Grosvenor Casinos Ltd v National Bank of Abu Dhabi

A verbal “paid” advice given by a collecting bank does not establish deceit unless the representor dishonestly intended it to convey a false representation of fact. Ambiguity or a mismatch between the parties’ understanding may negate dishonesty. The Uniform Rules for Collection 522 regulate existing banking relationships but do not, without more, create contractual privity between a principal and a collecting bank where none exists at common law. In assessing damages for deceit, the relevant transaction may include the entire credit facility and activity intrinsically connected with it. Benefits arising from that transaction must be brought into account.

Grosvenor operated a casino and accepted cheques drawn on an account held by Mr Al-Reyaysa with the National Bank of Abu Dhabi. It claimed against the bank after two cheques remained unpaid.

The claims were based on alleged deceit arising from verbal “paid” advices given by the bank’s employee and on an alleged contract arising under the Uniform Rules for Collection 522. The bank denied dishonesty, contractual privity and loss. The central issues were whether the advice was fraudulent, whether the Rules created a direct contract between Grosvenor and the bank, and how any loss should be assessed.

1. Deceit. The claim failed because Grosvenor did not establish, to the requisite standard, that the bank employee dishonestly made a knowingly false representation. The more probable explanation was that he understood “paid” to mean that the cheque was received and in order and that he expected funds to be made available by the customer. The ambiguity in the collection instructions and the absence of a settled international banking meaning for verbal “paid” advices supported that conclusion.
2. The court accepted that, had dishonesty been proved, the advice was intended to be relied on by Grosvenor through its bank. Grosvenor had in fact relied on the distinction between “paid” and “would be paid” answers when managing the customer’s cheque cashing facility. Reliance need not be the claimant’s sole reason for acting: Edgington v Fitzmaurice (1885) 29 Ch D 459.
3. URC 522 and privity. At common law, a principal is not in contractual privity with a sub-agent or collecting bank merely because delegation was contemplated or authorised. The collection letter did not alter that position. Nor did URC 522. Articles 3, 4, 9 and 21 showed that the Rules governed existing contractual relationships and standardised collection practice; they did not generally create new contractual relationships. Article 4, in particular, required the collecting bank to act on instructions from the remitting bank unless otherwise authorised. The contract claim therefore failed.
4. Quantum. Even if liability had been established, Grosvenor had suffered no recoverable loss. The relevant transaction was not confined to acceptance of the single unpaid cheque. The cheque cashing facility was granted for gambling, and the gaming during the relevant period was intrinsic to the transaction. All relevant winnings, losses, winner’s cheques and their subsequent re-gambling had to be considered. On the agreed figures, the casino made an overall profit.
5. The claim was dismissed.