The bank which negotiates the forged cheque that removes monies from your bank account is strictly liable for that act and for the monies you lost because of the bank’s transacting the forged cheque.
That is one of those little known protective provisions of a very old Act of Parliament: Bills of Exchange Act RSC 1985 c B-4
The reason that this act is not better known and more often used by customers who are the victims of forgery is the fact that banks in Canada require clients to execute a Financial Services Agreement which limits the bank’s otherwise strict liability to repay the amount removed from your account.
The standard Financial Services Agreement says that you are required to verify your monthly statement and if you don’t advise the bank of the improper withdrawal, the bank is not liable.
In other words you and the Bank opt out of the Bills of Exchange Act because you signed one of those absurd bank documents that no one can actually read properly. The bank pretends to make the language easier to understand by reversing the normal way in which a reader would read a contract, using language like ‘you’ and ‘us’ rather than ‘bank’ and ‘client’.
The outcome of signing this Financial Services Agreement is that you are responsible for reviewing your monthly statement and immediately telling the bank about any error and if you fail to do so the loss is not the responsibility of the bank. Arrow Transfer Co. Ltd. v. Royal Bank of Canada [1972] S.C.R. 845
In this case the summary judgment motion judge was in the process of siding with ‘client’ against the ‘bank’ on the question of whether he should have been aware of the fraud. The judge was in the process of giving the benefit of the doubt to the ‘client’ when the Court of Appeal stepped in in and indicated that you don’t take the ‘client’ as-if he were a thin-skulled plaintiff. A level of objective alertness is deemed applicable to the ‘client’ in terms of reviewing his monthly statements (even if the actual client did not do so).
Take-away: review your monthly statements! Mistakes that the bank makes are likely not recoverable if you didn’t discover it yourself within 30 days.
