On 30 October 2019, the Supreme Court handed down its judgment in Singularis v Daiwa [2019] UKSC 50, unanimously dismissing Daiwa's appeal. It upheld the High Court judgment that Daiwa (the "Bank") owed a duty (the "Quincecare duty") to Singularis (the "Company") not to execute an order if it had been put on inquiry that it was an attempt to misappropriate funds of the customer, and that the Bank had breached this duty.

Despite being a short judgment, the Supreme Court provides useful analysis of the law of attribution and "lays to rest" the controversial judgment in Stone & Rolls Ltd v Moore Stephens [2009] UKHL 39.

Facts and issues

The Company was wholly owned by Mr Al Sanea, a high net-worth individual, to manage his personal assets. Mr Al Sanea was a director of the Company, along with six other individuals, who were largely inactive. Separately, Mr Al Sanea also owned a substantial business group, the Saad group.

In April 2007, the Bank entered into a stock-lending agreement with the Company, pursuant to which the Company made equity investments. The Bank held the Company's funds in its client account.

During the first half of 2009, the Company sold a number of significant shareholdings and the proceeds were placed into the client account. Throughout June and July 2009, the Bank received several requests from Mr Al Sanea to pay monies totalling USD 204m from the Company's client account to Saad group companies. Largely, these instructions were authorised without further enquiry by the Bank, despite the Bank being aware of the financial difficulties of Mr Al Sanea and the Saad Group and of other suspicious factors.

On 24 July 2009, the Cayman Courts issued a worldwide freezing order over the assets of the Saad group. The Company ultimately went into liquidation and the liquidators brought a claim against the Bank for repayment of the USD 204m, claiming dishonest assistance and breach of the Quincecare duty.

At first instance, the dishonest assistance claim was dismissed, since the Bank's employees had not acted dishonestly. However, the breach of the Quincecare duty claim was upheld, subject to a 25% reduction for contributory negligence by Mr Al Sanea and the inactive directors

The Bank appealed against this finding but the Court of Appeal dismissed its appeal. The Bank further appealed to the Supreme Court and the issues to be decided were as follows: whether the fraud of Mr Al Sanea could be attributed to the Company, and, if so, whether the claim was thereby defeated due to: (i) illegality; (ii) lack of causation; or (iii) a countervailing claim in deceit against the Company.

Supreme Court judgment

Lady Hale, giving the only substantive judgment, stated that it was "incontrovertible" that the Bank had breached the Quincecare duty of care that it had owed to the Company, approving the judge's findings of fact in this regard.

The issue for the Supreme Court, therefore, was whether any of the Bank's defences, noted above, could defeat the claim. Whilst attribution was key to the defences succeeding, the Supreme Court agreed with the judge that all of the Bank's defences would fail, whether or not Mr Al Sanea's fraud was attributed to the Company.

Taking each in turn:


The legal doctrine, ex turpi causa non oritur action (the illegality defence), prevents a claimant from pursuing a claim if it arises from or is founded upon the illegality of the claimant. In this case, in order for the defence to have succeeded, the fraudulent activities of Mr Al Sanea would have needed to have been attributed to the Company. However, irrespective of any finding of attribution, the defence would fail for the following reasons (approving the judge's findings):

  • Directors are subject to fiduciary duties to their companies in order to protect their companies from any wrongful activity by them. These duties would not be enhanced by preventing the company's recovery of money which had been wrongfully removed from its account. Further, "although the purpose of protecting the bank would be enhanced by denial of the claim, that purpose was achieved by ensuring that the bank was only liable to repay the money if the Quincecare duty was breached". Thus, that purpose would be undermined if the bank were able to deny the claim due to illegality in a case where the circumstances are such that the duty arises due to the illegal actions
  • Financial institutions play a part in combatting financial crime and it would not be in the public interest to allow a bank to escape liability for failing to detect a crime by pushing blame on to the employees of its customer
  • It would be unfair and disproportionate to allow the defence to succeed: the appropriate response would be to discount the liability on the basis of contributory negligence


The Bank asserted that the Company inflicted the harm on itself and, thus, any breach of the Bank's duty did not cause the loss. The Supreme Court rejected this: "the purpose of the Quincecare duty is to protect a bank's customers from the harm caused by people for whom the customer is, one way or another responsible...the fraudulent instruction to Daiwa gave rise to the duty of care which the bank breaches, thus causing the loss."

The Bank's claim in deceit against the Company

The Bank further sought to argue that it had paid out the monies because of the Company's own deceit and, therefore, that it had a claim against the Company for any loss suffered from its exposure to the Company's claim, thus cancelling out the Company's claim for breach of the Quincecare duty. This was also rejected, as the Supreme Court agreed with the judge's finding that the exposure arose from the Bank's breach of the duty, not from Mr Al Sanea's misrepresentations.


The Supreme Court held that Mr Al Sanea's fraud could not be attributed to the Company and helpfully considered the line of authorities on the point

The starting point is that companies have a separate legal identity (Saloman v Saloman and Co Ltd [1897] AC 22) though they necessarily operate through individuals. The law presumes that the acts and state of mind of a company's directors and agents can be attributed to the company if those individuals act in accordance with the Articles of Association by the application of the law of agency. In Bilta (UK) Ltd v Nazir (No 2) [2015] UKSC 23 the Supreme Court held that, where a company has been the victim of wrongdoing by its directors or of which its directors had notice, then the wrongdoing, or knowledge, of the directors could not be attributed to the company.

The Bank, however, sought to rely on the decision of Stone & Rolls Ltd v Moore Stephens [2009] UKHL 39 to found attribution on the basis that the Company was, in effect, a "one-man company", as Mr Al Sanea was the sole shareholder and the Company's other directors were largely inactive.

In Stone & Rolls, the auditors, Moore Stephens, successfully relied on the illegality defence to bar a claim from their client company, Stone & Rolls Limited (Stone & Rolls). The controlling shareholder of Stone & Rolls, Mr. Stojevic, used it to deliberately carry out a scheme to defraud banks and then to pay away monies to himself or other of his companies. As a result, Stone & Rolls became insolvent and entered into liquidation. Stone & Rolls brought a claim against Moore Stephens for failing to detect that its transactions were fraudulent and for delay in stopping the continuing fraud. The House of Lords, by a 3:2 majority, held that Moore Stephens was entitled to rely on the illegality defence to strike out the claim by Stone & Rolls.

In summary, the House of Lords was of the view that Mr. Stojevic was the only shareholder, the sole director and the controlling mind of the company and, hence, Stone & Rolls was vested with the knowledge of the fraudulent scheme. Although Moore Stephens owed a duty of care to its client company and its shareholders, Stone & Rolls was precluded from suing its auditors in order to take advantage of and obtain benefit from its own fraud.

However, this decision has been subject to much debate, including by the Supreme Court in Bilta, in which Lord Neuberger copied Lord Denning's phrase from an earlier case that Stone & Rolls should be put "on one side in a pile and marked "not to be looked at again"".

However, there was some support within the judgment that the illegality defence was available where there were no innocent directors or shareholders, which the Supreme Court in Singularis said had been "unfortunately" treated as an established rule of law whatever the context and purpose of the attribution in question. In Singularis, the Supreme Court held that this was not the correct approach. Whilst agreeing with the High Court that the Company was not a "one-man company", like in Stone & Rolls, as it had other reputable directors on the board and there was nothing to suggest that they had been aware of or complicit in Mr Al Sanea's fraud, Lady Hale stated that,

"...the judge was correct also to say that "there is no principle of law that in any proceedings where the company is suing a third party for breach of a duty owed to it by that third party, the fraudulent conduct of a director is to be attributed to the company if it is a one-man company". In her view, what emerged from Bilta was that "the answer to any question whether to attribute the knowledge of the fraudulent director to the company is always to be found in consideration of the context and the purpose for which the attribution is relevant" (para 182). I agree and, if that is the guiding principle, then Stone & Rolls can finally be laid to rest".

Therefore, looking at the issue of attribution in the context of the Bank's breach of the Quincecare duty in this case, attributing the fraud of Mr Al Sanea to the Company would have the effect of stripping the duty of any value, as breach of the duty would cease to have a consequence. Therefore, the Supreme Court held that there was no attribution to the Company


The Quincecare duty that financial institutions owe to their customers is there for good reason: to protect a bank's customer from itself where circumstances put the bank on inquiry that there may be fraud on the account. On causation, the losses, the Court held, arose from the Bank failing to protect the customer, not from the illegal actions of Mr Al Sanea.

Further, when considering the illegality defence, the Supreme Court expressly confirmed that the illegality of the director (whether attributed to the Company or not) would not provide the Bank with an illegality defence when the exceptional circumstances of the fraudulent instruction to the bank is the very thing which gives rise to the Quincecare duty. As the Supreme Court confirmed, there are also good public policy reasons for preventing financial institutions from escaping their liability in these circumstances, due to the part they are required to play in identifying and preventing financial crime.

The Supreme Court's decision provides welcome clarification as to how attribution should be considered: namely, by looking at the context and the purpose for which the attribution is relevant. It was highly relevant that the question was being asked in the context of the Quincecare duty: to attribute Mr Al Sanea's fraudulent conduct to the company would "denude the duty of any value in cases where it is most needed".

The Supreme Court's limiting of the decision in Stone & Rolls to its facts also closes down debate surrounding this case and confirms that it is not a rule that conduct can be attributed to companies which are one-man companies; it will depend on the facts of the case.

The Quincecare duty has now been given Supreme Court approval and the case demonstrates that it will be very difficult for a financial institution to defend itself against such a claim. The decision should serve as a warning to all financial institutions that, where a customer is known to be in serious financial difficulty or there are circumstances in which it could reasonably be said that the bank has been "put on inquiry", financial institutions will want to consider carefully any unusual payment instructions received from a director (even if they are accustomed to dealing with that individual) and to ensure that those on the front line of their operations are alert to the need for caution.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.