THE TORT OF CONVERSION AND THE COLLECTING BANK: TEVA CANADA LTD V BANK OF NOVA SCOTIA

Abstract

The question of who should bear the loss when an employee defrauds an employer by means of cheques drawn on the employer’s account has arisen frequently in banking law. Yet an answer which accords with the common sense that the employer and/or employee should do so eludes the Supreme Court of Canada, in contrast to that result in other common law jurisdictions. In a recent case, Teva Canada Ltd v Bank of Nova Scotia, the Court declined leave to appeal in a case which would have challenged the Court to reconsider Boma Manufacturing Ltd v CIBC and the vexed issues canvassed there of the meaning of sections 20(5) and 165(3) of the Bills of Exchange Act, and of the common law doctrines of estoppel by negligence, contributory negligence and vicarious liability. This paper sets out these legal issues and a possible resolution in the hope that the court will revisit this frequent fact paradigm in the future