[1987] 1 S.C.R. CANADIAN PACIFIC HOTELS LTD. v. BANK OF
MONTREAL 711
Canadian Pacific Hotels Limited Appellant
v.
Bank of Montreal Respondent
and
Morris Sands also known as Morris Sigulim also known as Morris Van Sigoulim, Dundas
Discounts Limited and Sig-Mor Sales Limited Defendants
INDEXED AS: CANADIAN PACIFIC HOTELS LTD. v. BANK OF MONTREAL
File No.: 17330.
1985: April 24; 1987: June 4.
Present: Estey, McIntyre, Chouinard*, Lamer, Wilson, Le Dain and La Forest JJ.
*Chouinard J. took no part in the judgment.
ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO
Banks and banking operations -- Forged cheques -- Customer's employee forging
signatures of signing officers and concealing forgeries -- Whether customer precluded
from setting up forgeries against the bank -- Whether or not duty, in the absence of a
verification agreement, to examine bank statements with reasonable care and to report
discrepancies within a reasonable time -- Whether or not duty to maintain adequate
internal accounting controls for the prevention and minimization of loss through forgery -
- Bills of Exchange Act, R.S.C. 1970, c. B-5, s. 49(1).
Bills of Exchange -- Forged cheques -- Customer's employee forging signatures of
signing officers and concealing forgeries -- Whether or not customer precluded from
setting up forgeries against bank -- Whether or not duty, in the absence of a verification
agreement, to examine bank statements with reasonable care and to report discrepancies
within a reasonable time -- Whether or not duty to maintain adequate internal accounting
controls for the prevention and minimization of loss through forgery.
A number of forged cheques were drawn on the chequing account, at respondent bank, of
one of appellant's operating units and were made payable to defendant companies which
were controlled by defendant Sands. The cheques in question required the signature of
both the unit's manager and its accountant. Sands, as assistant accountant for the unit
forged both signatures and then, when he became the unit's accountant, that of the
manager. The procedure manual required the accountant of the unit to prepare monthly
bank reconciliations with a list of outstanding cheques and to forward them to the
assistant accountant of the head office of the appellant. The responsibility for the bank
reconciliations based on the daily bank statements and disbursement records was
delegated to Sands, as assistant accountant, by the unit's accountant and was later
exercised by Sands as accountant. The unit's accountant received a summary statement of
the monthly bank reconciliation from Sands, generally without a list of the outstanding
SNIPPETS:
Canadian Pacific Hotels Limited Appellant v. Bank of Montreal Respondent and Morris Sands
ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO
Banks and banking operations -- Forged cheques -- Customer's employee forging signatures of
through forgery -- Bills of Exchange Act, R.S.C. 1970, c. B-5, s.
Bills of Exchange -- Forged cheques -- Customer's employee forging signatures of signing
forgery.
A number of forged cheques were drawn on the chequing account, at respondent bank, of one of
Appellant's banking operations were part of the over-all banking arrangements made with the
He found that the appellant was in breach of both duties, that its negligence was the cause
49of the Bills of Exchange Act, from setting up the forgeries against the respondent.
Nor was any consideration given as to whether, as a matter of principle, a duty of care in
Notwithstanding general agreement with the judgment of Le Dain J., the issue of concurrent
During the relevant period the cheques of the Flight Kitchen required the signature of two
The Bank further alleges the breach by CP Hotels of a duty to take reasonable precautions to
49 of the Bills of Exchange Act, R.S.C. 1970, c. B-5, along the lines of the United States
Referring to the two duties of a customer clearly established by the existing authority,
the original vouchers, should be required to look at them and report discrepancies."
The customer's pass-book had been returned to him at intervals with his cancelled cheques,
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