Quincecare duty considered

The High Court considered the potential application of the Quincecare duty to a payment service provider (PSP) taking instructions from a customer that was a company controlled by fraudsters.

The Quincecare duty of care was established in Barclays Bank Plc v Quincecare [1992] 4 All ER 363. It is an implied negative duty imposed on a bank to its customer to refrain from executing an order/making payments if the bank has been put on inquiry that any instruction regarding payment may be an attempt to misappropriate funds. A bank will be put on inquiry for as long as there are reasonable grounds (not necessarily proof) for believing that there is an attempted fraud.

The court held, amongst other things, that, in the light of the Supreme Court decision in *Singularis Holdings Ltd v Daiwa Capital Markets Europe Ltd (2019] UKSC 50, it was arguable that a distinction could be drawn for the purposes of the Quincecare duty between the corporate customer and the fraudsters that controlled it.

The court rejected an argument that a breach of the Payment Services Regulations 2017 (SI 2017/752) (PSRs) gave rise to a statutory duty entitling a person that had suffered damage as a consequence of the breach to sue.

* In which the court found that “there is no principle of law that in any proceedings where the company is suing a third party for breach of a duty owed to it by that third party, the fraudulent conduct of a director is to be attributed to the company if it is a one-man company” and, more importantly, “The answer to any question whether to attribute the knowledge of the fraudulent director to the company is always to be found in consideration of the context and purpose for which the attribution is relevant.”

Hamblin and another v World First Ltd and another [2020] EWHC 2383 (Comm) (23 June 2020)