Watch That Fine Print!

Another opportunity to preach from the pulpit of experience.  I was in the Superior Court today on a motion asking that the claim against my client, a large bank, be dismissed.  The situation was, unfortunately for the bank’s customer, something that is happening more and more frequently.  The customer left all of its accounting to its bookkeeper and gave total control to the bookkeeper.  In this instance, the bookkeeper went on an extended leave and the company brought in another bookkeeper from a temp agency.  After a month or so, the temp bookkeeper proceeded to cut a bunch of cheques to his company and deposited them.  By the time he had over $340,000 he suddenly “disappeared” along with the money.

Now comes the bad part for the customer.  Because it had left absolutely everything to the bookkeeper (and then to the temp), the customer had no clue what to do about its accounting records and decided to wait until the regular bookkeeper returned about 6 weeks later.  The problem, though, was that by the time the regular bookkeeper had returned and immediately discovered what had happened, it was too late to do anything.  The temp had left the country with the money so the bank couldn’t get it back.  The company then said to the bank that the bank ought to reimburse the company for its lost money – to which the bank replied that it wasn’t an insurance company and the lack of supervision wasn’t the bank’s fault.

The customer sued the bank and the bank responded with a motion to have the lawsuit dismissed.  The bank relied on two portions of its account opening agreement.  The first provided that any problems with the account should be brought to the bank’s attention within 30 days of the monthly account statement being issued.  The second portion provided that forged cheques would not be covered unless the customer could show that it had adequate supervision and took steps to avoid the forgeries.  These are both standard provisions that you see in every bank account opening form.  They are even usually put in bold lettering (as was the case here).

The customer effectively said “but nobody brought this to my attention” and besides, the bank should have warned me that my accounting systems were inadequate.  The Court disagreed and the case against the bank was dismissed and the customer now has to pay the bank over $14,000 in costs.

The primary moral of the story – if the customer had stopped to look at its obligations under its contract with the bank, it would have known that it should have reported this matter more quickly to the bank and should have taken more care to avoid any forgeries from occurring.  By disregarding the fine print, the customer is now stuck with not only the more than $340,000 in lost money, but also a further hit of $14,000 + for costs.

The secondary moral of the story – think twice before you try to take on the big banks (or even landlords or other companies with standard form agreements) when you have signed a contract that makes it quite clear what you are required to do.  If you didn’t read the fine print before you signed, then you’d better make sure you do before you sue because you could end up wasting a lot of money on a lawsuit that won’t get very far.  To give an example, the costs awarded were $14,000 – of which the total amount of costs for the bank were approximately double that amount.  The amount of the customer’s costs have been approximately the same.  So, to bring this lawsuit, the customer has spent approximately $28,000 so far for its lawyer and now has to pay the bank another $14,000 – for a total to date of $42,000.  It may well be that the customer will have a good claim as against the temp agency, but if it doesn’t win (and it might not depending on what background checks the temp agency did or could have done), then this could prove to be a VERY expensive lesson in futility – due, in part at least, to not paying attention to the fine print.

Something to think about.


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