Teva: Employee Cheque Fraud - Who Is Liable?

On October 27, 2017 the Supreme Court of Canada released its long-awaited decision in Teva Canada Ltd. v. TD Canada Trust.  In a 5:4 decision, the Supreme Court held that two banks that accepted fraudulent cheques procured by a dishonest employee were strictly liable in conversion to the employer, and could not establish the "fictitious or non-existing payee" defence afforded by subsection 20(5) of the Bills of Exchange Act.  The decision is a positive development for victims of fraud who seek to recover from banks in respect of certain types of employee cheque frauds.  The Supreme Court reversed the decision of the Court of Appeal for Ontario, which had found that the payees were either fictitious or non-existing.