Quincecare duty confirmed (with important limitations)

Arena Television Limited (in liquidation) & Arena Holdings Limited v Bank of Scotland Plc & Lloyds Bank Plc [2025] EWHC 3036 (Comm)

The High Court has reaffirmed the Quincecare duty owed by banks to corporate customers. A novel attempt to argue that a bank could rely on the authority of a customer’s agent despite fraud by the agent was rejected. However, the Court applied “scope of duty” principles to limit liability to specific suspicious payments.

Introduction

A bank’s general duty is to follow customer instructions. However, under the Quincecare duty, if there are reasonable grounds to suspect fraud in an instruction given by an agent (such as a director), the bank should refrain from acting on it and investigate before executing the payment otherwise there is an actionable breach of its banking duty. This duty hinges on fraud on the part of the agent and whether, as a result, the agent’s authority can be relied upon by the bank to absolve itself.

In Philipp v Barclays Bank UK Plc [2023] UKSC 25, the Supreme Court declined any extension of Quincecare to cases where the instruction came not from an agent but directly from the account holder. Philipp confirmed that banks must honour direct instructions without assessing their wisdom and marked a clear boundary against attempts to extend the duty.

The Arena case sought to challenge the underlying Quincecare duty in corporate cases where the customer must act by an agent (such as a director) by reopening the question of an agent’s authority and a bank’s reliance on it.

The accepted position has been that an agent cannot have actual authority when acting in breach of duty to its principal. Further, under Quincecare, a bank could not rely on apparent authority when there are reasonable grounds to suspect fraud that it failed to act on.

The banks argued, in reliance on Briess v Woolley [1954] A.C. 333 which was referenced in Philipp, that if fraud was committed “by” the company rather than “on” it, the director had actual authority, and the banks had no duty to question an instruction it received.

The background

Arena Television Ltd and connected companies collapsed in 2021 with debts exceeding £280 million. Liquidators alleged that Arena’s directors had perpetrated a large-scale asset-based lending fraud, securing over £1 billion in loans against non-existent or double-pledged equipment. Of 8,196 assets supposedly sold, only 66 were genuine. Sentinel Broadcast Ltd is involved in these proceedings having acted as an intermediary in securing loans and taking commissions on loans. Claims against Arena and Sentinel are being case managed together.

Liquidators’ core case

The liquidators argued that the banks acted without actual authority and ignored red flags such as transaction volumes disproportionate to turnover. They contended that:

• Directors lacked actual authority because payments furthered fraud.

• Banks could not rely on apparent authority since they were on notice of suspicious facts that should have triggered inquiries.

The claims total over £270 million.

The banks’ argument

The banks defended arguing that:

• The directors had authority as this was fraud by the company not on it.

• Consequently, the banks were entitled to rely on instructions without further inquiry and were not required to investigate suspicions, much like the situation in Philipp.

The banks counterclaimed in deceit, alleging that fraudulent misrepresentations by directors were attributable to the companies or the companies were vicariously liable for them.

Applications Before the Court

The High Court considered strike-out and summary judgment applications. The threshold was whether the claims were realistic, not fanciful, and carried some conviction beyond being merely arguable.

The High Court Decision

Mr Justice Butcher declined to strike out the liquidators’ core claims, holding that:

• There is a realistic prospect that an agent only has actual authority to act honestly in the principal’s interests. The distinction between fraud by or on the company may not be workable in this context.

• The banks’ argument for summary judgment based on the directors’ authority was not compelling at this stage.

However, in relation to certain claims, the Court applied Manchester Building Society v Grant Thornton UK LLP [2021] UKSC 20 which found that the scope of a duty of care assumed by a professional adviser is governed by the purpose of the duty. It determined that the purpose of the duty was to avoid making unauthorised payments; it did not extend to any deeper fraud or its consequences. Thus, certain claims for damages for long-term losses that fell outside the scope of a bank’s duty were struck out.

Key Points

Arena confirms the underlying Quincecare duty and clarifies the extent to which banks can rely on fraudulent agents when making payment instructions, but it restricts the scope of a bank’s duty and possible liability. The banks’ arguments on authority have so far been rejected but will be heard at a full trial should the claims proceed.

Practitioners must continue to be alive to payments made in cases of fraud, but claims should be clearly referrable to fraudulent payment instructions acted upon by the bank. Wider fraud cannot be laid at a bank’s door. The Quincecare duty remains an important tool to practitioners in addressing loss to creditors where there is a clear underlying fraud.

From a practical perspective, Arena underlines both the continuing relevance and the complexity of Quincecare claims. They are often fact-heavy, document-intensive and expensive to pursue, particularly where Practitioners must establish which specific payments fall within the scope of a bank’s duty. In that context, access to specialist funding and claims management support can be critical in allowing office-holders to investigate and pursue meritorious claims for benefit of creditors.

Richard Fergusson - Associate Director (North East)

richard@manolete-partners.com / 07950 036625

An insolvency case law update prepared by Richard Fergusson, Associate Director for the IPA January 2026 Newsletter.

Manolete Partners Plc is an investment business focused on dispute finance. It is not a law firm and does not provide legal advice. The information provided in this article is correct at the time of publication.