Wednesday 30 October 2019 6:19 pm

Daiwa Capital Markets faces $150m bill after Supreme Court appeal loss

Daiwa Capital Markets Europe faces a $150m (£116m) bill after losing an appeal to the UK Supreme Court today.

The court ruled in favour of Singularis Holdings – now in liquidation – in a claim for negligence against the English subsidiary of the Japanese bank.

The case relates to a payment Daiwa made at the request of the main shareholder in Singularis and whether it had sufficiently carried out its duty as a financial institution to guard against fraud.

It was the first time that courts have found against a bank in respect of the so-called Quincecare duty of care for banker-customer relations, named after a court case involving Barclays bank and a company called Quincecare in 1992.


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It raises the prospect of a much higher duty of care burden for financial institutions when it comes to dealing with corporate clients.

Jenner & Block partner Christian Tuddenham, acting for liquidators Grant Thornton, said: “The Supreme Court’s decision develops the law with regard to the nature and scope of the duty owed by financial institutions to their corporate customers in situations where fraud is suspected.”

The Supreme Court unanimously dismissed Daiwa’s appeal and upheld an earlier High Court order.

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“Denial of the claim would undermine the public interest in requiring banks to play an important part in uncovering financial crime and money laundering,” the court said.

The High Court had upheld a claim by Singularis for damages amounting to $150m.


Grant Thornton said it expects the total amount to be about $200m, including interest and costs.

Herbert Smith Freehills partner Chris Bushell said: “The conclusion of the Supreme Court on the facts of this particular case appears to set the bar quite high for an illegality defence to be able to operate in response to a Quincecare claim.

“This may now mean that it’ll be more difficult to defend these claims and they could represent an increased litigation risk for banks.”

Daiwa was contacted for comment.

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