Liquidators Beware: An Alternative To Quincecare

• Law Firm: Conyers
• Subject Matter: Finance and Banking, Litigation, Mediation & Arbitration, Debt Capital Markets, Financial Services, Trials & Appeals & Compensation, Professional Negligence
• Author: Mr Norman Hau and Manwa Yip
• Published date: 21 February 2023

The Quincecare duty has become a popular tool for companies (or their liquidators) to claim against banks for funds misappropriated on wrongful payment instructions. It requires a bank to refrain from executing a payment order if and for so long as it was put on inquiry by having reasonable grounds for believing that the order was an attempt to misappropriate funds. The duty was established in Barclays Bank plc v Quincecare Ltd¹ and endorsed by the UK Supreme Court ("UKSC") in Singularis Holdings Ltd (in liquidation) v Daiwa Capital Markets Europe Ltd² .

In 2022 and 2023, the UKSC and Privy Council delivered judgments and heard appeal in respect of the scope of the Quincecare duty. In JP SPC 4 v Royal Bank of Scotland International Ltd³ , the Privy Council confirmed that the Quincecare duty is limited to protecting the bank's customer and does not extend to a beneficial owner of the monies in the customer's account. In Stanford International Bank Ltd (in liquidation) v HSBC Bank plc⁴ , Lord Sales (giving the dissenting judgment) observed that the Quincecare duty should be kept within narrow bounds by a strict approach governing when it applies according to the standard of care under it and by careful analysis of the scope of the duty. On 1 and 2 February 2023, the UKSC heard the appeal in Philipp v Barclays Bank UK plc⁵ , in which the Court will decide whether the Quincecare duty will extend to the case of a victim being deceived into instructing their bank to transfer money from their account into an account controlled by the fraudster. The judgment is pending.

On 6 February 2023 the Hong Kong Court of Final Appeal ("HKCFA") delivered the judgment in PT Asuransi Tugu Pratama Indonesia TBK v Citibank N.A.⁶ , which discusses the limits of the Quincecare duty – it could be time-barred and subject to claims of contributory negligence. Nonetheless, the HKCFA (with Lord Sumption giving the leading judgment) allowed the customer's alternative claim in debt against the bank. As can be seen below, this alternative claim may present a more attractive route for unauthorised debit claims than Quincecare.

Lord Sumption also clarified the test for displacing reliance on apparent authority laid down in Thanakharn Kasikorn Thai Chamkat (Mahachon) v Akai Holdings Ltd (No. 2)⁷ and East Asia Co Ltd v PT Satria Tirtatama Energindo⁸ .

Facts

The final appeal arises from an action by Tugu seeking recovery of monies paid out from its bank account at the bank on the dishonest...