A number of payment scams have been propogated recently which
focus on lawyers. The scammer generally asks the lawyer to assist
in making a payment to some foreign jurisdiction based upon a set
of circumstances that are designed to sound credible. One of these
schemes came to light in the recent case of Meridian Credit
Union Limited vs (The Estate of) Geoffrey Grenville-Wood.
Mr. Grenville-Wood was a prominent Ottawa area lawyer and was
approached by a purported Taiwanese businessman to assist that
businessman in issuing a cheque to a Japanese company. Mr.
Grenville-Woods was sent a cheque made out to him drawn on an
Ontario company (Polstar Construction Ltd.) which he deposited at
his credit union, reserving his five per cent commission in his
personal account and issuing a cheque in the remaining amount to
the Japanese company.
The cheque Mr. Grenville-Wood received had been altered to both
materially increase the amount of the cheque and to show Mr.
Grenville-Wood as the payee. The alterations were skilfully done.
They were not discovered until the cheque was queried by Polstar
Construction Ltd. Accordingly, some months after the original
transaction took place, Royal Bank of Canada, the bank on which the
cheque was drawn, returned the cheque to the credit union where Mr.
Grenville-Wood kept his accounts. That credit union seized all of
the money on deposit with it by Mr. Grenville-Wood and sued him for
the remaining amount owing.
The credit union did not have an agreement with Mr.
Grenville-Wood that explicitly addressed its right to charge back
forged or altered cheques as most Canadian banks do, but that did
not matter. The Ontario Court of Appeal ruled, in a decision issued
last July, that the right to charge-back forged or altered
instruments is a common law right arising from the relationship
between the bank and its client. When the payees' bank accepts
an instrument which turns out in the fullness of time to have been
forged or altered in some way, it acts only as the agent of the
payee and accepts no monetary risk. The court held that the payee
is the person in the best position to determine whether an
alteration has occurred and, if it has, it is the payee that must
bear the loss, not his conduit.
The tragedy of this story is that Mr. Grenville-Wood died in
2009, two years before this decision was issued, but four years
after the events at issue took place. This circumstance cannot have
made his declining years any happier; nobody likes to be forced to
admit that they have been duped.
For banks, this decision is good news. The status of the right
to return forged or altered instruments as a common law right is
affirmed and does not rely on the contractual relationship between
a bank and its customer. The fact that there is no particular time
period for the return of such items is also affirmed.
At a more personal level, this case is yet another illustration
of the old maxim, "If it looks too good to be true, it
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The British Columbia Court of Appeal has recently considered whether the doctrine of unconscionability can be invoked to set aside a contractual clause providing for the payment by one party to the other...
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