Teva Canada, Cheque Fraud And Risk Allocation For Collecting Banks

In a fiercely-contested, 5-4 split decision, the Supreme Court of Canada ruled that a company victimized by employee cheque fraud can recover its $5.5-million loss from the banks that deposited the fraudulent cheques.

We discussed the facts of this case (Teva Canada Ltd v TD Canada Trust, 2017 SCC 51) (“Teva”), as well as the legal and business issues at stake, in the December 2016 issue of our Collateral Matters newsletter.

In that article, we wrote that “the core policy question… is whether non-negligent banks should be penalized for the negligence and/or fraud of drawers [the issuers of the cheques] simply because the banks have a greater capacity to absorb the costs.” The Supreme Court’s majority opinion in Teva answered this question with a yes.