Document Type


Publication Date


Source Publication

31 Banking and Finance Law Review 607


Under Section 20(5) of the Bills of Exchange Act (‘‘BEA s. 20(5)”) where on a bill of exchange ‘‘the payee is a fictitious or non-existing person, the bill may be treated as payable to bearer.” A bill of exchange includes a cheque. Where BEA s. 20(5) applies to a cheque, its effect is to reallocate forged endorsement losses from banks involved in the collection and payment of the cheque to the drawer. Quite recently, in commenting on Raza Kayani LLP v. Toronto-Dominion Bank, I highlighted the ongoing confusion in the judicial interpretation of BEA s. 20(5) (‘‘Kayani Comment”). That comment does not appear to have been available to the judges of the Ontario Court of Appeal in subsequently rendering their judgement in Teva Canada Ltd. v. Bank of Montreal (‘‘Teva”). At the same time, in invoking a policy rationale, in addition to relying on a precedent, the Court in Teva acknowledged my position as had been already expressed in a previous writing on the subject. It thus recognized that as regards to cheque fraud committed by an insider in and on a corporate drawer BEA s. 20(5) is to be interpreted as allocating losses to ‘‘the drawer, who typically is better positioned to discover the fraud or insure against it.” Accordingly, the Court in Teva distinguished Boma Manufacturing Ltd. v. Canadian Imperial Bank of Commerce (‘‘Boma”) and thus restored a measure of consistency between law and good policies.