| BANKING— Cheque— Collection---Parties to a collection— No privity of contract at common law between customer or payee of remitting bank and collecting bank— Whether Uniform Rules for Collections creating privity of contract between principal and collecting bank
Grosvenor Casinos Ltd v National Bank of Abu Dhabi [2008] EWHC 511 (Comm); [2008] WLR (D) 88
QBD: Flaux J: 17 March 2008
The Uniform Rules for Collections 522 relating to international banking and collection processes did not create privity of contract between the principal and the collecting bank.
Flaux J so held in the Commercial Court when dismissing the claim by the claimant, Grosvenor Casinos Ltd, for, inter alia, breach of a contract said to have been made directly between the claimant and the defendant, National Bank of Abu Dhabi, by virtue of the relevant cheque collection being undertaken pursuant to the Uniform Rules for Collections (URC), 1995 Revision, International Chamber of Commerce Publication No 522. During a two-month period, A, a businessman from the United Arab Emirates, engaged in a gambling spree at a club owned and operated by the claimant, staking some £99m and losing over £18m. Two “scrip”cheques (blank house cheques of the club) drawn on his account with the Ajman branch of the defendant which he presented to the claimant were dishonoured. The claimant obtained judgment against A but was unable to enforce it.
FLAUX J said that the common law position was clear: there was no privity of contract between the payee/customer of the remitting bank and the collecting bank. The question was whether that position of no privity of contract between the claimant and the defendant, was displaced by the provisions of URC 522. Having considered those provisions and the parties’ respective submissions, his Lordship had reached the very firm conclusion that URC did not create privity of contract between the principal and the collecting bank for the following reasons: (1) collection of cheques and other documents was conducted between banks, specifically between the remitting bank and the collecting bank, in a highly structured and formalised manner and the URC was intended to reflect and support that approach and so far as possible achieve uniformity of collection practice across international boundaries. The setting out in art 3 of the “Parties to a Collection” was intended to do no more than ensure that all those parties were bound by the rules and foster uniformity of collection practice. The article was not intended to create a contractual relationship between parties who would not otherwise be in such a relationship pursuant to the relevant local law, here English law. Put another way, URC was intended to govern existing contractual relationships, not create such relationships where they did not otherwise exist; (2) there was nothing in the other articles which would lead to a contrary conclusion. Article 4 was a critical provision which militated strongly against the claimant’s contentions. Absent some specific provision in the collection instruction entitling a collecting bank to take instructions from a principal, completely absent from the collection instruction in the present case, the collecting bank must disregard any instructions other than from the remitting bank from which it received the collection. What a strange contract it would be if the collecting bank could not act upon instructions from the other party to the contract. That was fatal to the claimant’s case; (3) furthermore the fact that art 21c contemplated that a principal would only be liable to the collecting bank for its charges and expenses where the collection instruction expressly so provided was wholly inconsistent with the URC having created privity of contract between them independently of the specific terms of the collection instruction.
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