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Contracts - Factoring [Factors Act]. Liquid Capital Exchange Corp. v. Daoust
In Liquid Capital Exchange Corp. v. Daoust (Ont CA, 2024) the Ontario Court of Appeal dismissed an appeal of a fraud action involving 'factoring', a practice involving the prompt assignment of accounts receivable to a finance company in order to accelerate realization of funds by the assignor:[1] During 2013 the appellant, Liquid Capital Exchange Corp. (“Liquid Capital”) was the victim of a fraud relating to its “factoring” business.[1] It was led to believe that WF Canada Ltd. (“WF”) was providing services to the respondent Enbridge Gas Distribution Inc. (“Enbridge”), that WF had issued invoices for those services, that Enbridge had approved those invoices, and that Enbridge had agreed it would pay the amount of the invoices to Liquid Capital. Between June 10, 2013 and July 12, 2013, Liquid Capital advanced $757,525.50 to WF – a portion of the total amount of what it thought were valid WF invoices – with the expectation that Enbridge would forward payment of the full amount of the invoices to Liquid Capital.
[2] In fact, WF was providing no services to Enbridge. Enbridge owed WF nothing. The invoices were fictitious and the statements that Enbridge had approved the invoices and would make payments to Liquid Capital were not made by anyone authorized to do so by Enbridge. The result was that Liquid Capital received no payment from Enbridge to offset what it had advanced to WF.
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