Supreme Court strikes out £116 million claim for breach of Quincecare duty as claimant held to have suffered no loss

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The UK Supreme Court has handed down its judgment in Stanford International Bank Ltd (In Liquidation) (Appellant) v HSBC Bank PLC (Respondent) [2022] UKSC 34, striking out a significant claim (£116m) for breach of the Quincecare duty on the grounds that the claimant had suffered no loss.

The decision is important as another example of a significant claim for breach of the Quincecare duty being unsuccessful. The judgment also provides important guidance as to whether a claimant has suffered recoverable loss as a result of making payments to creditors prior to the claimant’s insolvency.

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The proceedings arose in the context of the well-publicised Allen Stanford Ponzi scheme discovered in 2009.

Claims were brought by the joint liquidators of Stanford International Bank Ltd (“SIB”) against HSBC (“the Bank”). SIB was an Antiguan bank run by its ultimate beneficial owner, Mr Allen Stanford. SIB was operated as a Ponzi scheme: it sold a large number of certificates of deposits to investors promising generous rates of interest and survived as long as it did by encouraging new investors to come in, using their money to pay out other investors who wanted to redeem their investments.

SIB alleged that the Bank failed, in breach of its Quincecare duty, to freeze payments out of SIB accounts from 1 August 2008. The Quincecare duty is the duty placed on a bank to refrain from following a payment instruction when the bank is ‘put on inquiry’ in the sense that it has reasonable grounds (although not necessarily proof) for believing that the payment instruction is an attempt to misappropriate the funds of the customer. SIB alleged that the Quincecare duty required the Bank to have reached a conclusion by 1 August 2008 at the latest that the SIB accounts should have been frozen. The accounts were not in fact frozen until 17 February 2009.

During August 2008 – February 2009 around £118m was paid out of the SIB accounts operated by the Bank. With the exception of one payment, all of those payments were made either directly or indirectly to individual investors holding certificates of deposit who had claims against SIB for the return of their capital and interest. The payments therefore discharged SIB’s liability to those investors. The other payment was a payment of $3m to the England and Wales Cricket Board (“the ECB Payment”) which did not discharge a liability of SIB (but rather was something Mr Stanford had promised to the ECB personally).

In addition to its Quincecare claim, SIB brought a claim against the Bank for dishonest assistance in relation to breaches of fiduciary duty by Mr Stanford. This was put on the basis that Mr Stanford owed fiduciary duties to SIB, that he broke those fiduciary duties to SIB and that every single payment out of the £118m, including the $3m paid to the ECB, was paid out in breach of duty. However, SIB was unable in its pleading to identify any individuals within the Bank that it alleged had acted dishonestly. SIB said it required full disclosure before it was able to particularise its case against named individuals within the Bank.

The Bank applied to strike out or obtain reverse summary judgment in relation to both heads of claim.

The applications were made on the following grounds:

  1. As regards the Quincecare duty head of claim, the Bank argued that SIB had suffered no loss in relation to the £118m payments (save for the ECB Payment) as such payments had discharged liabilities of SIB and so its net asset position was unaffected. As SIB had suffered no loss, the Bank argued that it could not bring a claim for breach of the Quincecare duty in relation to payments made after 1 August 2008 (save for the ECB Payment).
  2. As regards the dishonest assistance head of claim, the Bank argued that SIB had failed to plead a sufficient case regarding dishonesty as it had failed to allege dishonesty against a named individual within the Bank. The claim could not proceed on the basis of the allegation that the Bank had been “collectively” dishonest.

The underlying proceedings were stayed (prior to exchange of disclosure) to allow the above two issues to be determined. These issues were decided by the High Court in 2020 and then appealed to the Court of Appeal (2021) and Supreme Court (2022) for the purposes of deciding which of the pleaded heads of claim could survive and be pursued to a full trial at first instance.


For further detail and commentary on the High Court’s and Court of Appeal’s decisions, please see our previous LawNow articles available here and here.

By way of very brief overview, the High Court decided that the Quincecare duty claim could proceed to trial. The Judge’s view was that if the Bank had frozen the accounts on 1 August 2008, there would have been a significant sum of money held in cash (up to £118m) for the liquidators to pursue such claims as they thought they could usefully pursue and for distribution to SIB’s creditors. The alleged beaches by the Bank deprived SIB of that opportunity and the Judge viewed this as a real loss regardless of the fact that SIB’s net asset position remained the same. This decision was reversed at the Court of Appeal who accepted the Bank’s argument that the monies paid out of the SIB accounts had not caused SIB to suffer loss as the payments out to customers had reduced SIB’s liabilities meaning SIB’s net asset position remained the same. Accordingly, SIB’s claim for breach of the Quincecare duty was struck out.

Whilst not relevant to the Supreme Court decision, the dishonest assistance claim was struck out by the High Court on the basis that SIB was unable to plead dishonesty against any individuals within the Bank. This decision was upheld at the Court of Appeal and was not pursued to the Supreme Court.

The practical effect of the above was that rather than having a £118m claim against the Bank for breach of the Quincecare duty and/or dishonest assistance, SIB was left only with the breach of Quincecare duty claim regarding the ECB Payment ($3m) which did not fall within the “no loss” decision as it was a payment to a third party which did not discharge SIB’s liabilities and therefore was, in principle, an actual loss to SIB.

SIB was given permission to appeal the Quincecare duty / “no loss” issue to the Supreme Court.


In a judgment handed down on 21 December 2022, the majority of the Supreme Court (Lord Sales dissenting) upheld the Court of Appeal decision and decided that the Quincecare duty claim as it related to payments out to customers should be struck out on the basis that SIB had not suffered any recoverable loss.

Loss of chance argument

By the stage of the Supreme Court, SIB had reformulated its argument to try and get around the factual position that SIB’s net asset position had been unaffected by the payments out to customers. SIB sought to categorise its loss as a “loss of chance” to discharge the debts of certain customers for only a few pence in the pound via the liquidation process rather than them receiving 100% of amounts due to them from the payments made by the Bank prior to the liquidation.

The argument was essentially that there were two class of customers: the “early customers” who tried to withdraw their funds before SIB’s insolvency who were fortunate enough to receive a share of the £116m (being £118m less the ECB Payment) from the Bank and be paid in full; and the “late customers” who did not receive payments before SIB’s insolvency and are now only entitled to prove in the insolvency process to recover a few pence in the pound. SIB argued that if the £116m had not been used to pay the early customers and instead had been frozen in accordance with the Bank’s Quincecare duty then the early customers would have to prove as creditors and instead of receiving 100% of the sums due to them the early customers would also only receive a few pence in the pound as creditors in the liquidation. SIB therefore lost the chance to keep the £116m and the “loss” (broadly speaking) was the difference between the payments made to the early customers (£116m) and the dividend that the early customers would receive in the liquidation.

This loss of chance argument was dismissed by the Supreme Court. If the £116m had not been paid out to the early customers then the early and late customers would form a single (enlarged) creditor pool. The £116m would then have been used to pay a (slightly enhanced) dividend to this larger pool of creditors. The example given in the judgment is that instead of the late customers receiving 5 pence in the pound, perhaps with the £116m to distribute, the enlarged pool of early and late customers might receive 12 pence in the pound. However, the fact remained that SIB would still only be discharging the same amount of liabilities (£116m) – just to different customers in different amounts. On the actual facts of this case, SIB discharged £116m of its liabilities by paying the early customers 100% of what was due to them prior to the liquidation. SIB’s net asset position was therefore unaffected by these payments. In the counterfactual before the Supreme Court (i.e. assuming the Bank had frozen SIB’s accounts in August 2008 and there was therefore £116m of additional cash in the insolvency estate), that £116m would also have been used to discharge SIB’s liabilities via paying dividends to creditors - but by paying less to the early customers and more to the late customers. The problem for SIB was that there was no net loss suffered by it when comparing what actually happened to the counter factual.

Fairness argument

SIB sought to supplement the above argument by saying it had lost the chance to treat the early/late customers fairly. It was not “fair” that the early customers were paid in full whereas the late customers would only receive a few pence in the pound.

However, the Supreme Court rejected this as a relevant factor. The “fairness” of which customers should be paid what amounts was not a matter for the Supreme Court to investigate or assess. The fairness of payments out before an insolvency was a policy matter for insolvency law. The Supreme Court noted that the liquidators of SIB had previously attempted to claw back the payments made to the early customers and they were unable to do so under Antiguan insolvency law (a matter already decided by the Privy Council in In re Stanford International Bank Ltd [2019] UKPC 45; [2020] 1 BCLC 446). Accordingly, the payments made to the early customers were lawful payments that discharged SIB’s liabilities to those customers. Whilst it may be said to be “unfair” that the early customers were paid in full whilst the late customers will only get a few pence in the pound, and a “fairer” outcome might be to pool the early and late customers together and use the £116m to pay an enhanced dividend to all, that was not how Antiguan insolvency law operated.

In summary, SIB had not suffered a loss (or loss of chance) that had a pecuniary value to it and, in the absence of loss, the Quincecare duty claim as it related to the £116m payments to the early customers was struck out.


This is a helpful decision for banks and other financial institutions:

  1. It is another example of a very significant (£116 million) claim for breach of the Quincecare duty being unsuccessful. The only successful breach of Quincecare duty claim remains Singularis (which we commented on here). SIB’s breach of Quincecare duty claim for the ECB Payment ($3 million) was not struck out and so, in principle, can be pursued by SIB to trial. However, a $3 million claim is a very different proposition to a £118 million claim. There have been an increasing number of claims brought for breach of the Quincecare duty over recent years but recent decisions may cause claimants to think twice about the attractiveness of these claims.
  2. That said, the facts of the SIB case are unusual in that the payments out were made to existing creditors of SIB. In most other Quincecare duty claims the payments are unlikely to have been made out to creditors but rather to third parties who have no entitlement to the funds. The “no loss” argument available to the Bank in SIB is therefore not likely to be available in most other Quincecare duty claims.
  3. The nature of this appeal (i.e. focused on whether there was a recoverable loss) meant that there was very limited judicial commentary on the scope and application of the Quincecare duty itself. For the purposes of the appeals, the courts were asked to assume that there had been a breach of the Quincecare duty and the only issue was whether SIB had suffered a loss. The question of breach of the Quincecare duty would be fully argued at trial in due course only if the head of claim was allowed to proceed. However, it is worth noting that:
  1. The Court of Appeal judgment in SIB confirmed that the Quincecare duty was owed only to the Bank’s customer (SIB) and not to SIB’s creditors. This is consistent with the recent Privy Council decision which we commented on here which also confirmed that the Quincecare duty was owed to the bank’s customer only and not third parties.
  2. In his dissenting judgment, Lord Sales provided some commentary on the Quincecare duty noting that: “The Quincecare duty should be kept within narrow bounds, lest it interfere unduly with the conduct of commerce” [132]. This is also consistent with other recent judicial commentary.

In summary, banks and other financial institutions will welcome this decision. However, there will be other judgments that go further in shaping the scope and application of the Quincecare duty including the Supreme Court considering in 2023 the appeal of a another recent Court of Appeal decision involving Quincecare that we commented on here.