The UK Supreme Court Re-Visits Attribution Of Directors' Knowledge And The Illegality Defence Once More

Following the judgments in recent years on attribution to a company of its directors' knowledge in Bilta (UK) Ltd (In Liquidation) v Nazir [2015] UKSC 23 and UBS AG (London Branch) and another v Kommunale Wasserwerke Leipzig [2017] EWCA Civ 1567, the UK Supreme Court has once more returned to this issue in Singularis Holdings Ltd (in Official Liquidation) (a Company Incorporated in The Cayman Islands) v Daiwa Capital Markets Europe Ltd [2019] UKSC 50, in a case where a bank (Daiwa) was held liable for breaching its Quincecare duty of care to its customer, a company named Singularis, by not preventing an individual who was both the customer's sole shareholder and chairman from making fraudulent transfers of the company's assets.

Singularis was a company registered in the Cayman Islands which had been set up to manage the personal assets of a Saudi Arabian businessman, Mr Al Sanea. He was the sole shareholder, a director and the chairman, president and treasurer; he also had sole signing powers over the company's bank accounts. Singularis had six other directors but they did not exercise any influence over the management of the company. The bank argued that Mr Al Sanea was Singularis' controlling mind and will.

In June and July 2009, Mr Al Sanea instructed the bank to make payments totalling approximately $204.5m to third parties out of monies held in Singularis' account. The payments were held by the judge at first instance to be a misappropriation of Singularis' funds (a point which was not appealed) and left Singularis unable to meet the demands of its creditors. On 20 August 2009, Mr Al Sanea placed Singularis in voluntary liquidation. On 18 September 2009 the Grand Court of the Cayman Islands made a compulsory winding up order and joint liquidators were appointed. The liquidators subsequently brought a claim in Singularis' name against the bank for damages amounting to the value of the misappropriations made by Mr Al Sanea from the company's bank account.

The judge at first instance, Mrs Justice Rose, found that the bank's employees had acted honestly and therefore the bank was not liable for dishonestly assisting Mr Al Sanea. However, she found that the bank had been negligent, with Singularis being held 25% contributory negligent. As established in Barclays Bank Plc v Quincecare Ltd [1992] 4 All E.R. 363, an implied term of the contract between a bank and its customer is that the bank owes a duty of care not to execute the customer's...

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