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 is.”