22 April 2021
The Hong Kong Court of First Instance has dismissed a claim for breach of the so-called Quincecare duty of care on the basis that the duty could only arise in circumstances where misappropriation of a customer’s funds occurred by an authorised or trusted agent of the customer, rather than where the customer itself instructed payment as a result of being tricked or defrauded by a third party: Luk Wing Yan v CMB Wing Lung Bank Ltd [2021] HKCFI 279.
As discussed in our previous blog posts, the Quincecare duty of care is a key risk area for financial institutions handling client payments, given the proliferation of claims relying on the duty and an expansion in the scope of the duty in recent judgments. As a reminder, the duty arises where a bank has received a payment mandate from an authorised signatory of its customer, and executed the order, in circumstances where (allegedly) there were red flags to suggest that the order was an attempt to misappropriate the funds of the customer.
The recent decision of the Hong Kong court highlights the global nature of the Quincecare duty risk and illustrates the strict parameters of who the duty can be owed to. In summary, the Hong Kong court reached the same conclusion as the English High Court in Philipp v Barclays Bank UK plc [2021] EWHC 10 (Comm) (see our banking litigation blog post) and refused to broaden the scope of the duty to protect an individual customer who had instructed the bank to make the relevant payment directly, confirming that existing authorities limit the Quincecare duty to protect corporate customers or unincorporated associations such as partnerships.
For further information, please contact:
Gareth Thomas, Partner, Herbert Smith Freehills
gareth.thomas@hsf.com
