Tort of Conversion

Tran v. Chung, 2016 ONCA 378:


[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 owner's 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 claimant's 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 Falconbridge's 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 customer's 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 institution's 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.