Boma Manufacturing Ltd v Canadian Imperial Bank of Commerce [1996] 3S.C.R. 727

Facts: The appellants, two small, family-owned companies whose only shareholders and officers are M and his wife, were defrauded by their bookkeeper A through a series of fraudulent cheques issued over a five-year period. A, along with the two principals, was a duly authorised signing officer on the bank accounts maintained by the companies. Cheques drawn on these accounts required only one authorised signature. A used the appellants’ preprinted cheque forms to create some 155 cheques totalling $91,289.54, payable to a number of persons connected with the appellants, including the principals, several employees, and one of the subcontractors, Van Sang Lam (all but one of the cheques payable to Lam were made to ‘J. Lam’ or ‘J. R. Lam’, the initials and the last name mimicking the name of A’s first husband). A signed 146 of the cheques on behalf of the appellants, and fraudulently obtained M’s signature on the other nine. She deposited all the cheques into one of her accounts at the respondent bank. The respondent bank’s policy with respect to a customer wishing to deposit a third party cheque to her account was to require that the cheque be endorsed by the payee. However, the bank accepted 107 of the cheques payable to ‘J. Lam’ or ‘J. R. Lam’ for deposit without endorsement. The tellers apparently assumed that the payee was A’s first husband. A forged endorsements on some of the Lam cheques, and on all of the cheques payable to other third parties. The appellants brought an action in negligence, and in the alternative, conversion, against their own bank and against the respondent. They were successful at trial, and the respondent was ordered to pay $91,289.54. A majority of the Court of Appeal allowed the respondent’s appeal, reducing the judgment so as to reflect only the amount of the nine cheques bearing M’s signature.