Outcome at a glance
The Supreme Court unanimously dismissed Daiwa’s appeal. Its liability for negligently executing fraudulent payment instructions remained, subject to the trial court’s 25% reduction for contributory negligence. [1; 2]
Allegations & issues
Singularis claimed that Daiwa wrongly paid company funds to third parties on the instructions of its controlling shareholder. The trial court rejected dishonest assistance but found a breach of the bank’s duty of care. [2, Background]
Key rulings & findings
The shareholder’s fraud did not defeat the company’s negligence claim. Attributing that fraud to the company in this context would undermine the duty intended to protect it. [2, Reasons]
Admissions
Liability was judicially determined after contested proceedings; the appeal was not a settlement. [1; 2]
Disposition
Daiwa’s appeal unanimously dismissed; the High Court order stood. [2, Judgment]
Penalties, damages & redress
Civil compensation liability, with a 25% contributory-negligence deduction, remained. This was not a regulatory fine. [2, Background and Judgment]
Restrictions & obligations
The judgment concerned civil responsibility for payments, not an industry exclusion. [1; 2]
A company can be the victim of its controller’s fraud
After repayment of a loan, Daiwa held a cash surplus for Singularis. Payments directed by its dominant shareholder misappropriated company funds and left the company unable to meet creditor demands. The company’s liquidators pursued recovery from the bank. [1; 2, Background]
Daiwa argued that the shareholder’s dishonesty should be treated as the company’s own conduct. The Court examined attribution in light of the duty being enforced. Corporate personality was separate, and attributing the fraud for this purpose would deprive the protective duty of much of its practical value. [1; 2, Attribution]
Negligence, dishonesty and contributory fault
The unsuccessful dishonest-assistance claim and the successful negligence claim were different routes to liability. Upholding negligence did not convert the rejected dishonesty allegation into a finding against Daiwa. The distinction is important when describing the bank’s conduct. [1; 2, Background]
The Court also rejected arguments based on illegality, causation and a countervailing deceit claim. The reduction for contributory negligence allowed fault relevant to the company to be reflected without eliminating the bank’s responsibility altogether. [1; 2, Reasons]
THE UNDERLYING RECORD
Primary sources
Read the full documents for their precise wording and context. Regulator summaries are identified separately from court records.
Court record · supremecourt.uk01 · Supreme Court · Case record and judgment ↗Court record · supremecourt.uk02 · Supreme Court · Press summary, 30 October 2019 ↗