Supreme Court Confirms Financial Institution Is In Breach Of Its Quincecare Duty

On 30 October 2019, the Supreme Court handed down its judgment in Singularis v Daiwa [2019] UKSC 50, unanimously dismissing Daiwa's appeal. It upheld the High Court judgment that Daiwa (the "Bank") owed a duty (the "Quincecare duty") to Singularis (the "Company") not to execute an order if it had been put on inquiry that it was an attempt to misappropriate funds of the customer, and that the Bank had breached this duty.

Despite being a short judgment, the Supreme Court provides useful analysis of the law of attribution and "lays to rest" the controversial judgment in Stone & Rolls Ltd v Moore Stephens [2009] UKHL 39.

Facts and issues

The Company was wholly owned by Mr Al Sanea, a high net-worth individual, to manage his personal assets. Mr Al Sanea was a director of the Company, along with six other individuals, who were largely inactive. Separately, Mr Al Sanea also owned a substantial business group, the Saad group.

In April 2007, the Bank entered into a stock-lending agreement with the Company, pursuant to which the Company made equity investments. The Bank held the Company's funds in its client account.

During the first half of 2009, the Company sold a number of significant shareholdings and the proceeds were placed into the client account. Throughout June and July 2009, the Bank received several requests from Mr Al Sanea to pay monies totalling USD 204m from the Company's client account to Saad group companies. Largely, these instructions were authorised without further enquiry by the Bank, despite the Bank being aware of the financial difficulties of Mr Al Sanea and the Saad Group and of other suspicious factors.

On 24 July 2009, the Cayman Courts issued a worldwide freezing order over the assets of the Saad group. The Company ultimately went into liquidation and the liquidators brought a claim against the Bank for repayment of the USD 204m, claiming dishonest assistance and breach of the Quincecare duty.

At first instance, the dishonest assistance claim was dismissed, since the Bank's employees had not acted dishonestly. However, the breach of the Quincecare duty claim was upheld, subject to a 25% reduction for contributory negligence by Mr Al Sanea and the inactive directors

The Bank appealed against this finding but the Court of Appeal dismissed its appeal. The Bank further appealed to the Supreme Court and the issues to be decided were as follows: whether the fraud of Mr Al Sanea could be attributed to the Company, and, if so, whether the claim was thereby defeated due to: (i) illegality; (ii) lack of causation; or (iii) a countervailing claim in deceit against the Company.

Supreme Court judgment

Lady Hale, giving the only substantive judgment, stated that it was...