36918 Teva Canada Limited v. TD Canada Trust, Bank of Nova Scotia

(Ont.)

Commercial law – Bills of exchange – Legislation

The applicant (“Teva”) is a large manufacturer of generic pharmaceuticals. Teva and the respondent banks fell victim to a fraudulent scheme orchestrated by a Teva employee, M. M was responsible for administering Teva’s rebate programme but had no authority to requisition or authorize cheques. From 2002 to 2006, M took advantage of the fact that Teva’s internal payment approval policies were not followed. He requisitioned cheques payable to six entities to whom Teva owed no monies: two entities whose names he had invented, and four who were current or former customers of Teva. M requisitioned 63 fraudulent cheques totalling $5,483,249.40, which he and five accomplices deposited into small business accounts they had opened at the respondent banks. Teva sued the banks for damages for conversion, and the banks raised defences under ss. 20(5) and 165(3) of the Bills of Exchange Act, R.S.C. 1985, c. B.4 and under the Ontario Limitations Act. Each party brought motions for summary judgment. The motion judge granted summary judgment in favour of Teva, but this was reversed on appeal.