Quincecare duty does not extend to protect creditors

In Stanford International Bank v HSBC (2021 EWCA Civ 535), the liquidators of a Ponzi scheme company had their Quincecare duty and dishonest assistance claims against HSBC – amounting to approximately £118.5m – struck out by the Court of Appeal ("CoA"). HSBC, the bank operating the company's various accounts, continues to deny the remaining claim.

The liquidators alleged HSBC were negligent in respect of their duty not to execute payment instructions when "on enquiry" that the relevant payment may be fraudulent, and also claimed the bank had dishonestly assisted the company's chairman in carrying out the Ponzi scheme. The liquidators sought to introduce a novel concept of "corporate recklessness", however the CoA rejected this. 

Having found that the company had no claim in damages, as it had suffered no loss, the High Court decision was overturned on the basis the Court had erred in its reasoning. In relying on the company's insolvency as an important factor, such that if HSBC had performed its Quincecare duty then more cash would be available to pay the company's creditors, the CoA found that the lower court had confused the position before and after the commencement of the insolvency process.

As such, the position in Singularis (2019 UKSC 50) was reaffirmed: a bank owes its Quincecare duty to its customers, not their creditors. The decision is important as it rejects the liquidator's attempt to expand the type of conduct that amounts to liability for dishonest assistance and breach of fiduciary duty, and it also refused to acknowledge that this was a developing area of law. Those considering such attempts in the future are likely to be discouraged by this decision.