Quincecare Duty and Dishonest Assistance – High Court provides guidance on novel quantum argument

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Quincecare Duty and Dishonest Assistance – High Court provides guidance on novel quantum argument

Published 13 October 2020

In recent years there have been a number of claims brought against financial institutions alleging a breach of the Quincecare duty. This latest decision of the High Court in Stanford International Bank v. HSBC considered a novel point - whether a claim against a bank for an alleged breach of the Quincecare duty should be struck out where the account holder had benefited from the monies paid from its bank accounts through the discharge of contractual liabilities (i.e. it had suffered no loss).  The court also considered a separate claim of dishonest assistance and specifically whether a plea of dishonest assistance against a bank should be struck out where no individuals within the bank had been identified as dishonest.

The Facts

Stanford International Bank Limited (“SIB”) was an Antiguan bank beneficially owned by Mr. Robert Stanford. It operated as a Ponzi scheme and was heavily insolvent, owing around £5 billion to creditors.  HSBC operated four accounts for SIB across different currencies.

The claim, brought by the joint liquidators for SIB against HSBC, alleged that:

  1. HSBC had breached its duty under Barclays Bank Plc v Quincecare  to take sufficient care to ensure that monies paid out from the accounts under its control were properly payable, thereby causing it loss.  HSBC continued to allow money to be paid out of SIB’s accounts after 1 August 2008, the latest date by which HSBC (allegedly) should have realised something was wrong and frozen payments from the accounts. Instead, HSBC continued to make payments totalling £118m until February 2009; and
  2. HSBC had dishonestly assisted Mr. Stanford in relation to breaches of his fiduciary duties owed to SIB.

HSBC applied to strike out the claim and/or obtain summary judgment on the grounds that: (i) no loss arose from the alleged breach of HSBC’s Quincecare duty; and (ii) SIB had failed to establish dishonesty against HSBC or any of the individuals within HSBC.

No loss arising from breach of Quincecare

HSBC argued that this claim failed because the remedy for a breach of the Quincecare duty is damages and SIB had not suffered any loss. 

HSBC asserted that since the payments, with the exception of one, were to investors of SIB who held deposit certificates and had a contractual entitlement to the return of their capital and interest, the payment discharged SIB’s liabilities to these investors. Therefore, whilst there had been a reduction in SIB’s assets, it had made an equal gain in terms of the discharge of its liabilities and so there was no overall loss. 

The court accepted that HSBC’s argument may work for a solvent company where the net asset position would, in most circumstances, remain the same, but the position was very different for an insolvent company. If HSBC had frozen the accounts on 1 August 2008, SIB would have had £80m available to it. While insolvent liquidation was inevitable because SIB’s liabilities (£4-5bn) vastly outweighed its assets, it would have been better off to have £80m in the bank in actual assets, which the liquidators could have used to pursue any claims they thought necessary or for creditor distributions.

Therefore, the court held that the alleged breach of duty by HSBC had caused SIB to suffer a real loss and it dismissed the application to strike out the claim. Whether HSBC in fact breached the Quincecare duty will be decided at trial.

Dishonest Assistance

In relation to the second allegation, the parties were in agreement that by allowing the bank accounts to operate, HSBC had assisted Mr. Stanford in the breach of his fiduciary duties owed to SIB. However, the question for the court was whether this assistance had been dishonest.

In Ivey v Genting Casinos, the Supreme Court established the test for dishonesty as follows:

  1. Firstly, the court must consider the state of mind of the individual in question – this is a subjective test;
  2. Secondly, the Court must determine whether this was dishonest by applying the objective standards of “ordinary decent people”.

SIB/its liquidators were unable to identify any specific individuals who had been dishonest so instead pleaded dishonesty against HSBC collectively on the proviso that, following disclosure, it might be able to identify specific individuals.

So was SIB entitled to make a claim for dishonesty against HSBC where no individuals within HSBC had been identified as dishonest? The court said “no”. It is a well-established principle of English law that  “one cannot aggregate two innocent minds to make a dishonest whole”. In other words, it is not possible to aggregate the knowledge of one, five, ten or more individuals within the bank, who are not personally dishonest, but possibly not blameless, to make a case that the bank was dishonest. If SIB could not identify dishonest individuals within HSBC, then HSBC could not itself be dishonest.

SIB also proposed the idea that the “corporate recklessness” of HSBC could be sufficient to establish dishonesty on the basis that HSBC “neither knew nor cared… as to whether SIB was being run dishonestly”. It was alleged that HSBC often failed to apply its own policies and procedures and therefore, did not have the requisite knowledge that would have caused it to suspect wrongdoing.

This was also rejected by the court. Corporate recklessness could not amount to dishonesty where HSBC’s failure to make enquiries was because it had no suspicion of wrongdoing, even though this was due to its own poor procedures. (The court acknowledged however that this may be relevant to the Quincecare claim.) There would need to be more on the part of HSBC, such as a targeted suspicion of dishonesty and then the turning of a blind eye to this.

Recognising the obstacle to pleading fraud before the disclosure stage in proceedings, the court noted that a claim of dishonesty against a corporate entity, which does not identify individuals may avoid being struck out if the pleading sets out a “viable basis for alleging dishonesty”,  but this had not been achieved here.  HSBC was therefore successful in its application to strike out the claim of dishonest assistance with the court acknowledging that if further information came to light, the allegation could be re-pleaded by SIB.


The decision provides helpful commentary on the Quincecare duty, which increasingly features in claims against financial institutions.  It also raises the interesting point that the assessment of damages arising from a breach of this duty may depend on the solvency of the account holder at the time of breach. A solvent claimant may suffer no loss if monies wrongly paid out by the bank are used to discharge a debt owed, whereas the same may not be true for insolvent claimants, where the monies would have been available to distribute to a different mix of creditors.

The decision also provides clarification on pleading dishonest assistance where individuals within an entity have not been identified as dishonest.  It is clear the courts will not permit allegations of dishonesty to remain in pleadings (often adding layers of complexity to a case), without material evidence supporting the allegation.


Francesca Muscutt

Francesca Muscutt

London - Walbrook

+44 (0)20 7894 6189

Grace Tebbutt

Grace Tebbutt

London - Walbrook

+44(0)20 7894 6018

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