F. Legal Significance for Customers

• Author: M.H. Ogilvie
• Profession: LSM, B.A., LL.B., M.A., D.Phil., D.D., F.R.S.C. Of the Bars of Ontario and Nova Scotia Chancellor's Professor and Professor of Law, Carleton University
• Pages: 333-334

Page 333

Whenever any bank customer gives an instruction to its bank to pay or collect payment on that customer’s behalf, the bank will execute that mandate through the clearing and settlement systems described above and operated by the CPA, with the exception of "on-us" items which are cleared and settled internally within their own bank, although some financial institutions also send "on-us" items through the ACSS. The customer has no choice; indeed, most bank and customer account agreements contain a term authorizing the bank to clear and settle on the customer’s behalf as the bank sees fit. The only alternatives for a customer are to opt out of the banking system entirely by making or receiving payments in cash or services or by barter.

The binding effect in contract of the CPA systems on the banks is self-evident. All banks in Canada are statutorily required to be CPA members, whether they are domestic or foreign, or direct or indirect clearers, and by virtue of membership, they are parties to a multilateral contract, including abiding by the rules of membership in clearing and settling through the CPA.⁴¹

As between direct and indirect clearers, express contracts set out the terms on which direct clearers will act and include requirements for CPA compliance by the indirect clearer, enforceable not by the CPA, but as a matter of contract between direct and indirect clearers.⁴²

The rules governing the ACSS, the USBES, and the LVTS are binding on all banks, as well as on other financial institutions that voluntarily comply with the conditions for membership and become CPA members.

Page 334

The legal significance of the CPA rules and systems for customers has been less obvious to both courts and commentators in the past.⁴³

While it has always been clear that customers are not bound directly by contract to the rules because they are not members of the CPA and not parties to the multilateral contract constituted by membership, there has been some ambiguity as to whether those rules could be implied into the bank and customer agreement so as to bind the bank in its performance of its collection duties for the customer. This question has arisen in relation to failure to return dishonoured cheques within the ACSS deadlines and courts have implied the ACSS deadlines into the bank and customer contract by analogy to find banks liable for damages to customers when the rule is breached by the bank.⁴⁴

Thus, while it is clear as a matter of...