This application addressed which of two innocent parties, Bank of Montreal (BMO) or Asia Pacific International Inc. (API), should bear the loss from a third-party fraud.
An imposter fraudulently obtained a wire transfer of $428,000 from a BMO client's account to API's account for a gold purchase.
API subsequently released the gold to the fraudster.
BMO sought recovery based on a mistake of fact.
The court applied the "two innocent victims" framework, finding BMO was in a better position to prevent the fraud due to its lack of diligence in verifying the imposter's identity.
The court also determined that API could rely on the change of position defence, as its conduct, while lacking diligence, did not constitute wrongful or illegal activity under the Proceeds of Crime Act that would preclude recovery.
BMO's application was dismissed, and the funds were ordered released to API.
