A Quincecare claim is a claim in contract, or in limited circumstances in tort, by a customer against a bank, that asserts that the bank ought not to have followed a payment instruction it had received, because the bank should have apprehended that the instruction involved, or more controversially was induced by, a fraud on the customer.1

In the typical case, the customer will be asserting that the bank is liable for allowing funds to be withdrawn from its bank account by a dishonest signatory (“mandatary”) of the customer when the bank ought to have detected that dishonesty. However, a case is presently before the United Kingdom Supreme Court that seeks to extend the scope of Quincecare claims to failures by banks to prevent frauds perpetrated on a customer by external parties, such as scammers.2 It seems likely that the Court in that case will scrutinise the whole underlying basis, if not the existence, of the Quincecare duty. It is arguable that the current underpinnings of the duty are unsecure.

In the meanwhile, a Quincecare claim has come before the Hong Kong Court of Final Appeal, in PT Asuransi Tugu Pratama Indonesia TBK v Citibank NA (“Tugu”).3 This case involved the routine situation of mandataries dishonestly draining funds out of their principal’s bank account. However, the case is significant for two propositions of law, one satisfactory and the other unsatisfactory.

First, the Court took the point that, at least in the standard case of a payment directed by a dishonesty mandatary, the customer need not frame its claim as one for damages but has the option of disowning the payment made by the bank. The result is a claim in debt (albeit sourced in contract), with the customer asserting that its bank balance has not changed. On this analysis, the bank has simply paid away its own money. This point had not much surfaced in earlier cases, but in principle it is sound. It had some consequences for the outcome of the case, as we shall see.

The other proposition is that, because a dishonest mandatary loses, by reason of that dishonesty, actual authority to give the payment direction to the bank, the bank itself lacks actual authority to make the payment. That is so even if the bank is completely oblivious to the dishonesty. On this reasoning, the bank has to fall back on demonstrating that it still had apparent authority from the customer to carry out the mandatary’s direction. This proposition, it is respectfully submitted, is wrong. It is the main focus of this casenote. In fairness to Lord Sumption, who gave the judgment for the Court, the bank appears to have conceded the issue. One infers that the very strong facts of the case did not encourage the bank to put up much opposition to the proposition. The bank rested its defence largely on the law of limitation.