Lloyd's Maritime and Commercial Law Quarterly


CHUA Rui Yuan*

Stanford International Bank v HSBC Bank
The Ponzi scheme is an archetypical species of fraud. In essence, early investors who pay in money into the vehicle used to perpetrate the scheme are paid profits using funds from subsequent investors. The scheme continues to be viable, investors usually none the wiser, until new funds dry up. At this point, the fraud inevitably unravels and the unfortunate investors whose funds happen to remain trapped in the scheme are left to bear the loss, whilst a lucky few would have escaped without loss, and often with profits to boot.1
Stanford International Bank Ltd (in liquidation) v HSBC Bank Plc 2 (“SIB v HSBC”) was a case concerned with the fallout from such a scheme. The particular scheme is of much infamy, and one only needs to see the reward of a 110-year prison sentence visited by the US courts on the mastermind, one Mr Robert Allen Stanford, for his troubles as evidence of his fraudulent prolificity.3
The liquidators of the vehicle of fraud, the Antiguan-incorporated Stanford International Bank (“SIB”), brought a claim against the vehicle’s bank, HSBC. The liquidators’ allegation was that, in failing to freeze SIB’s bank accounts by a particular time and continuing to execute payment instructions, HSBC had breached its duty of care to SIB, this putative duty being the so-called Quincecare duty, christened after Barclays Bank Plc v Quincecare Ltd.4 HSBC applied to strike out the claim. Its principal defence was that, even assuming that said duty was owed and breached on the facts, the liquidators’ claim must fail as, in any event, SIB did not suffer any loss because the payments executed by HSBC went to the discharge of SIB’s liabilities to creditors.
At first instance,5 the High Court refused the strike-out application. Nugee J considered that SIB’s insolvency complicated the issue such that it was no longer, as HSBC had sought to characterise it, a matter of basic balance sheet arithmetic.6 Subsequently, the Court of Appeal disagreed and decided that HSBC’s simplification was correct.7 It considered that SIB’s insolvency was a red herring and thus determined that the claim should be struck out.8 That decision has now been affirmed by the Supreme Court.
Although the Supreme Court’s judgment is of considerable length and carries separate input from three different judges, a sizeable portion consists of dicta not going directly to the resolution of the particular—and quite narrowly formulated9—issue at hand, which

Case and comment


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