



COURT OF APPEAL FOR ONTARIO

CITATION: Tran v. Chung, 2016 ONCA 378

DATE: 20160519

DOCKET: C60661

Simmons, LaForme and Huscroft JJ.A.

BETWEEN

Nip Y Tran

Plaintiff (Appellant)

and

Phu Man Chung,

Majekodunmi Adega,
    also known as Majek Adega,

Tu Hong Luong,
    Tradeworld Realty Inc.,

Bank of Montreal
, and Cynthia Dacosta, also known as

Cynthia DaCosta, also
    known as Cynthia Da Costa,

and
    Kerryon Nugent

Defendants (
Respondent
)

James H. Chow, for the appellant

Allyson Fox, for the respondent

Heard: December 9, 2015

On appeal from the order of Justice Mary E. Vallee of the
    Superior Court of Justice, dated May 25, 2015
,
with reasons
    reported at 2015 ONSC 3315.

H.S. LaForme
    J.A.:

A.

INTRODUCTION

[1]

The appellant, Nip Y Tran, claims she was fraudulently induced to
    provide a bank draft payable to the Bank of Montreal (BMO) by a group of
    alleged fraudsters. Unbeknownst to her, the alleged fraudsters gave the bank
    draft to a third party whom the appellant did not know. The third party then
    took the bank draft to BMO. Following the third partys instructions, BMO
    accepted the bank draft and deposited it to her line of credit. The third party
    then instructed BMO to provide her with funds equal to the amount of the bank
    draft and gave those funds to one of the alleged fraudsters.

[2]

Did BMO commit the tort of conversion? The motion judge said no and
    dismissed the appellants claim on a motion for summary judgment. For the
    reasons that follow, I disagree and would allow the appeal and grant judgment
    to the appellant.

B.

BACKGROUND

[3]

Ms. Tran owned a house, which had a $225,750 mortgage registered against
    it in favour of BMO. In 2009, the mortgage went into default.

[4]

Ms. Tran was concerned about the bank repossessing her house and
    confided in one of the defendants, Phu Man Chung, who was a tenant at the
    property. Mr. Chung told Ms. Tran that he could sell the house for her quickly.
    Ms. Tran trusted him and left the matter in his hands.

[5]

Mr. Chung was friends with the defendant, Tu Hong Luong, who was a real
    estate agent with the defendant, Tradeworld Realty Inc. Mr. Luong listed the
    property for sale although there was no listing agreement signed by Ms. Tran.
    Mr. Chung advised Mr. Luong that he owned the property.

[6]

Mr. Chungs brother-in-law, Hui Ming Zhou, offered $420,000 to purchase
    the property. Ms. Tran signed an agreement of purchase and sale, prepared
    by Mr. Luong.

[7]

The defendant, Majek Adega, was Ms. Trans real estate lawyer. After the
    transaction closed on March 9, 2010, Ms. Tran was accompanied by Mr. Chung to
    Mr. Adega's office where Mr. Adega provided her with a bank draft payable to
    her in the sum of $148,788.32  the equity she had after the mortgage was
    discharged.

[8]

On the same day, Ms. Tran was escorted to a branch of the Royal Bank of
    Canada (RBC) where a bank account under her name had previously been opened
    under the instructions of, and with the assistance of, Mr. Chung.

[9]

At the RBC branch, Mr. Adega, Mr. Chung and Kerryon Nugent  a real
    estate agent who had acted for Mr. Zhou  were there to ensure that Ms. Trans
    bank draft in the sum of $148,788.32 was deposited into her bank account. She
    was then instructed by them to sign purchase orders for four RBC bank drafts
    payable as follows: $90,190 to BMO, $4,193.50 to Ms. Nugent, $40,000 to Mr. Chung,
    and $11,000 to Vicky Le.

[10]

Ms. Tran, who cannot read English and who completed only limited
    education in Vietnam, claims that she acted as instructed because she believed
    the drafts were necessary to complete the transaction for the sale of her
    property and to discharge her mortgage with BMO. However, BMO accepts that, on
    the date the bank draft was issued, Ms. Tran did not owe any money to BMO as
    her mortgage had already been discharged. Ms. Tran gave the $90,190 bank draft
    payable to BMO to Ms. Nugent who, in turn, gave the bank draft to Cynthia
    DaCosta, another defendant. Ms. Tran did not know Ms. DaCosta and did not know
    that the bank draft was given to her. Ms. DaCosta admits that she had no right
    to any money from Ms. Tran, and that Ms. Tran never gave her the draft and has
    never known her.

[11]

On March 10, 2010, Ms. DaCosta, accompanied by Ms. Nugent, visited a BMO
    branch. BMO, following Ms. DaCosta's instructions, deposited the $90,190 bank
    draft payable to BMO into Ms. DaCostas line of credit account with BMO. This
    bank draft had Ms. Trans name and address written on the front of it as the
    purchaser of the draft. Ms. DaCosta then immediately withdrew the exact sum of
    the bank draft in two transactions: (i) a bank draft made payable to
    "Majek Adega" in the sum of $79,190; and (ii) cash in the sum of
    $11,000. She then gave both the cash and bank draft to Ms. Nugent, who in turn
    gave them to Mr. Adega.

[12]

Ms. Tran says the defendants told her that she would receive more than
    $100,000 from the sale in the days following the issuance of the draft. She has
    received nothing to date.

[13]

Ms. Tran commenced an action against the individual defendants for fraud
    and various other breaches. She also included BMO as a defendant, claiming that
    BMO was liable for conversion because it collected the $90,190 and made those
    funds available to Ms. DaCosta, who was not a person entitled to receive them.
    In the alternative, Ms. Tran claimed that BMO was unjustly enriched.

[14]

Ms. Tran subsequently brought a motion for summary judgment against BMO
    for $90,190, and BMO brought a competing motion for summary judgment for an
    order dismissing the action against it. The motion judge granted BMOs motion
    for summary judgment and dismissed Ms. Trans claim against BMO.

C.

The Motion Judges Decision

[15]

The motion judge relied on the test for conversion of a cheque as set
    out in
373409 Alberta Ltd. (Receiver of) v. Bank of Montreal
, 2002 SCC
    81, [2002] 4 S.C.R. 312 (
373409 Alberta Ltd.
), at para. 10: a bank
    will be liable for conversion where it makes payment on a cheque to someone
    other than the rightful holder and that payment is not authorized by the
    rightful holder. The tort is one of strict liability.

[16]

Ms. Trans theory of liability was described by the motion judge: BMO
    converted her $90,190 RBC bank draft, which was payable to BMO, on the
    direction of Ms. DaCosta, who was not authorized by Ms. Tran to possess the
    draft. Accordingly, Ms. Tran asserts that BMO committed the tort of conversion
    and is liable for the $90,190.

[17]

The motion judge concluded that there were three questions to be
    answered to decide whether BMO was liable for conversion: (1)
who was the rightful holder of the bank draft; (2)
was
    the payment made to someone other than the rightful holder of the draft; and
    (3) was the payment not authorized by the rightful holder? The motion judge
    held that BMO was not liable for conversion of the bank draft.

[18]

I will say more about the motion judges reasons for her decision in my
    discussion below.

D.

SUBMISSIONS

[19]

The sole issue raised by the parties on appeal is whether the motion
    judge erred in finding that BMO is not liable for conversion. Nevertheless,
    there are several other issues that arise out of my conclusion on conversion,
    which I comment on briefly near the end of these reasons.

[20]

According to Ms. Tran, this is a classic case of conversion. She says
    that a bank converts an instrument by dealing with it under the direction of
    someone without authorization and making the proceeds available to someone
    other than the person rightfully entitled to possession. She alleges that, in
    this case, BMO converted the bank draft when it collected the proceeds of the
    bank draft and made them available to Ms. DaCosta and Mr. Adega, who had no
    entitlement to those funds.

[21]

BMO, on the other hand, submits that:

1. Ms. Tran cannot bring an action in conversion on the bank
    draft because she was not the drawer, payee, or endorsee of the bank draft.

2. BMO cannot convert funds payable to BMO. The funds were
    guaranteed funds from RBC.

3. BMO did not wrongfully interfere with the draft since Ms.
    Tran had authorized the draft be made payable to BMO.

4. Ms. Tran cannot make out a claim for conversion because she
    was not in actual possession of the draft, nor was she entitled to immediate
    possession of it.

5. Ms. Tran voluntarily parted with the bank draft when she
    gave it to Mr. Adega, Ms. Nugent and Ms. Chung, which conveyed to them the
    right to use the bank draft. That right was subject to Ms. Tran revoking her
    consent, which she did not do.

6. In the alternative, BMO has a defence as a holder in due
    course under the
Bills of Exchange Act
, R.S.C. 1985, c. B-4.

[22]

I will deal with these issues after first reviewing the law on
    conversion.

E.

ANALYSIS

(1)

The Tort of Conversion

[23]

The tort of conversion involves a wrongful interference with the goods
    of another, such as taking, using or destroying these goods in a manner
    inconsistent with the owners right of possession:
Boma Manufacturing Ltd.
    v. Canadian Imperial Bank of Commerce
, [1996] 3 S.C.R. 727, at para. 31.
    The tort is of one of strict liability and so it is no defence that the
    wrongful act was committed without intent:
Boma
, at para. 31. Even if
    the claimant is negligent with respect to its chattel, the wrongdoer will not
    be able to contest liability on the basis of the claimants contributory
    negligence:
Boma
, at paras. 31-35. In other words, the tort of
    conversion is not concerned with the moral concept of fault:
Westboro
    Flooring & Décor Inc. v. Bank of Nova Scotia
(2004), 71 O.R. (3d) 723
    (C.A.), at para. 14.

[24]

In
Boma
,

at para. 36, Iacobucci J. referred to the
    seminal discussion of the conversion of cheques from Crawford and
    Falconbridges treatise,
Banking and Bills of Exchange
, 8th ed.
    (Toronto: Canada Law Book Inc., 1986):

Conversion is the remedy of the lawful possessor of chattels to
    have their value paid to him by a wrongful dispossessor. It is normally applied
    to goods and there might appear to be some difficulty in holding that a bank
    that had paid part of what it owes to a customer to some other person not
    entitled to receive it is guilty of a conversion of the customers chattel. But
    any such apparent difficulty has been surmounted by treating the conversion as
    being of the instrument itself, that is, of the piece of paper in respect of
    which the payment is made. Similarly, a bank that collects a sum of money under
    an instrument for a person not entitled to it is treated as having converted
    the instrument.
It has been repeatedly held that a bank
    converts an instrument by dealing with it under the direction of one not
    authorized, either by collecting it or
,
semble
(although this
    has not yet actually been decided)
by paying it and in
    either case, making the proceeds available to someone other than the person
    rightfully entitled to possession
. [Emphasis added.]

[25]

Borrowing from this passage, Iacobucci J. affirmed, at para. 83, that
    [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.

[26]

The Supreme Court subsequently affirmed the test from
Boma
in
373409
    Alberta Ltd.
, in the context of a
    cheque.

At para. 10, Major J. noted that two factors must
    be present for a bank to be liable for conversion of a cheque:

[A] lending institutions liability in conversion is predicated
    upon finding both that payment upon the cheque was made to someone other than
    the rightful holder of the cheque,
and
that such
    payment was not authorized by the rightful holder. If either of these criteria
    is not satisfied, there is no tort. [Emphasis in original.]

[27]

Major J. noted, at para. 9, that dealing with anothers chattel in a
    manner authorized by the rightful owner is consistent with the owners right of
    possession and therefore does not qualify as wrongful interference.

(2)

Application of Legal Principles

(a)

Can Ms. Tran bring an action in conversion if she is not the drawer,
    payee or endorsee of the bank draft?

[28]

BMO accepts that it is possible to sue in conversion on a bank draft.
    However, it relies on a comment in
Boma
to argue that Ms. Tran is
    unable to bring such an action because she is not the drawer, payee or endorsee
    of the bank draft. At para. 37 of
Boma
, Iacobucci J. stated that
    [t]he drawer, the payee or the endorsee can bring an action for conversion of
    a cheque.

[29]

This argument is predicated on differences between a cheque and bank
    draft.

(i)

Cheques vs. Bank Drafts

[30]

A cheque is used to instruct a bank to pay funds from the payors
    account. In the case of a cheque, the following terminology is used:

·

The drawer is the payor, who directs, through the cheque, that
    funds be drawn from his or her account.

·

The drawee is the bank upon which the drawer writes the cheque
    (e.g., the drawers bank).

·

The payee of a cheque is the person to whom the draft is made
    payable.

·

An endorsee is a person to whom the cheque is negotiated by the
    original payee (or a previous endorsee). For instance, if a cheque is made payable
    to X, X may endorse it to Y. Y is now the endorsee and the person who is
    entitled to demand payment on the instrument.

[31]

Similar to cheques, bank drafts are often used to effect payment from
    one party to another. However, bank drafts fall within a category of
    instruments referred to as remittance instruments, which also includes
    certified cheques and money orders.

[32]

Unlike a cheque, a bank draft has a purchaser, who buys the instrument
    from an issuing bank. The purchaser instructs the issuing bank to fill out the
    draft with a payee and the amount he or she wishes to pay. The payee may be the
    purchaser or a third party. The bank then collects the payment amount from the
    purchaser (e.g., as a direct debit from the purchasers bank account). The
    purchased funds are placed in the issuing banks reserve account until the
    payee negotiates the draft. After negotiation by the payee, the issuing bank
    will transfer the funds to the payees account: M.H. Ogilvie,
Bank and
    Customer Law in Canada
, 2d ed. (Toronto: Irwin Law Inc., 2013), at pp.
    426-428.

[33]

Since the issuing bank holds the money in its own reserve account and
    then transfers it to the payees bank, the issuing bank is considered both the
    drawer and the drawee of the bank draft (unlike in the cheque context,
    where the drawer is the customer who asks, through the cheque, that money be
    transferred from its account to the payee). As with cheques, the payee is the
    person to whom the instrument is payable. While the purchaser may be named in
    the bank draft (e.g., on the face of the draft), it is not a party to the
    instrument.

[34]

One reason for using a bank draft to make a payment instead of a cheque
    is that a bank draft is said to be guaranteed funds. Because the bank holds
    the payment amount in its own account, there is no risk of the draft
    bouncing, as compared to a regular cheque where the drawer/payor could
    theoretically give a cheque to the payee and withdraw all of the funds in its
    bank account before the cheque clears or cancel the cheque.

(ii)

Conversion of a Bank Draft

[35]

There is very little case law dealing with conversion of bank drafts.
    However, what little there is supports the view that a claim for conversion is
    available where it involves a bank draft.

[36]

In
Bank of Montreal v. Bloomer
, [1965] S.C.R. 696, the
    purchaser of a bank draft sued the bank for conversion. The Supreme Court
    overturned the lower courts finding that BMO was liable for converting a bank
    draft on the basis that conversion was not established. It did not suggest that
    a purchaser of a bank draft could not establish conversion in a proper case. Nor
    did it suggest that the principles that apply to converting a bank draft are
    different than the principles that apply, for example, to converting a cheque.

[37]

More recently in
Raza Kayani LLP v. Toronto-Dominion Bank
, 2013
    ONSC 7967, 9 C.C.L.T. (4th) 154, the trial judge held that the defendant bank
    was liable for converting both a certified cheque and a bank draft. She did not
    specifically address whether the conversion analysis should be different in
    relation to the bank draft. Instead, at paras. 58 and 60, she appears to have
    equated the drawer of a cheque with the purchaser of a draft and assumed that
    the same principles apply in respect of both instruments:

Zwicker and Kayani were the drawers who
    authorized the writing of the cheque or draft on their Accounts
. The
    Bank was the drawee, which was directed to pay a sum of money on an instrument,
in this case a cheque or a draft
.



In the conversion of cheques or bank
    drafts
negotiated at a collecting bank and deposited to the credit of
    the collecting bank's customer, who was not entitled to the proceeds of the
    cheque or draft, the collecting bank is
prima facie
liable to the maker of the cheque or draft
. [Emphasis
    added.]

[38]

This court reversed the trial judges decision on appeal on the basis
    that the bank had a valid defence available to it under
the
Bills of Exchange Act
:
Raza

Kayani LLP v.
    Toronto-Dominion Bank
, 2014 ONCA 862
,
378 D.L.R. (4th) 729.
This court did not
    indicate any problems with the trial judges conclusion that the bank was
prima
    facie
liable for conversion, indicating that a bank draft may be the
    subject of a conversion action.

(iii)

Ms. Tran can bring a claim for conversion

[39]

As noted, BMO argues that Ms. Tran cannot bring an action in conversion
    as the purchaser of a bank draft.

[40]

I reject BMOs argument, which relies on para. 37 of
Boma
.
    While para. 37 says that a drawer, payee or endorsee can sue for conversion, the
    court in that case was expressly dealing with conversion of a cheque. The
    Supreme Court did not hold that only those three parties could maintain a claim
    in conversion for any kind of instrument.

[41]

In conclusion, I reject BMOs argument that Ms. Tran cannot bring a
    conversion action because she is not the drawer, payee or endorsee of the bank
    draft. As I will explain, in the circumstances of this case, Ms. Tran has met
    the test for conversion.

(b)

Did BMO convert funds payable to BMO in the circumstances of this  
    case?

[42]

BMO submits that, even if a purchaser of a draft can bring an action in
    conversion, the tort cannot be made out on the facts of this case.

[43]

Its primary argument is that the bank cannot convert a draft payable to
    itself and presented to it by its own customer. Relying on
Boma
and
373409
    Alberta

Ltd.
, it says there can be no conversion if the
    instrument is delivered to its intended payee and that BMO was the intended
    payee in this case. It also relies on the fact that a bank draft is guaranteed
    funds to assert that the proceeds belonged to BMO. I reject these arguments.

[44]

Returning to the test from para. 83 of
Boma
, the question is
    whether BMO converted the bank draft 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. Thus, the
    motion judge was required to consider (1) whether BMO dealt with the bank draft
    under the direction of one not authorized, and (2) whether the proceeds were
    made available to someone other than the person rightfully entitled to
    possession.

[45]

In grappling with those questions, the motion judge asked herself the
    following three questions: (1) who was the rightful holder of the bank draft?
    (2) was the payment made to someone other than the rightful holder of the
    draft? and (3) was the payment not authorized by the rightful holder? (para.
    22).

[46]

The heart of her analysis, found at paras. 20-21 and 25-27, is as follows:

The authorities relied upon by the parties with respect to
    conversion deal with cheques payable to one person but deposited into the
    account of another person without the authority of the drawer of the
    cheque. The situation here is quite different. Firstly, it involves a bank
    draft not a cheque. The draft was payable to BMO.  The plaintiff was not
    an endorsee. The draft was deposited into a BMO customers line of credit
    account. The line of credit was a debt secured against the customers property.
    Accordingly, the customer was indebted to the bank.

In
373409 Alberta Limited
, the court stated that, a lending institutions liability in
    conversion is predicated upon finding both that the payment upon the cheque was
    made to someone other than the rightful holder of the cheque,
and
that such payment was not authorized by the rightful holder. If
    either of these criteria is not satisfied, there is no tort. (see para. 10)



In this matter, the plaintiff states that she gave the drafts
    to the defendants Adega, Chung and Nugent. Accordingly, they were the
    rightful holders; however, the draft was not payable to them.  Nugent then
    gave the draft to DaCosta. According to the plaintiff, Nugent did not did use
    the cheque for the purpose she intended.

Even though the plaintiff did not know the reason for it, by
    virtue of the fact that she requested and obtained a draft payable to BMO, she
    intended that the $90,190 be payable to BMO. It was deposited into a line of
    credit account in which the holder of the account was indebted to BMO. The
    deposit was a payment to the bank on account of a secured debt.

The bank was entitled to accept a draft payable [to] itself and
    to deposit it to an account in which the account holder was indebted to the
    bank. The fact that the plaintiff was fraudulently induced to obtain the
    draft may give her a cause of action against Adega, Chung and Nugent as well as
    the person who ultimately received the funds; however, the bank did not commit
    the tort of conversion.

[47]

In her analysis, she referred to
373409 Alberta

Ltd.
for the proposition that [a]n owners right of possession includes the right
    to authorize others to deal with his or her chattel in any manner specified.
    She also made reference to
Jer v. Samji
, 2014 BCCA 116, 60 B.C.L.R.
    (5th) 173, which Ms. Tran relied on in support of her argument that she was the
    rightful holder of the draft because her mortgage with BMO was already paid
    out.

[48]

In my view, the motion judges analysis overlooks several important
    points.

[49]

First, while Ms. Tran authorized Mr. Adega, Mr. Chung, and Ms. Nugent to
    give the bank draft to BMO, it is fair to infer from the affidavit evidence
    that they were not authorized to do whatever they wanted with it. Rather, they
    were authorized to deliver the bank draft on Ms. Trans behalf.

[50]

Second, I fail to see how Ms. DaCosta became rightfully entitled to
    possess the bank draft. Ms. Tran had never heard of Ms. DaCosta and so it
    cannot be said that Ms. Tran authorized her to deal with the draft. Nor did Ms.
    Tran authorize Mr. Adega, Mr. Chung and Ms. Nugent to give the draft to anyone
    other than BMO.

[51]

Third, as the collecting bank, BMO acted on the instructions of Ms. DaCosta
    to deposit the proceeds of the bank draft into her account to reduce her
    indebtedness to BMO. Without Ms. DaCostas instructions, there was no reason to
    deposit the proceeds of the draft into her account, as she was neither the
    payee nor an endorsee. In acting on her instructions, BMO acted on the
    instructions of one not authorized to deal with the proceeds.

[52]

Fourth, in the circumstances, it is reasonable to infer that Ms. Tran
    never intended to either gift money to BMO or to pay off Ms. DaCostas line of
    credit.

[53]

BMO, however, points to the fact that it was entitled to the bank draft
    as payee of the draft and that, as payee, it was entitled to the guaranteed
    funds from RBC.

[54]

BMO provided no authority in support of the bald proposition that a bank
    cannot convert a bank draft made payable to itself where presented by its own
    customer to pay down an existing third-party debt.

[55]

BMO also submits that a plaintiff must prove that she was either in
    actual possession or entitled to immediate possession of the chattel in order to
    sue for conversion. It notes that, once Ms. Tran handed over the draft to the
    alleged fraudsters, she no longer had actual possession. Nor, in BMOs
    submission, was she entitled to immediate possession of the proceeds, as she
    had authorized that the bank draft be payable to BMO.

[56]

It is clear, in my view, that in relation to Mr. Adega, Ms. Nugent and
    Mr. Chung, Ms. Tran was entitled to demand immediate possession of the bank
    draft. They were not the payees or endorsees of the draft and it was clear that
    the draft was meant to be delivered to BMO. Effectively, they were merely
    messengers acting on Ms. Trans behalf.

[57]

Ms. Tran was also entitled to immediate possession as against Ms.
    DaCosta as, on the evidence before this court, Ms. Da Costa had no legal
    entitlement to the bank draft. To paraphrase the words of the House of Lords in
Midland Bank v. Reckitt
(1932)
,
    [1933] A.C. 1, at p. 14, had Ms. Tran found Ms. DaCosta at the counter of the
    bank waiting to deposit the RBC bank draft to her own account, Ms. Tran could
    have, if she knew the facts, demanded Ms. DaCosta deliver the bank draft to
    her.

[58]

In my view, Ms. Tran also had a right to demand immediate possession of
    the proceeds from BMO in the circumstances of this case. In
Boma
, the
    Supreme Court indicated that, where an instrument is payable to someone without
    any legal entitlement to the proceeds of the cheque, the payee will not have a
    right of possession as against the owner of the proceeds. At para. 38 of
Boma
,
    the court noted that the payees of the cheques in question had no right of
    possession to the cheques, as they were not created in respect of legitimate
    debts owed to them by the appellants.

[59]

Here, BMO recognizes that Ms. Tran owed it nothing at the relevant time.
    Furthermore, BMO treated the funds represented by the bank draft as being the
    property of Ms. DaCosta and not as BMOs property. BMO took instructions from
    Ms. DaCosta on how and where to pay the funds, even though she was not the
    payee of the bank draft. On her instructions, they credited the proceeds to her
    account and then permitted her to withdraw the same amount in the form of a new
    bank draft, payable to Adega, and cash.

[60]

As  I have already noted, wrongful interference in the conversion
    context does not involve any moral wrongdoing. Because Ms. Tran was entitled to
    immediate possession of the draft from BMO, the wrongful interference consisted
    of paying the proceeds to Ms. DaCosta without proper authorization.

[61]

BMO submits that it is irrelevant whether Ms. Tran intended Ms. DaCosta
    to have possession of the proceeds. It refers to
iTrade Finance Inc. v.
    Bank of Montreal
, 2011 SCC 26, [2011] 2 S.C.R. 360, at para. 49, for the
    proposition that when an innocent party consensually advances funds to another
    under an agreement, it voluntarily parts with those funds, and that divestiture
    conveys the right to use them. Until the transferor discovers the fraud and
    voids the transaction, the fraudster retains beneficial title. Relying on
iTrade
,
    BMO argues that Ms. Tran conveyed the right to use the bank draft when she
    transferred it to Mr. Adega, Mr. Chung and Ms. Nugent.

[62]

iTrade
does not assist BMO in this case. In the
    passages cited by BMO in support of its position, Deschamps J. was discussing
    principles that apply when a transfer occurs under a
contract
obtained through fraud. Those passages stand for the unremarkable proposition
    that a contract obtained through a fraudulent misrepresentation is voidable and
    that, until it is voided, it remains an effective contract.

[63]

Here, there was no contract between Ms. Tran on the one hand
    and Mr. Adega, Mr. Chung and Ms. Nugent

on the other. She gave them
    the bank draft based on their representation that they would give it to BMO to
    pay off a debt she thought she owed. Ms. Tran did not receive any consideration
    and did not enter into any legal agreement.
iTrade
has no application
    in this case.

(c)

Can BMO rely on a defence under the
Bills of Exchange Act
?

[64]

BMO raised an alternative argument for the first time in oral argument
    before this court. Counsel submitted that, if BMOs actions amounted to
    conversion, it is a holder in due course and as such can rely on s. 55 of the
Bills of Exchange Act
to absolve itself of liability.

[65]

While certain provisions in the
Bills of Exchange Act
may
    afford a defence to an action in conversion, since BMO did not plead a
    statutory defence or raise any such defence before the motion judge, I would
    not consider this ground of appeal. BMO was required to put its best foot
    forward on the summary judgment motion; however, it failed to raise this
    argument. Further, and in any event, BMO did not fully argue this issue on
    appeal and did not provide sufficient information in the record to allow this
    court to assess the merits of any defence it may have under the
Bills of Exchange
    Act
.

(d)

Conclusion

[66]

On the record in this case, Ms. Trans motion for summary judgment
    should have been granted and BMOs motion to dismiss her claim for conversion
    of the bank draft should have been dismissed.

F.

DISPOSITION

[67]

I would set aside the motion judges order and replace it with an order
    allowing Ms. Trans motion for summary judgment for conversion and denying
    BMOs motion to dismiss her claim.

[68]

Ms. Tran is awarded her costs of the appeal as well as those in the
    court below. Ms. Tran will have fourteen days from the release of these reasons
    to provide brief written submissions on costs. BMO will provide its brief
    written submissions within fourteen days thereafter.

Released: GH MAY 19 2016

H.S. LaForme J.A.

I agree. J. Simmons
    J.A.

I agree. Grant
    Huscroft J.A.


