The UK Supreme Court recently held in Singularis Holdings Limited v Daiwa Capital Markets Europe Limited [2019] UKSC 50 that the fraudulent actions of a director are not attributable to a company, so as to protect a Bank from its Quincecare duty to its customers.

Singularis' sole shareholder was a fraudulent Mr Sanea, who was also the chairman, president and treasurer, and the only director involved in the management of the company. Singularis had a substantial surplus fund held on its behalf in by the defendant banking company, Daiwa. At a time when Singularis was already facing significant financial difficulties, Mr Sanea, in breach of his fiduciary duties, instructed Daiwa to pay that money to other entities for his own benefit, rather than to his company who needed it.

It was held 'incontrovertible' that Daiwa had breached their Quincecare duty – that is, the implied duty a bank owes its customer to use reasonable skill and care in exercising the customer's orders. This duty requires a bank who reasonably ought to know of a dishonest order not to act upon it.

Daiwa argued that despite this breach, they should not be liable for Singularis' loss because Mr Sanea's fraudulent actions, as those of the directing mind of the company, were attributable to Singularis. Therefore, it argued, Singularis' claim should fail as a company cannot bring a claim based on its own illegal activity.

The Supreme Court held that attributing the fraud of the company's director to the company itself would undermine the Quincecare duty in cases where it is needed most. Even if the fraud were attributable, it would not have succeeded as it was not Mr Sanea's dishonesty that caused the loss, but Daiwa's breach of duty by acting on his orders. The appeal was thus unanimously dismissed.

See the Court's decision here.