail an imminent trial, and allowing the dated action to linger further would have wasted resources. The court also rejected James's submission that the motion judge misapprehended the evidence, finding the factual findings were open to him on the record.
On costs, the motion judge awarded costs on a substantial indemnity basis totalling $225,000 — $75,000 for the summary judgment motion and $150,000 for the underlying action — against the respondents' full claim of $371,885.64 (comprised of $89,499.88 for the motion and $282,385.76 for the action). The motion judge relied on several factors: James's refusal to accept an offer to settle served on January 29, 2018 (which offered dismissal without costs and remained open until March 9, 2018, after which it included costs), his unfounded claim for $2 million including a punitive component, his unwillingness to concede that HSBC had no access to the Hong Kong funds, and his filing of an affidavit that contradicted key admissions made at his discovery. On appeal, James sought a reduction to $150,000, arguing the motion judge erred in applying the elevated scale. The Court of Appeal agreed that substantial indemnity costs were warranted under r. 57.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, given both the unaccepted offer to settle and the unfounded allegations that impugned the integrity of HSBC. However, the court found it was an error in principle to apply the elevated rate to costs incurred during the roughly six years before the offer was made.
Ruling and overall outcome
The Court of Appeal dismissed the appeal from the summary judgment. Leave to appeal the costs order was granted, and the costs award was reduced from $225,000 to $175,000 — consisting of $75,000 for the summary judgment motion and $100,000 for the underlying action, both on a substantial indemnity scale. Given the divided success on appeal — HSBC succeeding on the summary judgment appeal and James achieving a partial reduction on costs — the respondents, HSBC Bank of Canada and HSBC Securities (Canada) Inc., were entitled to a net costs award of $5,000 on the appeal, all inclusive.
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Appellant
Respondent
Court
Court of Appeal for OntarioCase Number
COA-25-CV-0503Practice Area
Banking/FinanceAmount
$ 175,000Winner
RespondentTrial Start Date