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Banks liable for cheque conversion; statutory defences under Bills of Exchange Act rejected.
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.
Appeal of interlocutory order made during summary judgment mini-trial dismissed as premature.
During a summary judgment motion involving a mini-trial, the motions judge ordered that a paragraph in the self-represented respondent's affidavit be treated as a counterclaim for one million dollars against the appellant bank.
The bank appealed this order.
The Divisional Court dismissed the appeal as premature, holding that an appeal of a ruling made during a summary judgment motion should normally await the completion of the motion, similar to rulings made during a trial.
