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ARTICLE · 19 SEPTEMBER 2019

Who Bears The Loss When A Cybercrimal Diverts Funds?

What happens when two innocent parties to a settlement agreement are victims of cybercrime resulting in settlement funds being misdirected to a fraudster?

CanadaTechnology

What happens when two innocent parties to a settlement agreement are victims of cybercrime resulting in settlement funds being misdirected to a fraudster? The recent Ontario Small Claims Court decision St. Lawrence Test & Inspection Co. Ltd v. Lanark Leeds Distribution Ltd. And Mark Schokking, 2019 CanLII 69697 (ON SCSM) (“St. Lawrence“) considered this issue. As Kelford, DJ succinctly states:

The Plaintiff and Defendant were both innocent victims of a "cybercrime" which resulted in the loss of funds which were paid by the Defendants to settle the Plaintiff's claim. Both parties are innocent. Unfortunately, one of them must bear the loss.

The Facts

The Defendants had agreed, under the terms of a settlement agreement, to send the Plaintiff $7000, by way of electronic funds transfer, as full and final settlement of a claim.  Unfortunately for both parties, one of the Plaintiff's email accounts was hacked (that of the paralegal handling the claim), and a

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