Banque Nationale du Canada v. Bédard, B.E. 2008BE-457 (C.A.) (Superior court : Banque Nationale du Canada v. Bedard, 2006 QCCS 5476)

The Québec Court of Appeal recently upheld a decision rendered in 2006 by the Superior Court which established that, in the particular context of this case, the National Bank of Canada (the "Bank") had been negligent by immediately releasing, without making the appropriate verifications, the entire amount of a foreign bank draft deposited by a client, without the individual’s request to do so.

In this case, a client had deposited a $1,500,000 US bank draft from a Zimbabwe bank. Despite the obvious disproportion between the value of the client’s accounts (less than $20,000) and the deposited amount, the bank immediately gave the client access to the full amount of the bank draft. Three days later, the bank was notified that the bank draft was counterfeit. The bank succeeded in recovering some of the funds from the client directly, taken from the amount of the draft, and it claimed a sum of $180,000 to compensate for the damages incurred. The client submitted a counterclaim for $20,000 corresponding to the amounts seized in his account, arguing that the bank was negligent in its verification process.

In its decision, the Superior Court mentioned that the Bank should have made appropriate verifications before giving the customer immediate access to the funds of the foreign draft. It would have been simple for the Bank to verify that the alleged issuing financial institution actually issued the draft and had the funds to cover the amount, giving the individual immediate and full access. Given the amount of the bank draft, as well as its international origin, it was prudent that the Bank make the appropriate verifications before releasing the funds in full.

The Superior Court concluded that the Bank’s gross negligence endangered the Bank, as well as the client, by giving him a false impression of security regarding the availability of the funds. The Court of Appeal upheld this judgment, concluding that the Bank had been negligent. The Bank was therefore condemned to indemnify its client.