FCL Fidelity Blog

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Teva: Supreme Court of Canada rejects Fictitious or Non-Existing Payee Defence in finding Collecting Banks Liable for Employee Cheque Fraud

Jump To: The Facts | The Tort of Conversion and the Bills of Exchange Act | The Conclusion On October 27, 2017 the Supreme Court of Canada released its long-awaited decision in Teva Canada Ltd. v. TD Canada Trust. In a 5:4 decision, the Supreme Court held that two banks that accepted fraudulent cheques procured by a dishonest employee were strictly liable in conversion to the employer, and could not establish the “fictitious or non-existing payee” defence afforded by subsection 20(5) of the Bills of Exchange Act. The decision is a welcome development for Canadian fidelity insurers who seek to

D2 Contracting: B.C. Supreme Court accepts Bank’s Contractual and Statutory Defences to Forged Cheque Claim under Canada’s Bills of Exchange Act

The recent decision of the British Columbia Supreme Court in D2 Contracting Ltd. v. Bank of Nova Scotia provides useful guidance for fidelity claims and subrogation professionals on dealing with cheque fraud losses arising from forged drawer signatures.  The Court’s decision demonstrates the necessity of ensuring that the insured’s bank has been notified of suspected fraud or irregularities immediately upon such issues being discovered. The Facts D2 Contracting Ltd (“D2”) was a contractor operating on Vancouver Island.  D2 had two principals, Copeman and Cooper.  In January 2006, D2 opened an account with the Bank of Nova Scotia (“BNS”) and agreed

Raza Kayani: Ontario Court of Appeal addresses Scope of Fictitious Payee Defence under Canada’s Bills of Exchange Act

In the recent decision of Raza Kayani LLP v. Toronto-Dominion Bank, the Ontario Court of Appeal addressed the scope of the “fictitious payee” defence available to banks and other financial institutions under Canada’s Bills of Exchange Act. The decision has important implications for entities seeking to recover against financial institutions in cheque fraud cases. The plaintiffs were a law firm and another individual lawyer who fell victim to essentially identical counterfeit cheque scams. The plaintiffs were each retained by a purported purchaser in connection with a commercial transaction involving a vendor known as Nithiyakalyaani Jewellers. As part of the closing