Bank on the Hook for Fraudulent Cheque Scheme
Those found guilty of involvement in fraudulent cheque schemes can be required under the Criminal Code to pay restitution to any one who has sustained loss as a result of the commission of the offence. But an order in hand is a long way from the actual recuperation of the pecuniary loss incurred as a result of the offender’s criminal conduct, and large losses often remain unsatisfied. Thus, the answer to the question: which innocent party — the defrauded company/person ( the drawer of the cheque ) or the collecting banks ( the drawee ) — should bear the loss resulting from a fraudulent cheque scheme can have significant implications. Banks will not be happy, as their involvement may subject them to legal liability under the tort of conversion. As held in Teva Canada Ltd. v. TD Canada Trust , 2017 SCC 51, the tort of conversion involves the wrongful interference with the goods of another. Where a collecting bank pays out on a forged endorsement, it will be lia...