On February 2, 2016, the Ontario Court of Appeal released its decision in Teva Canada Limited v. Bank of Montreal. The plaintiff pharmaceutical manufacturer Teva Canada Ltd. and the defendants TD Canada Trust and The Bank of Nova Scotia were all victims of a $5M+ fraud perpetrated by a former employee of Teva. The former employee requisitioned and obtained fraudulent cheques from Teva made out to companies he registered with names similar to those of Teva customers. The cheques were negotiated by the defendant banks through accounts opened by the fraudster in the name of the companies he registered. Teva sued the banks for damages for conversion, a strict liability offence under the Bills of Exchange Act (“BEA”). Teva obtained summary judgment against the Banks, and the Banks appealed. The Court of Appeal has now allowed the Banks’ appeals and dismissed Teva’s action. The Court held that the cheques in question fell within a statutory defence at section 20(5) of the BEA which provides that banks are not liable for converting cheques made to non-existing and/or fictitious payees. The decision is helpful because it affirms that: (i) a Bank may rely upon the defence if a payee is non-existing, fictitious or both; (ii) whether a payee is non-existing is a question of fact; (iii) whether a payee is fictitious depends upon the drawer’s intention and the payor must provide evidence of that intention if alleging conversion; and (iv) companies must put in place and follow policies governing the issuing of pre-printed cheques if they hope to hold banks accountable for losses in conversion. Heather Pessione’s case summary.