Bank of Nova Scotia v. Beaudry (Gil) Farm Supply Inc., (1999) 94 O.T.C. 321 (GD)

• Judge: Aitken, J.
• Court: Ontario Court of Justice General Division (Canada)
• Case Date: April 16, 1999
• Jurisdiction: Ontario
• Citations: (1999), 94 O.T.C. 321 (GD)

BNS v. Beaudry Farm Supply Inc. (1999), 94 O.T.C. 321 (GD)

MLB headnote and full text

Temp. Cite: [1999] O.T.C. TBEd. MY.002

The Bank of Nova Scotia (plaintiff) v. Gil Beaudry Farm Supply Inc. (defendant)

(Court File No. 101874/96)

Indexed As: Bank of Nova Scotia v. Beaudry (Gil) Farm Supply Inc.

Ontario Court of Justice

General Division

Aitken, J.

April 16, 1999.

Summary:

Jim Beaudry Farm Supply Inc. gave Jim McRae Enterprises a $27,820 uncertified cheque for payment of equipment that Beaudry received. McRae deposited the cheque in its bank account, which had been in overdraft, and immediately received a certified cheque for $21,400. McRae had a short history with the bank and had previously declared bankruptcy. Beaudry put a stop payment on the cheque because in a previous transaction it had not received equipment from McRae that it paid for. The cheque did not clear. The bank obtained judgment against McRae, but only collected $10,000. The bank sought the outstanding balance from Beaudry ($17,820). Beaudry asserted that the bank was not a holder in due course under the Bills of Exchange Act because it did not act in good faith and the bank could not rely on this status due to its improper conduct in handling this transaction.

The Ontario Court (General Division) allowed the bank's claim against Beaudry. The court held that: the bank acted in good faith; the bank was a holder in due course; the bank was not precluded from relying on its status as a holder in due course as a result of any carelessness it exhibited at the time of the transaction or subsequently because it acted honestly; the bank's relationship with McRae was not of a nature that the two commercial organizations should be considered one for the purpose of any equities that existed between McRae and Beaudry. The court discussed the requirements of good faith.

Editors Note: For a related decision see 65 O.T.C. 397 (Gen. Div.).

Banks and Banking - Topic 3246

Bank deposits - Deposit of cheques - Rights of bank as holder in due course - See paragraphs 1 to 129.

Banks and Banking - Topic 3633

Cheques and orders drawn on deposits - Conversion - Defences - Holder in due course - See paragraphs 1 to 129.

Negotiable Instruments - Topic 4204

Cheques - Rights of holder in due course - What constitutes a holder in due course - See paragraphs 1 to 129.

Negotiable Instruments - Topic 4206

Cheques - Rights of holder in due course - Good faith defined - See paragraphs 1 to 129.

Negotiable Instruments - Topic 4214

Cheques - Rights of holder in due course - Against maker and endorsers where payment stopped - See paragraphs 1 to 129.

Negotiable Instruments - Topic 4407

Cheques - Stop payment orders - Consequences of - See paragraphs 1 to 129.

Negotiable Instruments - Topic 7822

Promissory notes - Holders - Rights of holder in due course - Holder in due course - What constitutes - See paragraphs 1 to 129.

Cases Noticed:

Caisse Populaire (St. Jean-Baptiste) Belle Riviere ltée v. A & L Auto Wreckers Ltd. (1978), 18 O.R.(2d) 344 (Div. Ct.), refd to. [para. 16].

Canadian Imperial Bank of Commerce Ltd. v. May Trucking Ltd. (1984), 10 D.L.R.(4th) 755 (B.C.C.A.), refd to. [para. 16].

578722 Ontario Inc. v. Dowma Ltd., [1988] O.J. No. 2649, refd to. [para. 16].

Toronto-Dominion Bank v. Jordan (1985), 61 B.C.L.R. 105 (C.A.), refd to. [para. 17].

Foster v. Pearson (1835), 1 C. M. & R. 849, refd to. [para. 18].

Jones v. Gordon (1877), 2 App. Cas. 616 (H.L.), refd to. [para. 19].

Raphael v. Bank of England (1855), 17 C.B. 161, refd to. [para. 20].

Sheffield (Earl of) v. London Joint Stock Bank (1888), 13 App. Cas. 333 (H.L.), refd to. [para. 21].

London Joint Stock Bank v. Simmons, [1892] A.C. 201 (H.L.), refd to. [para. 21].

Union Investment Co. v. Wells (1908), 39 S.C.R. 625, refd to. [para. 30].

Bank of Montreal v. Normandin, [1925] S.C.R. 587, refd to. [para. 32].

S & S Seafood Co. v. Toronto-Dominion Bank, [1993] B.C.J. No. 375 (S.C.), refd to. [para. 32].

Lockhart v. Wilson (1907), 39 S.C.R. 541, refd to. [para. 33].

Dominion Bank v. Fassel & Baglier Construction Co., [1955] 4 D.L.R. 161 (Ont. C.A.), refd to. [para. 33].

Toronto-Dominion Bank v. Jordan, [1985] B.C.J. No. 2251, dist. [paras. 33, 46].

Royal Bank of Canada v. Ryan et al. (1993), 107 Nfld. & P.E.I.R. 1; 336 A.P.R. 1 (Nfld. T.D.), dist. [paras. 33, 51].

Bank of Nova Scotia v. Archo Industries Ltd. (1970), 11 D.L.R.(3d) 593 (Sask. Q.B.), consd. [para. 80].

Ciurluini (William) Ltd. v. Royal Bank of Canada, [1972] 2 O.R. 748 (H.C.), consd. [para. 82].

Canadian Imperial Bank of Commerce v. Gardner Watson Ltd. and Belanger (1983), 43 A.R. 39 (Q.B.), consd. [para. 84].

Edmonton Motors Ltd. v. Edmonton Savings & Credit Union Ltd. (1988), 85 A.R. 29 (Q.B.), consd. [para. 96].

Huron & Erie Mortgage Corp. v. Rumig (1969), 10 D.L.R.(3d) 309 (Ont. C.A.), dist. [para. 110].

Federal Discount Corp. v. St. Pierre and St. Pierre (1962), 32 D.L.R.(2d) 86 (Ont. C.A.), dist. [para. 117].

Statutes Noticed:

Bills of Exchange Act, R.S.C. 1985, c. B-4, sect. 3, sect. 55(1), sect. 55(2), sect. 73, sect. 165(1), sect. 165(2), sect. 165(3) [para. 15].

Authors and Works:

Crawford, Bradley, and Falconbridge, Banking and Bills of Exchange (8th Ed. 1986), p. 1457 [para. 29].

Counsel:

Melanie Polowin, for the plaintiff;

Mario Mannarino, for the defendant.

This action was heard before Aitken, J., of the Ontario Court (General Division), who released the following judgment on April 16, 1999.