In Marcus Food Co v. TD Canada Trust, two cheques deposited in the Plaintiff's Canadian account by an unknown individual for a third party not known to Plaintiff were subsequently dishonoured. Alleging fraud, Plaintiff claimed the reimbursement of the amount of those cheques from the Bank by virtue of their Business Banking and Services Agreements (the "Agreement"), which included a clause by which the Bank could "place a hold on funds if [it] became aware of suspicious or possible fraudulent activity or unauthorized account activity".
The Superior Court of Quebec ruled that, while banks have a duty to act prudently and reasonably, and to verify abnormal account operations and suspicious transactions, they should not interfere in the business affairs of their clients. Hence, they have no obligation to determine the source of any deposits to their client's accounts. The Court also found that the Agreement created not an obligation for the Bank, but rather an option to be asserted by the Bank on its discretion. Justice Peacock specifies that the Court is required to take "usage" into account in interpreting contracts, and the deposits were consistent with the usual account operations.
The Court ultimately found there were insufficient suspicious circumstances to put the Bank on notice to undertake the further investigations suggested by the Plaintiff. The Court then concluded that any damages suffered by the Plaintiff were because of its own fault in not informing itself further with the Bank on the status of the anticipated pre-payment for the shipment. However, the Court tempered the costs award on the basis that an "Explanation of Abbreviations" could have been provided at little or no extra expense such that the Plaintiff could have deduced that "DEPOSIT" was not an electronic funds transfer prior to authorizing shipment.
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