Arena Television v Bank of Scotland: High Court refuses to strike out Quincecare claims arising from £1.2 billion fraud

The High Court has delivered an important judgement on the scope of banks' duties when processing payment instructions, refusing to strike out claims arising from an alleged £1.2 billion asset-backed lending fraud whilst clarifying the boundaries of recoverable losses.

In Arena Television Limited & Anor v Bank of Scotland Plc & Anor [2025] EWHC 3036 (Comm), Mr Justice Butcher considered summary judgement applications in two related proceedings concerning what have become known as Quincecare claims. The Arena claimants alleged that their directors, Mr Yeowart and Mr Hopkinson, orchestrated a massive fraud involving purported asset-backed lending arrangements for television equipment, most of which did not exist. Over £1 billion flowed through accounts held with Bank of Scotland and Lloyds Bank.

The banks sought to strike out the claims on the basis that the directors had actual authority to give the payment instructions. They argued that whilst an agent lacks actual authority when acting fraudulently for their own benefit, authority exists for frauds "by" the company rather than "on" the company. This distinction, they contended, was established by long-standing authority and necessary to protect third parties.

Mr Justice Butcher declined to resolve this complex question summarily. He held that it was realistically arguable that Article 23 of Bowstead & Reynolds on Agency correctly stated the law: "Authority to act as agent includes only authority to act honestly in pursuit of the interests of the principal." Lord Leggatt had endorsed this formulation in Philipp v Barclays Bank UK Plc [2024] AC 346.

The Court found it was arguable that no realistic distinction could be drawn between frauds "on" and "by" a company where, as alleged here, the fraud rendered the companies insolvent. The Arena claimants pleaded that the overarching purpose was dishonest extraction of funds, with all payments being necessary for or ancillary to that purpose. Whether directors acting pursuant to Table A articles had actual authority to breach their statutory duty under section 172(1) of the Companies Act 2006 required factual investigation at trial.

The Court did, however, strike out one aspect of the banks' defence. The banks had pleaded that the mandate terms and account conditions conferred actual authority on the directors. Mr Justice Butcher held these terms could not be construed as conferring authority to engage in fraudulent activities. The clauses merely addressed the bank's authority to act on instructions without inquiry, not the directors' underlying authority.

The judgement also addressed the scope of recoverable losses. The Court struck out claims for damages representing increased liabilities to lenders caused by continuation of the fraud. Applying the scope of duty principle from Manchester Building Society v Grant Thornton, Mr Justice Butcher held that a bank's duty is to avoid making unauthorised payments. It does not extend to protecting customers against consequences of transactions they would not have entered had the bank frozen the account during inquiries.

Finally, the Court refused to strike out the banks' counterclaims in deceit and unlawful means conspiracy. These relied on representations beyond the payment instructions themselves, raising factual questions requiring trial determination. The relevance of the companies being "one-man companies" without innocent shareholders also required fuller investigation.

The applications for summary determination of the central actual authority issue were dismissed, ensuring this significant case will proceed to a full trial on established facts.

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