Quincecare: can you exclude the implied duty?

In a recent decision, upholding a refusal to grant summary judgment, the Court of Appeal held that an entire agreement clause and an exemption clause were ineffective to prevent a Quincecare duty arising or to exclude liability under that duty.

In simplified form, a Quincecare duty means that a bank must not make a payment (despite instructions to do so) where there are reasonable grounds for believing that that payment is part of a scheme to defraud a customer.

The bank disputed the ambit and scope of the duty. It also argued that the depository agreement either prevented the duty arising or excluded it.

Entire agreement clause

The court held that the principle in Gilbert-Ash still holds. This says that while parties can of course exclude a remedy that would otherwise be available, "one starts with the presumption that neither party intends to abandon any remedies for its breach arising by operation of law, and clear express words must be used in order to rebut this presumption." On the facts, the entire agreement clause stated that the duties and obligations of the agreement were to be determined solely by the express provisions of the agreement. This was held not to be clear enough to displace the Quincecare duty.

Exclusion clause

The bank accepted, and the court agreed, that exclusion clauses are still narrowly construed (Nobahar-Cookson). So clear words were necessary to exclude the duty. On the facts a reference to the bank not being liable where it was acting in good faith on what it believed to be the instructions of the customer was not sufficiently clear to exclude the duty.

Indemnity clause

The indemnity in the agreement did not cover the bank in this scenario. The court said it would have needed very clear words to do so. The alleged breach was of a duty aimed at protecting the customer from the fraud of its trusted employee or officer.

Thus, without forming any view on the overall merits of the claim, the court concluded there was nothing in the depository agreement that allowed the bank to bring the proceedings to an end summarily.