Civil Litigation

Customers Unable to Recover Missing Deposit Funds Sent by E-Transfer

April 8, 2024

photo of person holding open empty wallet representing a customer's inability to recover their e-transfer deposit

The Internet has considerably changed the way customers and businesses interact. One of these key differences is how money is transferred between the parties, as there are many more convenient options beyond cash and cheque, such as e-transfers or other electronic payment methods, like PayPal. However, consumers and other users of these types of financial tools should be careful and recognize that there are additional security elements to consider, particularly when large amounts of money are involved.

In a recent decision from the Alberta Court of Justice, the plaintiffs sought to recover funds from two e-transfer deposits which were sent to the defendant roofing company’s email address after the work was not completed. The company, however, claimed that it never received the e-transfers, and the funds were traced to separate bank accounts.

Would-Be Customers Send E-Transfer Deposits for Roofing Job

In Butler-Jenkins v C R Roofing Services Inc., the plaintiffs were a married couple who sought to have work done to the roof of their home. The defendant roofing company (“CR”) was owned by the individual defendants (“JC” and “KR”). On October 19, 2022, CR sent an email to the male plaintiff with a quote for $10,193.40 regarding a re-shingling job. The quote specified that payment would only be due upon completion of the project and payment by cash, cheque, or bank draft was accepted. The quote included a spot for a signature if the quote was accepted, however, there was no evidence to suggest that it was signed by the plaintiffs.

Two days later, the office manager of CR responded to the plaintiff’s inquiry regarding whether a deposit was required, and when the work would start. The office manager advised that work would begin in the Spring, but did not speak to deposit. A few days later, the plaintiff emailed CR again asking about a deposit. He received a reply from the same email, however, the responding email was in all capital letters. The response stated that a deposit of 50% was required. He was asked to send an electronic funds transfer (e-transfer) to the responding email address and use “roofing” as the password. The plaintiffs then sent two e-transfers, one for $3,000 and another for $2,348.04 to the lower case email.

Funds Traced to Two Separate Bank Accounts, Neither Belonging to Roofing Company

Evidence showed that CR’s upper-case email address was forwarded to another email address on October 31, 2022, however, the body of the email was empty and neither the office manager or the plaintiffs could explain who the email belonged to.

By November, the plaintiffs felt they were getting the “runaround” from CR following several missed appointments. No mention of the deposits was made, however, the plaintiffs looked to recoup their deposit and cancel the project, which is when confusion arose. CR only had a bank account with Bank of Montreal, whose personnel confirmed an e-transfer deposit was not made to CR’s account for the specified e-transfer amounts. However, the parties learned that the e-transfer for $2,300 ended up in an individual’s bank account in Ontario, while the one for $3,000 ended up in another person’s bank in Winnipeg. This information was relayed by the police. One of the individuals was contacted by CR and said the funds would be paid back, however, there is no indication of whether that happened.

Plaintiffs Sue For Breach of Contract And Unjust Enrichment

The plaintiff’s first course of action was to sue CR for breach of contract. However, the Court pointed out that there was insufficient evidence to demonstrate that a contract existed in the first place, since the plaintiffs had not signed the quote provided by CR. Although there was evidence of an informal acceptance of the offer through email, CR’s office manager asserted that it was not received. The plaintiffs also tried to sue CR for unjust enrichment, but the Court found that, since no money was shown to have actually been paid to CR, there was no enrichment at all.

The plaintiffs then pursued an alternative course of action by suing the individual defendants, JC and KR, as directors of CR for their failure to have cyber insurance or other protections in place for situations like these. The Court noted that, while there was no evidence to show the named individuals were directors at that time, it still considered whether the plaintiffs had established that the corporate veil should be pierced.

The corporate veil is a term that is used to illustrate the protection afforded to corporate owners and directors from personal liability for the actions of a business. There are circumstances in which that veil should be lifted (or “pierced”), which are outlined in a 2020 decision from the Alberta Court of Queen’s Bench, stating that:

“Typically, the corporate veil is pierced when the company is incorporated for an illegal, fraudulent or improper purpose. But it can also be pierced if when incorporated ‘those in control expressly direct a wrongful thing to be done.’”

Plaintiffs Unable to Recover Full Amount of Deposit

In this case, the Court found that there was no evidence relating to the incorporation of CR to suggest that it was created for purposes that were “illegal, fraudulent, or improper.” Despite this, the Court noted that “the decision of the police not to pursue criminal charges in this matter against the two individuals who ended up with the Plaintiffs’ money is baffling” and that “criminal activity concerning diverted e-transfers appears to be becoming increasingly common with a resulting dampening effect on commerce, and with innocent parties left “holding the bag”. If in this matter, charges were laid and convictions ensued, the monetary loss of the Plaintiffs could be addressed by way of a restitution claim.”

As a result, aside from the $2,000 liability that was acknowledged by CR, the Court concluded that the plaintiffs had failed to meet their burden of proof and their claim was dismissed. Judgment against CR and KR, jointly and severally, with the claim against JC dismissed entirely.

Contact the Civil Litigation Lawyers at DBB Law for Comprehensive Legal Solutions

At DBB Law, our experienced litigation lawyers offer modern litigation services across the province. We provide every client with pragmatic legal advice on matters involving business and commercial law, construction law, and real estate and property law. To speak with a member of our team and learn how we can assist you, please contact us online or by phone at 403-265-7777.

Blogs/Firm News

Civil Litigation

April 25, 2024

Court Orders Used Car Seller to Refund Buyer Due to Misrepresentation

Civil Litigation

April 8, 2024

Customers Unable to Recover Missing Deposit Funds Sent by E-Transfer

Employment & Labour Law

March 28, 2024

Human Rights Tribunal Addresses Objections to Proposed Witnesses in Discrimination Case