An important ruling regarding the liability of financial
institutions who are found to have been negligent in their dealings
with their customers was handed down by the UK Supreme Court on 30
October 2019 in the case of Singularis Holdings Ltd (In
Official Liquidation) (A Company Incorporated in the Cayman
Islands) v Daiwa Capital Markets Europe Ltd  UKSC 50.
The Supreme Court upheld the decisions of both the High Court and
Court of Appeal that Daiwa, the former investment bank and broker
of Singularis, had breached the Quincecare duty of care, which
establishes that a bank owes a duty to use reasonable skill and
care in executing its customer's orders.
Singularis had originally lacked sufficient funds to meet the costs of bringing this claim against Daiwa; its only substantial assets being those it was pursuing by way of litigation. Without third party funding, therefore, the claim for $204 million plus interest would never have gone ahead. Walkers, who have acted as Cayman Islands Counsel for Singularis and the Grant Thornton Joint Official Liquidators throughout the liquidation, advised on and successfully obtained sanction from the Grand Court of the Cayman Islands to enter into the litigation funding agreements which made this litigation possible.
The English courts found that Singularis successfully established that Mr Al Sanea, who was the company's chairman, director, president, treasurer and sole shareholder with dominating influence over the company's affairs, fraudulently deprived the company of approximately US$204 million of its money by directing Daiwa to pay those monies in eight separate transactions to two separate companies associated with Mr Al Sanea. Daiwa had breached its Quincecare duty of care to Singularis, and was therefore liable for Singularis' losses arising from these transactions, albeit with a deduction of 25% for Singularis' contributory negligence.
Daiwa's appeal to the Supreme Court was based on the issue of attribution; Mr Al Sanea was Singularis' duly authorised instruction giver and "controlling mind" and, accordingly, should his actions/behaviour be treated as one and the same as Singularis.
The Supreme Court took the view that the case "bristled with simplicity", confirming that Mr Al Sanea and Singularis were not to be treated as one and the same. Daiwa should have suspended payment until it had made reasonable enquires to satisfy itself that the payments were properly made. Its failure to do so was negligent. In coming to these findings, the Supreme Court developed two areas of law:
- it provided clarity on the nature and scope of the Quincecare duty of care owed by financial institutions to their customers, particularly in circumstances where fraud is, or ought to be, suspected; and
- it set out the approach to be taken by the courts when determining whether the (dishonest) actions of a company's "controlling mind" should be attributed to the company, in particular when considering defences to breaches of the Quincecare duty of care.
This case is an important decision in the insolvency of Singularis and will return significant assets to the liquidation estate.
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