A decision came down from the Divisional Court up in Sudbury on Oct. 31 involving a dispute over Petro Canada credit cards. It seems that a company obtained several Petro Canada credit cards with the intention that they be used to gas up the company vehicles from time to time. The company decided for some crazy reason to keep the credit cards – along with their PINs – in an unlocked area that was known to the various employees. Not too surprisingly, an employee grabbed a card and proceeded to ring up thousands of dollars of purchases of cigarettes. One of Petro Canada’s gas station employees thought that this was odd, after seeing it happen for more than a few days, so he called the company and the credit card fraud was discovered and stopped. When Petro Canada sent the bill for payment, the company refused to pay on the basis that the company believed that the cards were only good for purchasing gas, and not for purchasing other items sold by Petro Canada.
Petro Canada responded on the basis that the cardholder agreement was clear and the company was stuck with the purchases made by its employee – whether authorized or not. The trial judge and the Divisional Court concluded that Petro Canada lost because the application form and the credit cardholder agreement appeared to restrict the use of the card for gas purchases. While I find this result odd, the Court did not give any specific mention of the wording of the agreement, so I will have to trust the Court that this was so. That said, the Court did go on to expressly state: “This is different from a situation where an employee is provided with a VISA card that can be used for the purchase of any item almost anywhere.” It is clear that if the situation had involved a credit card that was not restricted to just gasoline purchases the company would have been on the hook.
What is also interesting about the case was the position of the trial judge. Petro Canada had argued at trial that the company was liable on all charges against the credit card until the company advised Petro Canada that the credit card had been used without authority. The trial judge rejected this argument and also faulted Petro Canada for not having a better fraud detection system that would have flagged what amounted to approximately $250 per day in cigarette purchases as likely fraudulent. The Divisional Court overturned this position and held that Petro Canada could rely on its cardholder agreement that required the company to report the fraud and that Petro Canada was not required to establish a fraud detection system as this was not a requirement of the cardholder agreement. That said, Petro Canada still lost because the purchases were not for gasoline.
Ultimately, if the credit card had not been limited to specific purchases, the company would have been obligated to pay Petro Canada the money spent on the credit card. Small businesses should ensure that if they have corporate credit cards that they should kept in a secure place and used only by authorized employees (the fewer, the better). Otherwise, you may find yourself with a large credit card bill at the end of the month and nothing to show for it.