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Writer's pictureSiddharth Mahajan

Bank transfer scam a reason to not honour payment obligations?

If the buyer (or debtor) is a victim of a bank transfer scam, then can they argue that because payment was made in good faith (even though to a fraudulent entity), it is discharged from payment obligations? This was the question before a Canadian court in Ronsco v. MWL Brasil [2020], where MWL was seeking a payment of $200k for shipment of wheels.

Fraudsters intercepted emails and sent chasers to Ronsco, pretending to be MWL’s accountant. They used spoofing to make the email id look credible. Payment was requested to the bank a/c of a subsidiary. Reason given for modification was that bank audit was being carried out for the other account. Ronsco treated the mail as legitimate & made payment. Canadian CCQ’s rule says payment made in good faith to the apparent creditor (i.e. a fraudster) is valid.


Court found Ronsco’s payment as a curious risk laden transaction. Bank audits and impossibility to use accounts are not a common occurrence, and Ronsco should have caught that. Court said minimum verification was required on Ronsco's part to detect the fraud. They should have called MWL’s finance dept. and clarified things such as why were such measures being taken; is it appropriate to divert sums away from the usual bank etc.


Ronsco had not met its payment obligation.





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