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Bills of Exchange - Bad Cheques

. Drive Auto Group Inc. v. David Hay Limited (Fix Auto Richmond Hill)

In Drive Auto Group Inc. v. David Hay Limited (Fix Auto Richmond Hill) (Ont CA, 2022) the Court of Appeal considered the interesting issue that a 'directing mind' of a corporation, signing 'bad' cheques for the corporation, was liable personally under the Bills of Exchange Act (BEA):
[2] The appellant submits the motion judge erred because he did not intend to incur personal liability as he was signing on behalf of 9033955 Canada Limited, of which he was the directing mind, and which carried on business under the name and style “Collision Repair Experts Toronto North”. He submits that due to the relationship between the parties, the respondent knew that it was contracting with the corporation and not with him in his personal capacity.

[3] We do not accept this submission. The BEA is a complete answer to the appellant’s argument. Section 131(1) of the BEA provides that “[w]here a person signs a bill in a trade-name or assumed name, he is liable thereon as if he had signed it in his own name.” The appellant signed cheques under an unregistered trade name and he thereby became personally liable on the cheques. The name “Collision Repair Experts Toronto” was not the name under which 9033955 Canada Limited carried on business. The case of K & S Plumbing & Heating Ltd. v. Troughton (c.o.b. T.F.D. 2000), [2003] O.J. No. 4564 (S.C.), relied on by the appellant, was not a bills of exchange case and has no application to the appellant’s liability on cheques he signed.

[4] As the motion judge observed, at para. 18, “The purpose of the [Bills of Exchange Act] is to provide certainty in upholding negotiable instruments. It is the responsibility of the person signing the instrument to ensure that it properly reflects the name of the corporate entity.” The scheme of the BEA is supported by s. 2(1) of the Business Names Act, R.S.O. 1990, c. B.17, which provides that, “No corporation shall carry on business or identify itself to the public under a name other than its corporate name unless the name is registered by that corporation.” See also: Canada Business Corporations Act, R.S.C. 1985, c. C-44, s. 10(5), which requires that a corporation set out its name in legible characters in, among other things, all negotiable instruments.

[5] In sum, the appellant was the directing mind of several companies which carried on business under a number of trade names. He signed cheques under a trade name that was not registered to any of the corporations and thereby became liable on those cheques pursuant to operation of the BEA.
. Drive Auto Group Inc. v. David Hay Limited (Fix Auto Richmond Hill)

In Drive Auto Group Inc. v. David Hay Limited (Fix Auto Richmond Hill) (Ont CA, 2022) the Court of Appeal cited basic law from the Bills of Exchange Act (BEA) on bad cheques:
[1] ... Applying the law to the undisputed facts, the motion judge found the appellant liable as the drawer of the dishonoured cheques pursuant to s. 94(2) of the Bills of Exchange Act, R.S.C. 1985, c. B-4 (the “BEA”).


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Last modified: 07-11-22
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