Dominion Bank v. Union Bank of Canada

Dominion Bank v. Union Bank of Canada

Where a cheque bearing the genuine signature of the drawer has been fraudulently altered in the body, money paid by the drawee under mistake of fact is recoverable from the receiving bank if that bank dealt as holder and indorser and was negligent in obtaining payment (e.g. by failing to require identification); the receiving bank's subsequent payment out of the proceeds does not defeat recovery unless it can properly be characterized as a mere agent or otherwise establish an equitable change of position defence.

Citation
(1908) 40 SCR 366
Parties
Appellant / Defendant: Dominion Bank; Respondent / Plaintiff: Union Bank of Canada
Court
Supreme Court of Canada
Jurisdiction
Canada
Judgment Date
9 June 1908
Procedural Posture
Collection (banking) / Appeal to Supreme Court of Canada From Court of Appeal for Manitoba
Outcome
Appeal dismissed with costs; judgment of the Court of Appeal for Manitoba affirmed (Idington J. dissenting).
Legal Topics
Forged Cheque, Negligence, Mistake of Fact, Indorsement, Holder in Due Course, Agency, Change of Position, Laches, Money Had and Received, Implied Warranty
Source Language
English
Banking Equity Commercial Law Forged Cheque Negligence Mistake of Fact Indorsement Holder in Due Course +5 more

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Parties

Dominion Bank

Appellant / Defendant

Union Bank of Canada

Respondent / Plaintiff

Procedural Posture

Collection (banking) / Appeal to Supreme Court of Canada From Court of Appeal for Manitoba

Legal Issues

  1. 1 Whether drawee can recover money paid on a cheque where forgery altered the body but not the drawer's signature
  2. 2 Whether the receiving bank acted as agent or as principal/holder and thus is liable to refund
  3. 3 Whether payment to third parties (change of position) defeats recovery by the drawee

Ratio Decidendi

Where a cheque bearing the genuine signature of the drawer has been fraudulently altered in the body, money paid by the drawee under mistake of fact is recoverable from the receiving bank if that bank dealt as holder and indorser and was negligent in obtaining payment (e.g. by failing to require identification); the receiving bank's subsequent payment out of the proceeds does not defeat recovery unless it can properly be characterized as a mere agent or otherwise establish an equitable change of position defence.

Court Disposition

Appeal dismissed with costs; judgment of the Court of Appeal for Manitoba affirmed (Idington J. dissenting).

Orders

  • Judgment for respondent ordering appellant to refund monies received on the forged cheque with costs
  • Respondent entitled to recover money paid under mistake of fact; appellant not excused by having paid out part of the proceeds