National Bank of Greece ( Canada ) v. Bank of Montreal
T-981-98
Pelletier J.
24/9/99
13 pp.
Processing of cheques and negotiable instruments-Clearing and settlement transactions between financial institutions-LDO, customer of applicant National Bank of Greece (NBG), paid $50,000 account by means of cheque drawn on NBG-Payee, RCL, deposited $50,000 in its account at Bank of Montreal (BOM)-BOM credited their customer's account for $50,000 and forwarded cheque to NBG's clearing agent, Royal Bank of Canada (RBC)-Cheque reached RBC on 24/4/97 which immediately debited NBG's settlement account $50,000-However, LDO's account had not been debited amount of cheque: latter remained with RBC until 22/5/97 when forwarded to NBG without any advice as to customer or transaction-On 23/5/97, NBG realized LDO's account did not have sufficient funds to cover cheque-NBG, in contravention of Clearing Rules, put cheque back into system as NSF cheque-All previous entries reversed-At end of clearing day, RBC credited NBG's clearing account $50,000, RBC's settlement account with Bank of Canada credited $50,000 and BOM's settlement account with Bank of Canada debited $50,000-When cheque returned to BOM's branch, it debited payee RCL's account $50,000 which it had previously been credited-Complaint about NBG made to Canadian Payment Association (creation of Canadian Payments Association Act) of which all banks members-Basis of complaint that NBG had put NSF cheque back into system more than one day after cheque came to attention of bank officer having authority to deal with cheque, contrary to Clearing Rules-By putting NSF cheque back through system, NBG balanced its clearing account at BOM's expense-CPA panel ruled NBG had breached rules and ordered NBG to make restitution to BOM in amount of $50,000-NBG seeking to set aside compliance panel's decision on ground BOM either had recourse to its customer, in which case it suffered no loss or it proposes to credit its customer with amount of transaction as goodwill gesture, in which case it is simply acting as collection agent for its customer-In either case, NBG arguing BOM advancing claim which client ought to be pursuing in courts-Application dismissed-Clearing and settlement rules creating rights and remedies between banks and CPA-Panel fully justified in finding NBG in breach of Rules-Member who gains unfair advantage by its breach of Rules should be required to disgorge that advantage without requiring another bank to elect whether it would stand on its strict legal rights with its customer or absorb loss itself-Canadian Payments Association Act, R.S.C., 1985, c. C-21.