The Court was asked whether a claim against a bank for breach of the Quincecare duty is defeated if the customer is a company, and the fraudulent payment instructions are given by the company’s Chairman and sole shareholder who is the dominating influence over the company’s affairs. That shareholder had given the bank instructions for various payments intended to defeat the company’s creditors. The bank now appealed against a finding that it was liable for the payments.
Held: The appeal failed. An implied term (‘Quincecare Duty’) of the contract between a bank and its customer is that the bank owes a duty not to execute the customer’s order if it knows the order to be dishonestly given, or shuts its eyes to obvious dishonesty, or acts recklessly in failing to make inquiries.
The Quincecare duty strikes a careful balance between the interests of the customer and those of the bank and denying the claim would not enhance the integrity of the law, the purpose of the Quincecare duty is to protect the bank’s customers from harm caused by people for whom the customer is responsible.
There was no universal rule to attribute the fraudulent acts of a sole shareholder and director to the company.
Judges:
Lady Hale, President, Lord Reed, Deputy President, Lord Lloyd-Jones, Lord Sales, Lord Thomas
Citations:
[2019] UKSC 50, [2019] 2 CLC 743, [2020] 2 BCLC 392, [2019] Bus LR 3086, [2020] Lloyd’s Rep FC 54, [2019] WLR(D) 608, [2019] 3 WLR 997, [2020] BCC 89, [2020] 1 Lloyd’s Rep 47, [2020] AC 1189, [2020] PNLR 5, [2020] 1 All ER 383, [2020] 1 All ER (Comm) 1, UKSC 2018/0039
Links:
Bailii, Bailii Summary, WLRD, SC, SC Summary, SC Summary Video, SC 2019 Jul 23 am Video, SC 2019 Jul 24 am Video, SC 2019 Jul 24 pm Video
Jurisdiction:
England and Wales
Citing:
Appeal from – Singularis Holdings Ltd v Daiwa Capital Markets Europe Ltd CA 1-Feb-2018
The court was asked whether the defence of illegality is available to allow a bank to defeat a claim in negligence and breach of contract brought by its corporate customer.
Held: The Court of Appeal unanimously dismissed the appeal. Mr Al . .
Cited – Barclays Bank plc v Quincecare Ltd QBD 1992
The relationship of banker and customer is that of agent and principal: ‘Primarily, the relationship between a banker and customer is that of debtor and creditor. But quoad the drawing and payment of the customer’s cheques as against the money of . .
At First Instance – Singularis Holdings Ltd v Daiwa Capital Markets Europe Ltd ChD 16-Feb-2017
Claim for return of money said to be held for the claimant’s benefit by a stockbroker.
Held: Rose J dismissed the dishonest assistance claim because Daiwa’s employees had acted honestly. However, she upheld the negligence claim, while making a . .
Cited – Patel v Mirza SC 20-Jul-2016
The claimant advanced funds to the respondent for him to invest in a bank of which the claimant had insider knowledge. In fact the defendant did not invest the funds, the knowledge was incorrect. The defendant however did not return the sums . .
Cited – Barings Plc and Another v Coopers and Lybrand (A Firm) and others ChD 20-Mar-2002
. .
Cited – Barings Plc and Another v Coopers and Lybrand (A Firm) and Others ChD 11-Jun-2003
Evans-Lombe J expressed an unwillingness to accept any all-embracing test for what may constitute the breaking of the chain of causation, saying: ‘It seems to me that what will constitute such conduct is so fact-sensitive to the facts of any case . .
Cited – Salomon v A Salomon and Company Ltd HL 16-Nov-1896
A Company and its Directors are not same paersons
Mr Salomon had incorporated his long standing personal business of shoe manufacture into a limited company. He held nearly all the shares, and had received debentures on the transfer into the company of his former business. The business failed, and . .
Cited – Luscombe v Roberts 1962
A solicitor’s claim against his negligent accountants failed because he knew that what he was doing – transferring money from his clients’ account into his firm’s account and using it for his own purposes – was wrong. . .
Cited – In re King CA 4-Feb-1963
. .
Cited – Jetivia Sa and Another v Bilta (UK) Ltd and Others SC 22-Apr-2015
The liquidators of Bilta had brought proceedings against former directors and the appellant alleging that they were party to an unlawful means conspiracy which had damaged the company by engaging in a carousel fraud with carbon credits. On the . .
Cited – Moore Stephens (A Firm) v Stone Rolls Ltd (in liquidation) HL 30-Jul-2009
The appellants had audited the books of the respondent company, but had failed to identify substantial frauds by an employee of the respondent. The auditors appealed a finding of professional negligence, relying on the maxim ex turpi causa non . .
Cited – Commissioner of Police for the Metropolis v Reeves (Joint Administratix of The Estate of Martin Lynch, Deceased) HL 15-Jul-1999
The deceased was a prisoner known to be at risk of committing suicide. Whilst in police custody he hanged himself in his prison cell. The Commissioner accepted that he was in breach of his duty of care to the deceased, but not that that breach was . .
Cited – Meridian Global Funds Management Asia Ltd v Securities Commission PC 26-Jun-1995
(New Zealand) The New Zealand statute required a holder of specified investments to give notice of its holding to a regulator as soon as it became aware of its holding. Unbeknown to any others in the company apart from one colleague, its chief . .
Lists of cited by and citing cases may be incomplete.
Banking, Company
Updated: 02 May 2022; Ref: scu.642832