A Case Note: Universal Import Export GmbH v Bank of Scotland. Court of Session, Edinburgh, 28th October, 1994
| Pages | 156-159 |
| Published date | 01 March 1995 |
| Date | 01 March 1995 |
| DOI | https://doi.org/10.1108/eb025697 |
| Author | George Walker |
Journal of Financial Crime — Vol. 3 No. 2 — Banking
A Case Note: Universal Import Export GmbH v
Bank of Scotland
Court of Session, Edinburgh, 28th October, 19941
George Walker
The case concerned an action of payment brought
by Universal Import Export GmbH against the
Governor and Company of the Bank of Scotland
for payment of the sum of £515,793.95 under a
bank draft which had been issued in favour of the
pursuers at the request of a firm known as Cos-
groves, which held an account with the bank, in
settlement of certain goods supplied by the pur-
suers to Cosgroves. The bank had refused payment
on the grounds that the funds in Cosgroves'
account had been embezzled from,
inter
alios,
Mads
Freres SA, minuters, by Cosgroves and certain
other third parties in connection with a money-
laundering operation.
The Second Division of the Inner House of the
Court of Session held that where a bank was
induced by the fraudulent misrepresentations of a
third party to issue a banker's draft in favour of a
bona
fide creditor of the third party, which impor-
ted a direct contractual relationship between the
bank and the creditor, the bank could not avoid
the contract by virtue of the misrepresentation.
Moreover, given that the creditor took the draft
in good faith and for value, it was irrelevant that a
third party had induced the bank to issue the draft
as part of a money-laundering fraud because the
creditor's right to payment could not be subjected
to any general public conscience test such as that
suggested in
Thackwell
v
Barclays
Bank
plc.2
It had been argued that the draft contained a
contractual undertaking by the defenders to pay
the sum specified and that, although the pursuers
were entitled to treat the draft as either a bill of
exchange or a promissory note3 at their option, the
Page 156
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