Teva Canada Limited v. Bank of Montreal et al. Bank of Nova Scotia v. Teva Canada Limited et al.

[Indexed as: Teva Canada Ltd. v. Bank of Montreal]

Ontario Reports

Court of Appeal for Ontario,

Weiler, Laskin and Cronk JJ.A.

February 2, 2016

129 O.R. (3d) 1 | 2016 ONCA 94

Case Summary

Banks and banking — Bills of exchange — Employee of plaintiff with no power to requisition or sign cheques committing fraud by requisitioning cheques payable to two invented entities and four customers of plaintiff who were not owed money and depositing them to accounts which he had opened — No responsible officer or employee of plaintiff ever looking at requisitions or cheques — Plaintiff having no intention to pay named payees — Defendant banks negotiating cheques — Plaintiff suing banks for damages for conversion — Banks having valid defence under s. 20(5) of Bills of Exchange Act — Invented payees non-existent and all six payees fictitious — Bills of Exchange Act, R.S.C. 1985, c. B.4, s. 20(5).

While employed by the plaintiff, M perpetrated a large-scale fraud by requisitioning cheques payable to six entities and depositing them in small business accounts which he had opened. Two of the payees were invented by M, and four were customers of the plaintiff who were not owed money. M had no authority to requisition or sign cheques. The plaintiff's internal approval policies were not followed. The defendant banks negotiated the cheques. The plaintiff sued the defendants for damages for conversion. The motion judge granted the plaintiff's motion for summary judgment. The defendants appealed.

Held, the appeal should be allowed.

The motion judge erred in failing to hold that the defendants had a valid defence under s. 20(5) of the Bills of Exchange Act. The two invented payees were "non-existent". While the plaintiff argued that it plausibly believed that the imaginary entities were real persons with a connection to its business, it failed to establish that at the time each cheque was drawn, it considered the name of the payee on the cheque and, because of the similarity in name, had an honest though mistaken belief that the named payee was a real customer. In fact, no responsible officer or employee of the plaintiff ever looked at the requisitions or the cheques. All six payees were "fictitious". The relevant intent for determining whether a payee is fictitious is the intent of the drawer. Where the drawer is a corporation, the intent of its directing mind, or at least of one of its responsible officers, is determinative. The plaintiff never had an intention to pay the named payees. It formed no intention at all for any of the cheques. [page2 ]

Boma Manufacturing Ltd. v. Canadian Imperial Bank of Commerce, 1996 149 (SCC), [1996] 3 S.C.R. 727, [1996] S.C.J. No. 111, 140 D.L.R. (4th) 463, 203 N.R. 321, [1997] 2 W.W.R. 153, 82 B.C.A.C. 161, 27 B.C.L.R. (3d) 203, EYB 1996-67134, J.E. 96-2218, 66 A.C.W.S. (3d) 1127, revg 1994 247 (BC CA), [1994] B.C.J. No. 2581, 120 D.L.R. (4th) 250, [1995] 2 W.W.R. 435, 52 B.C.A.C. 161, 99 B.C.L.R. (2d) 201, 19 B.L.R. (2d) 166, 51 A.C.W.S. (3d) 690 (C.A.); Rouge Valley Health System v. TD Canada Trust (2012), 108 O.R. (3d) 561, [2012] O.J. No. 81, 2012 ONCA 17, 287 O.A.C. 241, consd

Metroland Printing, Publishing and Distribution Ltd. v. Canadian Imperial Bank of Commerce, 2002 41862 (ON CA), [2002] O.J. No. 1137, 158 O.A.C. 111, 112 A.C.W.S. (3d) 922 (C.A.), affg 2001 28367 (ON SC), [2001] O.J. No. 1695, [2001] O.T.C. 330, 14 B.L.R. (3d) 212, 105 A.C.W.S. (3d) 111 (S.C.J.) [Leave to appeal to S.C.C. refused [2002] S.C.C.A. No. 236, 180 O.A.C. 400n]; Royal Bank of Canada v. Concrete Column Clamps (1961) Ltd., 1976 192 (SCC), [1977] 2 S.C.R. 456, [1976] S.C.J. No. 80, 74 D.L.R. (3d) 26, 8 N.R. 451, distd

Other cases referred to

Fok Cheong Shing Investments Co. v. Bank of Nova Scotia, 1982 57 (SCC), [1982] 2 S.C.R. 488, [1982] S.C.J. No. 74, 146 D.L.R. (3d) 617, 46 N.R. 181, 20 A.C.W.S. (2d) 63; Raza Kayani LLP v. Toronto Dominion Bank, [2014] O.J. No. 5784, 2014 ONCA 862, 14 C.C.L.T. (4th) 175, 378 D.L.R. (4th) 729, 328 O.A.C. 229, 247 A.C.W.S. (3d) 725; Teva Canada Ltd. v. Bank of Montreal, [2012] O.J. No. 3098, 2012 ONCA 486, 294 O.A.C. 323, 353 D.L.R. (4th) 326, 218 A.C.W.S. (3d) 606; Westboro Flooring and Décor Inc. v. Bank of Nova Scotia (2004), 2004 59980 (ON CA), 71 O.R. (3d) 723, [2004] O.J. No. 2464, 241 D.L.R. (4th) 257, 187 O.A.C. 357, 131 A.C.W.S. (3d) 703 (C.A.)

Statutes referred to

Bills of Exchange Act, R.S.C. 1985, c. B.4 [as am.], ss. 20(2), (5), 165(3)

Business Names Act, R.S.O. 1990, c. B.17 [as am.]

Limitations Act, 2002, S.O. 2002, c. 24, Sch. B [as am.]

Authorities referred to

Crawford, B., The Law of Banking and Payment in Canada (Aurora, Ont.: Canada Law Book, 2008)

Falconbridge, John D., Banking and Bills of Exchange, 6th ed. (Toronto: Canada Law Book, 1956)

Falconbridge, John D., Crawford and Falconbridge, Banking and Bills of Exchange: A Treatise on the Law of Banks, Banking, Bills of Exchange and the Payment System in Canada (Toronto: Canada Law Book, 1986)

Geva, Benjamin, "Conversion of Unissued Cheques and the Fictitious or Non-Existing Payee — Boma v. CIBC" (1997), 28 C.B.L.J. #2 177

APPEAL by the defendants from the judgment of Whitaker J., [2014] O.J. No. 799, 2014 ONSC 828 (S.C.J.) for the plaintiff.

Frank J. McLaughlin, Jeffrey E. Feiner, for appellant TD Canada Trust.

Martin Sclisizzi and Heather Pessione, for appellant Scotiabank.

Colby Linthwaite and Sean Cumming, for respondent Teva Canada Limited. [page3 ]

The judgment of the court was delivered by

LASKIN J.A.: —

A. Overview

[1] The appellants TD Canada Trust and Bank of Nova Scotia and the respondent Teva Canada Limited, a manufacturer of generic pharmaceuticals, were the innocent victims of fraud of over $5 million, perpetrated by Neil McConachie, a former employee in Teva's finance department. The general question on this appeal is did the motion judge err in determining that the banks should bear the loss for the fraud[?] The principal issues raised by the parties concern the application of two sections of the Bills of Exchange Act, R.S.C. 1985, c. B.4 ("BEA") that create statutory defences for the banks in certain circumstances: s. 20(5), which deals with fictitious and non-existing payees; and s. 165(3), which deals with holders in due course.

[2] Between 2003 and 2006, McConachie requisitioned numerous cheques payable to six entities he designated. Two of the entities had names he invented; the other four were current or former customers of Teva. None of the entities was owed any money by Teva. The cheques were issued by Teva's accounts payable department and given to McConachie, even though he had no authority either to requisition cheques or approve payments to customers and Teva's own internal approval policies had been ignored.

[3] McConachie and several accomplices opened accounts in the names of the six entities and deposited 63 cheques, which the banks negotiated, into these accounts. When the fraud was discovered in 2006, McConachie was fired.

[4] Teva then sued the banks for damages for conversion -- for the misappropriation of its property. As neither McConachie nor his accomplices were lawfully entitled to the cheques, the banks were prima facie liable to Teva for converting them. The banks, however, put forward three defences:

The cheques were payable to non-existing or fictitious payees, and thus under s. 20(5) of the BEA, the banks were lawfully entitled to negotiate them.

The banks became holders in due course of the cheques under s. 165(3) of the BEA, and therefore were not liable to Teva in conversion. [page4 ]

For 17 of the cheques, Teva's claim was barred by the Limitations Act, 2002,[^1] as the banks negotiated those cheques more than two years before Teva issued its statement of claim.

[5] Each party then brought motions for summary judgment, which were heard by the motion judge over two days in October 2014. In a short endorsement, the motion judge rejected the banks' defences and granted Teva judgment in the amount of $5,483,249.40. The banks' cross-motions were dismissed. On their appeals, the banks argue that the motion judge's reasons are inadequate, that he erred in failing to give effect to the banks' defences, and that he erred in his award of prejudgment interest in favour of Teva.

[6] The banks' appeals give rise to these six issues:

(1) Are the motion judge's reasons so deficient that his decision is not entitled to deference, and the standard of review is thus correctness?

(2) Did the motion judge err by failing to hold that the banks had a valid defence under s. 20(5) of the BEA for two of the payees because they were non-existing?

(3) Did the motion judge err by failing to hold that the banks had a valid defence under s. 20(5) of the BEA because all six payees were fictitious?

(4) Did the motion judge err by failing to hold that the banks were holders in due course of the cheques under s. 165(3) of the BEA, and therefore not liable to Teva in conversion?

(5) Did the motion judge err by failing to hold that the banks' Limitations Act defence raised a genuine issue requiring a trial?

(6) Did the motion judge err by failing to exercise his discretion properly in his award of prejudgment interest?

[7] I would answer yes to the questions raised by the second and third issues and, for those reasons, would allow the banks' appeals. It is thus unnecessary to consider the other two defences raised by the banks, or the motion judge's award of prejudgment interest, or the adequacy of his reasons. [page5 ]

B. The Fraud

(1) McConachie's employment at Teva

[8] McConachie worked in Teva's finance department in Toronto from August 2002 until July 2006, when he was fired. In 2005, he was made finance manager. He was never an officer or director at Teva, and he never had authority to sign cheques. He reported to Teva's controller, and later to its chief financial officer, Michael Schmid.

(2) McConachie uses Teva's rebate program to perpetrate his fraud

(a) The program

[9] During the time McConachie worked at Teva, the company maintained a rebate program it called the continuing education ("CE") program. The CE program was designed to encourage Teva's customers and service providers to buy its products.

[10] The prices of pharmaceuticals are tightly controlled by provincial drug formularies. But typically a pharmacist, for example, has a choice of products to sell to consumers. Under the CE program, Teva would refund its customers -- the pharmacists in my example -- part of the formulary purchase price as an inducement to buy Teva's products. Teva paid tens of millions of dollars under its CE program until Ontario banned the practice, shortly after McConachie's fraud was uncovered.

[11] McConachie was responsible for administering Teva's CE program. The program was to work as follows: McConachie would prepare or print a CE form and cheque requisition, and send it to Teva's accounts payable department in Mirabel, Quebec; the department was to process the form and requisition; one technician was supposed to ensure that the requisition corresponded to a customer account number and that the requisition for payment had been approved; another technician was to enter particulars of the request into Teva's accounting system; once a week, a batch of cheques would be prepared, and signed by the mechanical application of the signature of two authorized signing officers; the cheques would then be sent back to McConachie for distribution to the appropriate account manager, and ultimately to Teva's customers and service providers.

(b) Teva's approval policies for CE payments

[12] Before June 2005, Teva had no express policy for the approval of payments under its CE program. Any sales employee could prepare a cheque requisition for any amount and forward [page6 i]t to McConachie, who would then send it on to the accounts payable department. The sales employee's signature on the requisition form provided the necessary approval. Importantly, however, McConachie was not authorized either to requisition or approve cheques for CE payments.

[13] In June 2005, Teva implemented an electronic system for payments and an express policy requiring approval for CE payments. McConachie was involved in the implementation of the electronic system and obtained administrative rights in the system. For larger amounts, the approval for CE payments had to be given by designated corporate officers. If the requested cheque was for over $50,000, Teva's chief financial officer had to approve the payment. If the requested cheque was for over $100,000, both the chief financial officer and the vice-president of sales and marketing had to approve the payment. Once the necessary approval was obtained and recorded in Teva's electronic system, McConachie was to review the form and forward it to the accounts payable department for processing.

(c) Teva ignored its approval policies

[14] McConachie exploited his administrative role and Teva's failure to follow its own approval policies to perpetrate his fraud. All the fraudulent cheques deposited in the two banks were requisitioned and approved solely by McConachie, though he had no authority to approve CE payments for any amount.

[15] Before June 2005, McConachie sent cheque requisitions in paper form even though these requisitions did not have a sales person's signature. After June 2005, McConachie, using the administrative rights he retained in the electronic system, created CE forms requesting CE payments to the entities he designated. Of the 40 cheques McConachie requisitioned after June 2005, 36 were for more than $50,000, and of those, seven were for more than $100,000. Not a single cheque he fraudulently requisitioned was approved either by the chief financial officer or the vice-president of sales and marketing of Teva. Although all these cheque requisitions lacked the required officer approval, Teva's accounts payable department generated cheques based on McConachie's fraudulent forms, applied a mechanical signature to the cheques and sent the cheques to him. In total, McConachie requisitioned and received 63 fraudulent cheques in the amount of $5,483,249.40, which he and five accomplices later deposited in accounts at the two banks.

[16] Schmid, Teva's former chief financial officer, and the only Teva employee to give evidence on the motions, admitted on cross-examination that "all the forms were not approved in [page7 a]ccordance with the proper policy", and that, though the accounts payable department "knew that McConachie had no authority to approve these payments, they nevertheless issued cheques". In short, Teva's failure to follow its own approval policies allowed McConachie to carry out this fraud.

(3) McConachie designates six entities as payees of the fraudulent cheques, and deposits the cheques in TD and Scotiabank accounts in the names of these entities

[17] McConachie designated six entities to be payees of his fraudulent cheques: (1) PCE Pharmacare, (2) Pharma Team System, (3) Phamachoice, (4) London Drugs, (5) Pharma Ed Advantage Inc. and (6) Medical Pharmacies Group. McConachie invented the names of the first two entities, PCE Pharmacare and Pharma Team System. They were imaginary entities. The other four entities were legitimate Teva customers or service providers. Three were existing customers at the time of the fraud; the other was a former customer. Although Teva had made legitimate payments to each of these four entities, none of the cheques McConachie requisitioned and obtained was for a legitimate debt owed by Teva.

(a) The Scotiabank accounts and cheques

[18] McConachie and his accomplices opened three small business accounts at Scotiabank, each under the name of a sole proprietorship registered under Ontario's Business Names Act, R.S.O. 1990, c. B.17. The name on each account corresponded to the names of three of McConachie's designated payees: PCE Pharmacare, Pharmachoice and London Drugs.

[19] Into these three accounts, McConachie and his accomplices deposited 43 cheques, in the total amount of $3,949,481. The main payee was PCE Pharmacare, one of the two entities that was a creature of McConachie's imagination. Thirty-one cheques amounting to $2,853,002 were payable to PCE Pharmacare and deposited into a business account at Scotiabank with the name "Neil McConachie operating as PCE Pharmacare".

(b) The TD accounts and cheques

[20] McConachie and his accomplices opened four small business accounts at TD, again under registered sole proprietorships, this time with names corresponding to four of McConachie's designated payees: PCE Pharmacare, Pharma Team System, Pharma Ed Advantage and Medical Pharmacies Group. [page8 ]

[21] Into these accounts, McConachie and his accomplices deposited 20 cheques totalling $1,533,768.43. Seven of the cheques for over $1.2 million were payable to PCE Pharmacare and Pharma Team System, the two imaginary entities.

(4) Discovery of the fraud

[22] In July 2006, Scotiabank notified Teva about a suspicious cheque payable to Overwaitea Food Group. Teva investigated the cheque, and eventually uncovered McConachie's fraud. Teva has accepted that the banks were innocent dupes of McConachie's fraudulent scheme.

C. The Statutory and Legal Context for the Issues Under Section 20(5) of the BEA

(1) Terminology

[23] In this section, I will use what I believe is accepted banking terminology:

"collecting bank" is the bank in which a cheque is deposited, in this case Scotiabank and TD;

"drawer" is the person on whose account a cheque is drawn, in this case Teva;

"drawee" or "drawing bank" is the bank on which a cheque is drawn and is directed to pay the cheque, in this case Teva's bank;

-- "payee" is the person to whom the cheque is payable;

-- "bearer" is a person delivering a cheque to a bank.

(2) The tort of conversion

[24] Conversion is the wilful interference with the goods of another -- that is, taking, using or destroying these goods in a manner inconsistent with the owner's right of possession. In Boma Manufacturing Ltd. v. Canadian Imperial Bank of Commerce, 1996 149 (SCC), [1996] 3 S.C.R. 727, [1996] S.C.J. No. 111, which remains the principal authority on the BEA issues in this appeal, Iacobucci J., in his majority reasons, described, at para. 83, the tort of conversion in the banking context:

A bank converts an instrument, including a cheque, by dealing with it under the direction of one not authorized, by collecting it and making the proceeds available to someone other than the person rightfully entitled to possession. It should be noted that the tort of conversion is one of strict liability. [page9 ]

[25] Boma also confirmed that the drawer of a cheque (Teva) has an action in conversion against a collecting bank (Scotiabank or TD). A collecting bank is liable in conversion if it credits the account of someone not authorized to deal with the cheque. As McConachie and his accomplices were not lawfully in possession of the 63 cheques and deposited them into accounts they controlled, the two banks are prima facie liable to Teva for converting its cheques.

[26] As Iacobucci J. also noted in the above passage, conversion is a strict liability tort. That the banks committed these wrongful acts, as they did, innocently and in good faith, affords them no defence. Equally, a drawer's negligence cannot provide a bank with a defence to a conversion action, and a court cannot therefore apportion liability on the basis of a drawer's contributory negligence.

[27] In his majority reasons in Boma, at para. 80, Iacobucci J. discussed the benefits of the current bills of exchange system and the seeming unfairness and arbitrariness of excluding any notion of fault from the determination of liability under that system:

To some, the allocation of risk in the bills of exchange system may seem arbitrary, but in my view a necessary and coherent rationale sustains this allocation. With respect to forged endorsements, for example, no party in particular is in any better position to detect the fraud than any other. It is a risk that all parties must bear, including collecting banks. It is a price that must be paid if one wishes to enjoy the significant benefits of the bills of exchange scheme, not the least of which is, from the bank's perspective, the facilitation of huge numbers of financial dealings conducted rapidly, and without overwhelming transaction costs. While the banks are accorded the important advantage of holder in due course status in many situations, it would not be appropriate, as the respondent would have it, to exempt any party, including collecting banks, from all exposure to the risk and consequence of fraud.

[28] That any alleged negligence by Teva gives the banks no relief is evident from previous proceedings between these parties. The banks had tried to avoid liability in conversion by asserting Teva's negligence. Scotiabank sought to amend its statement of defence to plead "estoppel by negligence". Both banks asserted a counterclaim for damages for negligence. This court rejected both pleas, in Teva Canada Ltd. v. Bank of Montreal, [2012] O.J. No. 3098, 2012 ONCA 486, at paras. 19 and 20:

In Boma, the court recognized that there is a tension between the law's need for certainty and equity's need to achieve objectively fair results. In the case of bills of exchange, courts of law and equity over several hundred years have determined that certainty is the predominant value and that the operation of an efficient banking market requires strict adherence to objective rules for the allocation of risk. [page10 ]

We are of the view that if one applies the line of reasoning set out by the court in Boma to the circumstances in this case, it is not tenable that a court would recognize the new duty of care urged by Scotia Bank, nor would it recognize the availability of a defence of estoppel by negligence which Bank of Nova Scotia seeks to plead. Doing so would change the allocation of risk and affect the certainty with which participants in the banking system now conduct banking transactions.

[29] Still, though the tort of conversion is a strict liability tort, it is not an absolute liability tort. s. 20(5) of the BEA gives a collecting bank a statutory defence to an action for conversion.

(3) Cheques payable to order and bearer, and s. 20(5) of the BEA

[30] In most cheque transactions, the drawer issues a cheque on its bank account, which instructs its bank, the drawee, to pay the stated amount of the cheque to the payee. The payee deposits the cheque at its own bank, the collecting bank, which collects the money from the drawing bank and credits the payee's account.

[31] Under s. 20(2) of the BEA, a cheque may be payable either to order or to bearer. The distinction is important. A bank may validly negotiate a cheque payable to order only if the cheque is both delivered and validly endorsed. In contrast, a bank may validly negotiate a cheque payable to bearer, if the cheque is simply delivered to the bank. Even if a bearer cheque has a forged or missing endorsement, the bank can negotiate it on delivery.

[32] Ordinarily, if a cheque is made payable to a specific payee, as are the 63 cheques in issue on this appeal, then it is payable to order. And if a bank, even innocently, credits the account of someone not authorized to deal with the cheque, as did the banks here, then the bank is prima facie liable in conversion. But s. 20(5) of the BEA provides both a collecting bank and a drawing bank with a valid defence to a conversion action. Section 20(5) states:

Fictitious payee

20(5) Where the payee is a fictitious or non-existing person, the bill may be treated as payable to bearer.

[33] In other words, a cheque payable to a specific payee that is either non-existing or fictitious, is treated by statute as payable to bearer, not to order. A collecting bank may validly negotiate such a cheque on mere delivery. So if the two appellant banks can show that McConachie's 63 fraudulent cheques were payable to non-existing or fictitious payees, they have a valid [page11 ]defence to Teva's conversion action. That is so because the bearer of the cheque is deemed to be the rightful payee, and the bank is thus not liable for negotiating the cheque.

[34] The purpose of s. 20(5) is to protect the bank from fraud on the drawer, committed by a third party, including an insider in the drawer's organization. The section allocates the loss to the drawer, who typically is better positioned to discover the fraud or insure against it. See Rouge Valley Health System v. TD Canada Trust (2012), 108 O.R. (3d) 561, [2012] O.J. No. 81, 2012 ONCA 17, at para. 11; Benjamin Geva, "Conversion of Unissued Cheques and the Fictitious or Non-Existing Payee -- Boma v. CIBC" (1997), 28 C.B.L.J. #2 177, at 195.

(4) Falconbridge's four propositions

[35] For determining whether a payee is non-existing or fictitious, Iacobucci J. in Boma, approved, with a significant modification, four propositions taken from the late Dean John D. Falconbridge's influential book, Banking and Bills of Exchange, 6th ed. (Toronto: Canada Law Book, 1956), at 468-9. I will discuss the modification separately below. The four propositions are the following:

(1) if the payee is not the name of any real person known to the drawer, but is merely that of a creature of the imagination, the payee is non-existing, and is probably also fictitious;

(2) if the drawer for some purpose of his own inserts as payee the name of a real person who was known to him but whom he knows to be dead, the payee is non-existing, but is not fictitious;

(3) if the payee is the name of a real person known to the drawer, but the drawer names him as payee by way of pretence, not intending that he should receive payment, the payee is fictitious, but is not non-existing; [and]

(4) if the payee is the name of a real person, intended by the drawer to receive payment, the payee is neither fictitious nor non-existing, notwithstanding that the drawer has been induced to draw the bill by the fraud of some other person who has falsely represented to the drawer that there is a transaction in respect of which the payee is entitled to the sum mentioned in the bill. [page12 ]

[36] As is evident from the propositions themselves, a payee can be

-- both non-existing and fictitious;

-- non-existing but not fictitious; or

-- fictitious but not non-existing.

[37] Falconbridge also drew an important distinction between non-existing and fictitious payees:

Whether a payee is non-existing is a simple question of fact, not depending on anyone's intention.

Whether a payee is fictitious depends on the intention of the creator of the instrument, that is, the drawer of a bill or cheque, or the maker of the note.

[38] In this appeal, Scotiabank and TD contend that all six payees designated by McConachie fall under Falconbridge's first proposition: PCE Pharmacare and Pharma Team System were non-existing; and all six payees are fictitious. Thus, the banks have a valid defence to Teva's action for conversion.

[39] Teva, on the other hand, contends that all six payees fall under Falconbridge's fourth proposition. Thus, the banks have no defence to its action for conversion, and this appeal should be dismissed. To come under Falconbridge's fourth proposition, two requirements must be met:

-- each payee must be a real person, that is, not non-existing;

each payee must be intended by Teva to receive payment and thus not fictitious.

[40] As I will discuss, these two requirements give rise to the s. 20(5) issues on this appeal.

(5) Boma's modification to the non-existing payee defence

[41] The non-existing payee defence under Falconbridge's first proposition was modified by Iacobucci J. in Boma. He appeared to treat non-existing and fictitious payees interchangeably. And, instead of adhering to Falconbridge's explanation of "non-existing" as a question of objective fact, Iacobucci J. imported the notion of "plausibility" into the question whether a payee is non-existing. The effect of his modification is that even if a payee is, in fact, a creature of the fraudster's imagination, the payee may still not be non-existing if the drawer had a plausible and [page13 ]honest, though mistaken, belief that the payee was a real creditor of the drawer's business.[^2]

[42] Boma itself shows the impact of this modification to the non-existing payee defence. In Boma, Donna Alm, a bookkeeper, defrauded her employer, two family-owned companies, of over $90,000. The companies were controlled by a husband and wife, Mr. and Mrs. Mange. Alm was not an officer, director or shareholder of the companies. But she was an authorized signing officer on the companies' bank account with the Royal Bank of Canada. Over the course of five years, she fraudulent[ly] prepared 155 cheques made payable to various payees, and appropriated the proceeds by collecting them through her account with the collecting bank, the CIBC.

[43] Of the 155 cheques, 114 were made payable to an imaginary person, either a "J. Lam" or a "J.R. Lam". As an objective fact, the payees of these 114 cheques were non-existing and would fall under Falconbridge's first proposition, as La Forest J. held in his dissenting reasons. But Iacobucci J. held that the payees came under Falconbridge's fourth proposition because Mr. Mange honestly believed the cheques were made out to a real person who had business dealings with his companies, a Mr. Lam. Iacobucci J. explained his reasoning, at paras. 60-61 of his judgment:

Many of the cheques, however, were made payable not to actual persons associated with the companies, but to "J. Lam" and "J. R. Lam". The appellants had no dealings with any persons of such names. According to the criteria set out in Falconbridge, supra, such a person would be categorized as "non-existing", and hence, fictitious. But in my view, it seems that Boris Mange was reasonably mistaken in thinking that "J. Lam" or "J. R. Lam" was an individual associated with his companies. Mange knew that one of the subcontractors retained by the companies was a "Mr. Lam". He did not specifically recall Lam's first name, which, incidentally, was Van Sang. However, when Mange approved the cheques to "J. Lam" and "J. R. Lam", he honestly believed that the cheques were being made out for an existing obligation to a real person known to the companies. The trial judge's comments in this regard were tantamount to a finding of fact, and were not disturbed on appeal; as these are concurrent findings of fact, this Court should not intervene.

Accordingly, the cheques made out to "J. Lam" and "J. R. Lam" also fall within the fourth category, and could not be treated by the CIBC as payable to bearer. Rather, the cheques were payable to order, and in order to be [page14 ]negotiable to the bank, delivery alone was not sufficient. Valid, non-forged endorsements were required.

[44] In The Law of Banking and Payment in Canada (Aurora, Ont.: Canada Law Book, 2008), Bradley Crawford summarized the effect of Iacobucci J.'s modification to Falconbridge's first proposition [at pp. 22-34]:

[T]he law appears to be that if the name of the payee is a pure invention of the drawer of a cheque (or the maker of a note), the payee may be "non-existing" within the meaning of BEA, s. 20(5), but only if it is also true that the name is of a person having no real connection with the drawer's business, or semble, is not a name that plausibly might be identified by the drawer as being a real creditor of his business.

(Emphasis in original)

[45] Thus, where the evidence establishes this honest but mistaken belief, what was under Falconbridge's first proposition, a non-existing payee, becomes a real payee. If the drawer intended this "real" entity to receive payment, the payee is not fictitious either, bringing it within the parametres of Falconbridge's fourth proposition and leaving the collecting banks liable for the loss.

D. The Issues Under S. 20(5) of the BEA

[46] In this appeal, Scotiabank and TD contend that all six payees designated by McConachie fall under Falconbridge's first proposition. PCE Pharmacare and Pharma Team System were non-existing. The other four payees (Medical Pharmacies Group, Pharmachoice, London Drugs and Pharma Ed Advantage Inc.), though not non-existing, were fictitious because Teva formed no intention that payments be made to those payees. No signing officer or directing mind of the company turned their minds to the cheques and no one examined them. The cheques were mechanically processed without proper internal approvals. In the absence of any evidence that Teva actually intended to make the payments to the named (real) payees, the payees are fictitious, the cheques are deemed payable to bearer and the banks are not liable for negotiating the cheques.

[47] Teva, on the other hand, contends that all six payees fall under Falconbridge's fourth proposition. It relies on the modification to Falconbridge's first proposition in Boma to bring the cheques payable to the two non-existing entities within the scope of Falconbridge's fourth proposition. Teva argues that all six payees were real and not fictitious because Teva intended that the cheques drawn would discharge legitimate obligations to existing Teva customers, or suppliers to customers. Thus, the banks have no defence to its action for conversion, and this appeal should be dismissed. [page15 ]

(1) Did the motion judge err by failing to hold that the banks had a valid defence under s. 20(5) of the BEA for the payees PCE Pharmacare and Pharma Team System because both were non-existing?

[48] PCE Pharmacare and Pharma Team System were, in fact, non-existing. They were invented by McConachie and were creatures of his imagination. Teva has conceded as much. Thus, seemingly, these two payees fall under Falconbridge's first proposition.

[49] But, Teva fairly submits that simply because PCE Pharmacare and Pharma Team System did not in fact exist, is not decisive in the light of Boma's modification to the non-existing payee defence under Falconbridge's first proposition. It submits that though both PCE Pharmacare and Pharma Team System were invented by McConachie, their names were similar to the names of legitimate customers of Teva, PCE Management Inc. and Pharma Systems. Thus, Teva argues it plausibly believed these imaginary entities were real persons with a connection to its business. Under the modification in Boma to the non-existing payee defence, they were real persons, not non-existing.

[50] I do not agree with Teva's submission. It seems to me that to satisfy Boma's modification to the "non-existing" payee defence, Teva has to meet two requirements, and though it perhaps meets the first, it does not meet the second:

The name of the imaginary payee is sufficiently similar to the name of one of Teva's legitimate customers that Teva could plausibly, though mistakenly, maintain it was writing a cheque to a real person, a real creditor of its business: contrast Westboro Flooring and Décor Inc. v. Bank of Nova Scotia (2004), 2004 59980 (ON CA), 71 O.R. (3d) 723, [2004] O.J. No. 2464 (C.A.), at para. 25, and Rouge Valley, supra, at paras. 34-35.

At the time each cheque was drawn, Teva considered the name of the payee on the cheque and, because of the similarity in name, had an honest, though mistaken, belief that the named payee was a real customer or service provider. See Rouge Valley, supra, at paras. 34-38 and 40; Raza Kayani LLP v. Toronto Dominion Bank, [2014] O.J. No. 5784, 2014 ONCA 862, at paras. 39-42.

[51] I accept that the made-up entity Pharma Team System has a name sufficiently similar to the name of Teva's real customer Pharma Systems that one might plausibly confuse the two. The same might be said of PCE Pharmacare and PCE Management Inc., [page16 ]though less obviously so. Indeed, the motion judge, at para. 34 of his endorsement, found that "the payees could plausibly be understood to be real entities and customers of the plaintiff". I would not interfere with this finding and so I accept that Teva meets the first requirement of the modification in Boma to the non-existing payee defence.

[52] But the motion judge made no finding on the second requirement, and therefore erred because Teva led no evidence to show it met this requirement. On the evidence, those who were in positions of authority at Teva (and who, arguably, could represent the drawer's "belief") could not have come to the honest but mistaken belief that the named payees "Pharma Team System" and "PCE Pharmacare" referred to Teva's real customers Pharma Systems and PCE Management Inc.

[53] No one in a position of authority ever looked at any of the requisitions or the cheques. Clerks processed the cheques and mechanically applied signing officers' signatures. The evidence does not even demonstrate that the clerks themselves turned their minds to the names on the requisitions or the cheques, or that they were misled by the similar names. Instead, the evidence reflects that no one gave the names on the requisitions or the cheques any thought at all. No officer or other responsible person at Teva considered the identity of the payees on the fraudulent cheques and formed an honest, though mistaken, belief that the named payees were legitimate customers or service providers.

[54] By contrast, in Boma, Mr. Mange at least considered the identity of the payees on nine of the fraudulent cheques, and formed an honest, though mistaken belief that they were payable to legitimate customers of his companies. And, it can be inferred from the reasons of Iacobucci J. that because Mr. Mange had viewed and formulated a mistaken belief that each of the names on the nine fraudulent cheques he authorized corresponded to one of his real customers, he would have formulated the same mistaken belief in the names had he viewed them on all 114 cheques payable to the non-existing entities "J.R. Lam" or "J. Lam". I draw this inference because Iacobucci J. goes on to treat the payees on all the cheques as "real", and then considers all the cheques in his analysis of the fictitious payee defence.

[55] This court's decision in Westboro Flooring is consistent with Boma, and markedly different from the case before us. In Westboro Flooring, the fraudster Duarte prepared 36 cheques payable to an imaginary payee with a very similar name to a real Westboro customer and presented the cheques to a signing officer for authorization. In holding that the banks did not have [page17 ]a defence under s. 20(5) of the BEA, this court concluded, at para. 25, that because Westboro had an existing supplier referred to by a very similar name, the signing officers, seeing this very similar name, plausibly believed they were paying a legitimate supplier and "the error was one of misnomer and did not make the payee non-existing under the Falconbridge criteria".

[56] Here, in summary, there is no evidence of anyone, other than McConachie, turning a mind to the names of the payees on the cheques at the time they were drawn. Teva's argument that PCE Pharmacare and Pharma Team Systems were payees under Falconbridge's fourth proposition must fail for the same reason the drawer's identical argument in Rouge Valley failed [at para. 40]:

Third, as the trial judge noted in Boma, Mr. Mange, who ran the companies, actually considered the name of the payee when the cheques in question were drawn. The court could therefore find that he honestly believed he was paying a legitimate creditor of his business. Here, in contrast, no one responsible for running Rouge Valley considered any of the cheques authorized by Marshner. Therefore, no one at Rouge Valley could say that the cheques were being issued to a known entity with whom the hospital had previous legitimate business dealings.

[57] In my opinion, the motion judge erred in failing to hold that both PCE Pharmacare and Pharma Team System were non-existing payees under Falconbridge's first proposition, even as modified in Boma. The banks were entitled to treat the cheques to those two payees as payable to bearer. Correspondingly, Teva's conversion action on those cheques must fail.

(2) Did the motion judge err in failing to hold that the banks had a valid defence under s. 20(5) of the BEA because the payees were fictitious?

[58] "Fictitiousness" matters under s. 20(5) of the BEA and under Falconbridge's fourth proposition only where the payees are real persons. In this case, four of the payees -- Pharmachoice, London Drugs, Pharma-Ed Advantage Inc.[^3] and Medical Pharmacies Group -- are real persons. They are or were Teva's customers or service providers. [page18 ]

[59] Under Falconbridge's propositions, whether these payees are fictitious "depends upon the intention of the creator of the instrument, that is the drawer of a . . . cheque . . .". But whose intent should the court look to? In Boma, at para. 40, Iacobucci J. said that the relevant intent for determining whether a payee is fictitious is the intent of the drawer itself, not the intent of the actual "creator of the instrument".[^4] Where the drawer is a corporation, the intent of its directing mind, or at least the intent of one of its responsible officers, is determinative.

[60] Thus, it is Teva's intent or the intent of its directing mind, not McConachie's intent that governs.[^5] And the relevant time for determining Teva's intent is the time when the cheques were drawn, not afterwards. See Raza Kayani, supra, at para. 41.

[61] So, if the payees are real persons intended by Teva to receive payment, then these payees are not fictitious, and the banks are liable for the loss. Conversely, if Teva has drawn cheques to order, not intending that the payees receive payment, then Teva is liable. In Boma, at para. 46, Iacobucci J. discussed the rationale for the fictitious payee defence:

The policy underlying the fictitious person rule seems to be that if a drawer has drawn a cheque payable to order, not intending that the payee receive payment, the drawer loses, by his or her conduct, the right to the protections afforded to a bill payable to order.

[62] Although the motion judge found that the payees were not fictitious, he made no finding on Teva's intent, and, at para. 28 of his endorsement, he said incorrectly that "[t]he issue as to whether the drawer is a fictitious person is a question of fact". Because of this error and the absence of any finding on Teva's intent, the motion judge's finding that the payees were not fictitious is not entitled to any deference on appeal. [page19 ]

[63] Teva submits that the payees were not fictitious because it had the necessary intent to pay the named payees. Teva rests its argument on four planks: the affidavit evidence of Schmid shows Teva's intent; Teva's intent can be presumed; a general corporate intent should be inferred; and the case law uniformly supports its position.

[64] The banks submit that the evidence establishes that Teva formed no intention at all for any cheques. They say that Schmid's affidavit evidence is undermined by his evidence on cross-examination; that if a presumption of intent exists, it has been rebutted by the evidence; that a general corporate intent cannot be inferred as Teva consistently made CE payments contrary to its own approval policies; and that the cases Teva relies on are distinguishable on their facts. I agree substantially with the banks' submission. The evidence does not support Teva's claim that it intended to pay the named payees.

[65] Schmid's evidence. Schmid baldly asserted, at para. 10 of his affidavit filed on the motions, that ". . . at the time [Teva] issued the Fraudulent Cheques, [Teva] believed each of these cheques was to satisfy a legitimate obligation owed by [Teva] to a legitimate [Teva] customer or service provider". But Teva led no evidence to support this assertion and it did not stand up to cross-examination.

[66] When he was cross-examined, Schmid admitted no cheque was legitimate; each cheque was defective on its face; in each case where the approval of one or more officers was required, none was obtained; and in each case McConachie approved the requisitions though he had no authority to do so; and finally, although the accounts payable department knew that McConachie had no authority to approve these transactions, the cheques were nonetheless issued. In the light of his admissions on cross-examination, Schmid's evidence does not assist Teva in demonstrating the drawer's intent to make legitimate payments to the payees.

[67] Presumption of intent. Teva relies on Boma in arguing that Teva's intent to pay legitimate creditors should be presumed. Teva finds support for this argument, at para. 57 of Iacobucci J.'s reasons:

The validity of the cheques is not challenged; therefore, it must be presumed that the drawer intended the payees to receive the proceeds of the cheques. Clearly, the appellants had no intention of transferring over $90,000 to Alm, rather than the payees, for no reason and via the circuitous route of third party cheques.

[68] Standing alone, this paragraph does appear to lend some support to Teva's position. But this paragraph must be read in [page20 ]conjunction with the rest of Iacobucci J.'s analysis. For he goes on, at para. 60, to consider and rely on Mr. Mange's honest belief that "the cheques were being made out for an existing obligation to a real person known to the companies". Having found that Mr. Mange formed an honest but mistaken belief about the legitimacy of the named payees, Iacobucci J. concluded that Mr. Mange also formulated the intent to pay the persons he mistakenly believed to be legitimate payees. Justice Iacobucci was not merely presuming Boma's intent; he found its intent in the evidence.

[69] In the case before us, Teva has put forward no such evidence. To the extent it can rely on a presumption that it intended the payees to receive the proceeds of the fraudulent cheques, that presumption has been rebutted by the evidence of its undeniable, indeed admitted, failure to follow its own approval process. Instead, Teva allowed every cheque to be requisitioned and approved solely by McConachie and then issued by one of its technicians without any scrutiny whatsoever.

[70] Inference of corporate intent. Teva also argues that even if its intent to pay legitimate creditors cannot be presumed, it should be inferred. Teva contends that we should focus on the intent of the section of the overall enterprise to which it had delegated the drawing of cheques, its accounts payable department in Quebec. There, Teva employees who prepared the cheques knew they had been requisitioned and were payable to customers or service providers recognized by its accounting system. Teva did not intend to be robbed by these employees, and the employees issued the cheques intending to satisfy legitimate obligations.

[71] Again, Teva draws support for its argument from the majority reasons in Boma. As in the case before us, all 155 cheques in Boma were written on the drawer's preprinted cheque forms. Alm used these preprinted forms to create all the cheques, but she signed only 146 of them. She induced Mr. Mange to sign the other nine. Again, Iacobucci J. did not distinguish between the cheques signed by Mr. Mange and the cheques signed by Alm,[^6] nor did he distinguish between the cheques payable to existing employees and the cheques payable to imaginary persons. He treated them all the same. He found that the fictitious payee defence did not apply to any of them. [page21 ]

[72] Teva contends that implicitly, if not expressly, Iacobucci J. was inferring a general corporate intent to pay legitimate creditors from Mr. Mange's specific knowledge of the nine cheques he was induced to sign. Without that inference of intent, the collecting bank in Boma, CIBC, would have had a good defence for all but the nine cheques signed by Mr. Mange -- that is, a good defence for all the cheques signed by Alm.

[73] I agree that the majority's reasons seem to infer a general corporate intent to pay legitimate creditors from Mr. Mange's specific knowledge of the nine cheques. However, on the evidence in this case, the same inference is not available.

[74] In Boma, there was a basis in the evidence to conclude that Mr. Mange honestly but mistakenly believed the imaginary payees were legitimate and that he intended to make legitimate payments to these payees. Mr. Mange looked at nine cheques, Alm had authority to sign cheques, and she and Mr. Mange agreed that she could use her signing authority to sign cheques to pay legitimate company obligations when both he and his wife were unavailable. See Boma Manufacturing Ltd v. Canadian Imperial Bank of Commerce, 1994 247 (BC CA), [1994] B.C.J. No. 2581, 120 D.L.R. (4th) 250 (C.A.), at paras. 8-17. Mr. Mange's evidence regarding the nine cheques he did consider and his belief regarding these cheques, taken together with Alm's role and authority within the companies, leads to the reasonable inference that Mr. Mange, as the company's directing mind, intended only to make payments to his legitimate customers.

[75] Here, by contrast, there is no evidence from which a corporate intent could be inferred. Neither Teva's directing mind nor any of its responsible officers scrutinized or even looked at any of the fraudulent cheques. Its sensible cheque-approval policies were not followed. Instead, the only person within Teva's organization who considered the identity of the payees on the cheques and the legitimacy of the payments was an employee who had no signing authority, and no authority even to requisition cheques or approve CE payments. On these unchallenged facts, no inference of a corporate intent to pay legitimate creditors should be drawn. To hold otherwise would render the fictitious payee defence under s. 20(5) of the BEA meaningless.

[76] The case law. In addition to Boma, Teva relies in particular on two cases, which it argues support its position: the earlier Supreme Court of Canada decision in Royal Bank of Canada v. Concrete Column Clamps, supra, footnote 4; and the decision of Lederman J. in Metroland Printing, Publishing and Distribution Ltd. v. Canadian Imperial Bank of Commerce, 2001 28367 (ON SC), [2001] O.J. No. 1695, [2001] O.T.C. 330 (S.C.J.), which was upheld by this court [page22 ]at 2002 41862 (ON CA), [2002] O.J. No. 1137, 158 O.A.C. 11 (C.A.), with leave to appeal to the Supreme Court of Canada dismissed [2002] S.C.C.A. No. 236, 180 O.A.C. 400n. But both cases differ from the case before us in important ways.

[77] In Concrete Column, a payroll clerk, whose duty was to prepare salary cheques, perpetrated a fraud by preparing numerous cheques payable either to unknown persons or former employees who were not owed any wages. The clerk had the cheques signed by an authorized signing officer of the company, who did not know the employees personally, but who mechanically placed his signature on the cheques. The clerk then took the cheques to the company's bank and, by forging endorsements, obtained the proceeds.

[78] In the company's action against the bank, the trial judge held that the cheques payable to the unknown persons were payable to fictitious persons and the bank was not liable for negotiating them. But he also held that the bank was liable for the cheques payable to the former employees, even though they were not owed any money. The trial judge's decision was upheld by the Quebec Court of Appeal and by a majority in the Supreme Court of Canada.

[79] The important distinction in Concrete Column is that for the cheques payable to former employees, the majority in the Supreme Court implicitly held that the intent of the signing officer was the intent of the company or drawer, even though the signing officer did not appear to be a directing mind of the company. By contrast, in the case before us, the intent of the technicians who prepared the cheques and mechanically applied signatures of Teva's signing officers could not be equated with Teva's intent. Nor could any intent of the signing officers be equated with Teva's intent as they never applied their signatures to the cheques or even saw them.

[80] In Metroland Printing, which the motion judge relied on, an accounts payable supervisor defrauded her employer by causing the company's computer system to produce cheques with legitimate signatures but for non-existing obligations. The supervisor was to enter into the company's computer system the names of truck drivers who supplied services to the company, but instead she reversed the order of the drivers' first and last names. She then stole the cheques that had been computer-generated and negotiated them.

[81] In an action against the collecting banks for conversion, Lederman J., relying on Boma, found that the payees were neither non-existing nor fictitious. In doing so, he made an important finding on the intention of the drawer, which differentiates [page23 ]that case from the one before us. At paras. 42-43 of his reasons, he said:

The next question which must then be answered is what was the intention of the drawer of the cheques. Here, the plaintiff honestly expected that the cheques in question were being created in respect of valid obligations and being paid out to real individuals, i.e. the plaintiff's truck drivers. The fact that the names were created in reverse does not necessarily mean that these individuals were non-existing or fictitious. Rather, as the names on the cheques were essentially the same names as those of real drivers employed by the plaintiff, it follows that the plaintiff would have honestly believed that these cheques satisfied actual obligations. As a result, the defence of fictitious payee would not apply.

It is true that in the case at bar, as in Boma, the cheques were made out to non-existing persons, and neither Latiff nor Alm ever intended that the payees indicated on the cheques receive the cheques. Nonetheless, the plaintiff Metroland, the real drawer of the cheque, did believe that the cheques were being made out for existing obligations to real persons. As a result, following Boma, these payees are not fictitious, and subsection 20(5) of the BEA would not apply.

[82] That finding was supportable because the cheques were generated in accordance with the company's usual practice. Here, by contrast, McConachie circumvented Teva's practice and Teva allowed him to do so.

[83] For these reasons, the case law Teva relies on is distinguishable and does not support its position.

[84] In saying that in this case no corporate intent should be found, I make two final points. First, I do not suggest that every cheque issued by a company must be scrutinized and approved by the signatory of the cheque. Of course, now many companies, like Teva, use preprinted cheques and have the signature of their authorized officers stamped on or applied mechanically. In large companies, it might be impractical to expect every individual cheque, no matter how small the amount, to be scrutinized by the company's directing mind. But if these companies do not put in place and follow a policy for approving the issuance of their cheques, and if they are then defrauded by an employee within their organization, their action for conversion risks being met with a successful fictitious payee defence.

[85] Conversely, had Teva followed its own approval policies and mistakenly approved the fraudulent cheques obtained by McConachie, I would have inferred a corporate intent to pay real creditors for legitimate obligations. Had those in a responsible position reviewed and mistakenly approved even some of the cheques (as in the case of Boma), Teva would have had a basis to argue that its intent should be inferred. But that is not the evidence in this case. [page24 ]

[86] Second, my conclusion does not depend on an allocation of fault. It is not Teva's negligence for which it is being found liable, but rather its lack of corporate knowledge and therefore the absence of any evidence from which one could reasonably infer it intended to pay real creditors of its business for legitimate debts.

[87] I conclude that Teva has failed to show it intended the four payees who are or were its customers or the two non-existing payees to receive the proceeds of the cheques. All these payees were fictitious and the banks were entitled to treat all the cheques as payable to bearer. Teva's conversion action must therefore fail.

E. Conclusion

[88] I would hold that the payees PCE Pharmacare and Pharma Team System were non-existing and that, even if they were deemed "real", all six payees were fictitious. Therefore, under s. 20(5) of the BEA, the banks have a valid defence to Teva's conversion action. I would allow the banks' appeals, set aside the judgment of the motion judge and dismiss Teva's action. The banks are entitled to their costs of the appeals, which I would fix in the agreed amount of $30,000, inclusive of disbursements and applicable taxes, for each bank.

Appeal allowed.

[^1]: S.O. 2002, c. 24, Sch. B. [^2]: This modification has been criticized. See the persuasive dissenting reasons of La Forest J. in Boma; Geva, supra; and John D. Falconbridge, Crawford and Falconbridge, Banking and Bills of Exchange: A Treatise on the Law of Banks, Banking, Bills of Exchange and the Payment System in Canada (Toronto: Canada Law Book, 1986), s. 4902.3(i) at p. 1254. [^3]: I accept Teva's position that Pharma-Ed Advantage Inc. simply changed its name to Majestic Waters Enterprises Inc. in March of 2004, but Teva continued to do business with, and issued legitimate cheques payable to, "Pharm-Ed Advantage Inc." after the name change. [^4]: Unless the person who signed the cheque is also the company's directing mind. See Fok Cheong Shing Investments Co. v. Bank of Nova Scotia, 1982 57 (SCC), [1982] 2 S.C.R. 488, [1982] S.C.J. No. 74. This aspect of the majority judgment in Boma has also been criticized. Again, see Geva, supra, and La Forest J.'s dissenting reasons in Boma. The basis of the criticism is that the majority's view does not take account of the law of agency or vicarious liability in tort. See, also, Laskin C.J.C.'s dissent in Royal Bank of Canada v. Concrete Column Clamps (1961) Ltd., 1976 192 (SCC), [1977] 2 S.C.R. 456, [1976] S.C.J. No. 80. [^5]: If McConachie's intent governed, or, in Boma, if Alm's intent governed, then the payees would have been named by pretence, and would be fictitious under Falconbridge's third proposition. In his dissent in Boma, La Forest J. so held for the 38 cheques signed by Alm and payable to existing employees. [^6]: La Forest J. did in his dissent. He ultimately concluded that the banks were liable for converting only three cheques -- those payable to existing employees and signed by Mr. Mange.