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So Mathepac, are you absolutely sure? Did you take legal advice at the time? The bank had no right to stop the draft even if you were in collusion with the debtor. They might have a right to sue the debtor or to sue you, but they cannot stop a validly issue draft...
Brendan, I don't want to hijack OP's car sale thread, but yes I am absolutely crystal clear about what happened and yes legal advice was taken and legal action ensued, as I have already said in my post above.
I still have copies of every single piece of paper generated by the incident (one of the reasons for flooring out the attic in my house!). The worst thing was that it precipitated a chain of events eventually leading to the demise of a very succesful little company which the principals had worked very hard to establish.
Ironically, I didn't want to do business with the party in question as I didn't trust him, but I was over-ruled by my partners. Having done all the usual background credit checks etc., they saw what they believed was a good business opportunity. Thats how it looked at the start with small invoices being paid promptly, and initially I was glad to be proven wrong, as this individual gave us other good leads.
The "other good leads" turned out to be companies associated with the individual in question and fairly soon the problems began to surface; invoices going past due, phone calls not returned, cheques bounced, the usual signs that all was not well. One of the partners and myself eventually met with our friend in a hotel and went with him to get the draft which was paid for by withdrawals from a number of accounts, not all of which were in the branch in question, but it all seemed kosher as the draft was duly signed and issued, payable to our company.
We made the lodgment, and thus started a three year long nightmare of investigations, legal proceedings and internal recrimination. We did eventually get paid, and the funds the draft represented were part of what we used to pay the liquidator's fee.
So Brendan, there is no part of this story I am not crystal clear about. It is an episode I am unlikely to forget, the lesson being, for the benefit of OP, if your gut says something isn't right, the chances are that something isn't right.