Supreme Court to consider issues of loss and insolvency in Quincecare claims

The Supreme Court is set to decide a key case in relation to the Quincecare duty. In giving permission to the claimant to appeal Stanford International Bank Limited v HSBC Bank plc [2021] EWCA Civ 535, the Court will look closely at what constitutes a loss in this context.

The case should clarify the circumstances in which a bank will be liable for breaching a duty to exercise reasonable care and skill in carrying out a customer’s instruction.  The Court will be required to determine if such losses claimed by an insolvent customer must be limited strictly to payments which affect the customer’s balance sheet; or whether they extend to payments which deplete assets available to the customer for distribution in its insolvency.

The Quincecare duty

Through a series of cases, the Court has developed the so-called Quincecare duty, which can impose a duty on a bank not to follow a customer’s instructions where the bank is put on enquiry that it may facilitate a fraud on the customer.  The duty arises from the eponymous Barclays Bank plc v Quincecare Limited [1992] 4 All ER 363, in which it was held that a bank owes an implied duty to exercise reasonable care and skill when executing a customer’s instructions. This will include not executing payment instructions if there are reasonable grounds for believing they are an attempt to misappropriate funds.  Originally, the duty was intended to strike a balance between the desire to protect customers from fraud, without imposing overly burdensome obligations on banking transactions.


In this case the claimant, Stanford International Bank Limited (SIB), had been used as a vehicle for a substantial Ponzi scheme and entered liquidation in April 2009 with debts of over US$ 5 billion. SIB’s former chairman, R. Allen Stanford, was sentenced to 110 years in a US prison for his involvement in the scheme. SIB’s liquidators pursued a claim against HSBC, the company’s bankers, in addition to a dishonest assistance claim. The Quincecare claim was for £116.1 million, which was the total of sums paid out of SIB’s accounts between August 2008, when the liquidators considered the bank was first put on enquiry, and February 2009, when HSBC froze SIB’s accounts.

High Court decision

HSBC applied to have the case struck out and when the application was heard in the High Court, HSBC argued that a Quincecare duty claim is a common law claim for damages for breach of a tortious duty (or an implied contractual duty) and therefore the remedy is damages to compensate for loss suffered. HSBC contended that SIB had no claim for damages, because on a net asset basis the company was no worse off as a result of the bank’s actions: the payments of £118 million reduced SIB’s assets by £118 million, but equally discharged SIB’s liabilities by the same amount, by paying money out to deposit-holders in satisfaction of SIB’s contractual obligations. HSBC took the position that, as a result, there would have been nothing left over for the company or its shareholders, regardless of whether those payments were made.

Conversely, SIB argued that, because of its state of insolvency, it had no net assets. Whilst the payment of £118 million reduced its assets by that amount, it did not discharge SIB’s liabilities. This was because SIB was insolvent and so had no assets on any view, but instead had a net liability. 

The High Court ruled that, where a company is insolvent, the counterfactual scenario must be interrogated for the purpose of assessing damages.  The Court concluded that it was arguable that, absent the Bank’s breach of the Quincecare duty, cash in SIB’s accounts would have been available to pay the creditors when the insolvency occurred, or to enable the liquidators to pursue such claims as they considered appropriate. It was therefore arguable that a loss had in fact been suffered.

Court of Appeal decision

In contrast to the decision in the High Court, the majority of the Court of Appeal considered that SIB had suffered no recoverable loss, because a majority of the payments in question discharged valid debts and therefore had a neutral effect on SIB’s balance sheet.  The Court reasoned that the fact that the payments reduced the cash available to SIB once it entered insolvency, and therefore the ultimate dividends to its creditors, did not affect the outcome.

The Court took this view on the basis of a distinction between the position when comparing (i) a company that is trading with a company in respect of which a winding up process has commenced; as opposed to (ii) a solvent trading company trading with an insolvent trading company. This was because, as the Court made clear, HSBC owed its Quincecare duty to SIB and not its creditors.

Issues for the Supreme Court

The appeal has not yet been listed for a hearing in the Supreme Court. When the case is ultimately heard, the Court will seek to determine whether losses caused by a breach of the Quincecare duty can include payments which deplete the assets available to the customer for distribution in its insolvency. This will include an examination of the Court of Appeal’s rationale concerning the solvency and trading status of the claimant.

Specifically, the Supreme Court will be asked to consider if it agrees with the proposition that a company with lower liabilities as a result of transactions executed by a bank in arguable breach of the Quincecare duty, receives a corresponding benefit to its net asset position, such that the company does not suffer a loss, even if the company is in a heavily insolvent position at the relevant time. In addition, the Court will need to consider who the Quincecare duty is intended to protect and whether that is the customer alone, or additionally the customer’s creditors.


This case is fact-specific, given the fairly novel factual matrix of the case and the events involving SIB as the underlying Ponzi scheme was revealed.  The Court of Appeal’s decision was also limited, in that it was given on the basis that SIB was not claiming consequential losses, which could therefore form part of a Quincecare claim. 

However, it is hoped that the Supreme Court will provide some clarification over what constitutes loss when assessing an insolvent company, and who the Quincecare duty is owed to. In doing so, the Supreme Court will no doubt have to continue to grapple with careful calibration of the Quincecare duty, balancing the interests of banks in carrying out transactions without onerous and potentially significant risk, whilst protecting customers from the perils of fraud. The current Court of Appeal decision in this case appears to sideline creditors, who lose out on distributions and the repayment of debts within the insolvency process as a result of fraud. The Supreme Court’s decision is therefore of wide importance and will be keenly awaited.

This case adds to an emerging canon of case law on the Quincecare duty. The evolution and refinement of the law in this area has been rapid, following an effective 29-year long period of dormancy between the eponymous case, and the Supreme Court’s decision in Singularis Holdings v Daiwa Capital Markets Europe Ltd [2019] UKSC 50, being the first instance where the Court determined a Quincecare claim in favour of the Claimant. The developing case law is highly relevant given the increasing pervasiveness of financial and cyber fraud, and Hausfeld has received a number of instructions in relation to this area of law. It appears likely that claims for breach of the Quincecare duty will continue to rise.