In Khosroabadi v. TD Canada Trust Branch 241, the Court of Appeal upheld the Superior Court's decision dismissing an action against the bank for misrepresentation and negligence, in which the plaintiff claimed the bank had a duty to only negotiate a cheque to joint payees when they were both present.
The action was brought by a fraudster who was cheated by her co-conspirator. There was a fire in the plaintiff's home. Her insurer indicated it would cover some of the repair work, but not certain other renovations the plaintiff wanted to have done. The insurer would only make the cheque payable to the contractor who completed the covered repairs. The plaintiff was concerned that the contractor had completed the covered repairs for less than the amount of the insurance payment and so the contractor would keep the excess insurance funds and apply them to the outstanding balance related to the renovations that were not covered by the insurer. To avoid this, the plaintiff devised a scheme with one Yeretsian, the owner of Consilium, a contractor. The plaintiff told her insurer that Consilium completed the covered repairs, and the insurer made out the cheque to the plaintiff and Consilium jointly. The plan was that the plaintiff would merely deposit the cheque with Consilium and she would keep the money.
When she received the cheque, the plaintiff attended at the bank to deposit it. She claimed that the teller represented to her that a cheque to joint payees could only be negotiated if they both attended at the bank at the same time. The plaintiff then endorsed the cheque and gave it to Yeretsian. One year later the plaintiff learned that Yeretsian had negotiated the endorsed cheque and had kept all the money.
The plaintiff claimed that the bank should be held to the teller's representation that a cheque to joint payees could only be negotiated with both payees present. In any case, the plaintiff alleged the bank was negligent and owed the plaintiff a duty of care.
The Court of Appeal upheld the trial judge's finding that the teller did not make such a representation, but even if there was a representation, that did not change the requirement under the Bills of Exchange Act that a cheque could be negotiated under the endorsement of joint payees, and that their presence was not necessary. Furthermore, the Court of Appeal upheld the trial judge's finding that the bank did not owe a duty of care in the circumstances.
While this case involves very unique factual circumstances, it is notable that the Court of Appeal continues to uphold a strict interpretation of the Bills of Exchange Act, which promotes certainty and predictability with respect to the functioning of the banking system.