A pharmaceutical company brought summary judgment motions against banks for conversion after an employee fraudulently issued corporate cheques payable to entities with names similar to legitimate customers and deposited them into accounts he controlled.
The banks asserted statutory defences under the Bills of Exchange Act, including the fictitious payee rule and the holder in due course provision, and advanced negligence-based counterclaims and equitable set-off.
The court held the payees were plausibly identifiable real entities and therefore not fictitious or non‑existent for the purposes of s. 20(5) of the Act.
It further found that s. 165(3) did not apply because the cheques were not delivered to authorized persons entitled to them.
The negligence-based counterclaims and related defences were barred by the strict liability regime governing cheque conversion.
