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
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
The case of Harbouredge Mortgage v Powell is a classic example whereby a secured party registered a financing statement which contained an error in the debtor's name, and therefore lost their claim as a secured creditor.
The Supreme Court of Canada has provided guidance to financial institutions holding otherwise "highly sensitive" information to determine when that information is somewhat less sensitive, such that it can be disclosed.
The purpose of the Clearing Rule is to impose central counterparty clearing of certain OTC derivative transactions in order to mitigate counterparty risk in the derivatives market and to increase financial stability.
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