The plaintiffs invested $17.8 million with a mortgage broker, who fraudulently used the funds to repay an unauthorized overdraft at TD Bank caused by a cheque kiting scheme.
The plaintiffs sued TD Bank for negligence, knowing receipt, conversion, and unjust enrichment.
The court dismissed the negligence claim, finding TD Bank lacked actual knowledge of the fraud and thus owed no duty of care.
However, the court found TD Bank liable for knowing receipt, conversion, and unjust enrichment, as the bank had constructive knowledge of the fraud due to multiple red flags requiring enhanced due diligence, and the tort of conversion was held to apply to funds on deposit.
TD Bank was ordered to pay damages of over $16.3 million.
