Stewarts’ clients have successfully defeated an application to strike out significant parts of their claim in a judgment on the principles regarding the actual authority of an agent (here, company directors) perpetrating a fraud through a company.
The case is now set to continue to trial and is likely to be one of the most high-profile Quincecare-type claims following the Supreme Court’s 2023 decision in Philipp v Barclays.
Stewarts acts for the joint liquidators of the Arena companies (“Arena”), who have brought claims against Bank of Scotland Plc and Lloyds Bank Plc (the “Banks”) in relation to losses suffered by the companies after their directors had perpetrated a large Ponzi-type fraud using accounts provided by the Banks. The fraud involved the procurement of asset-based finance in excess of £1bn from a range of lenders to acquire equipment for Arena that did not, in fact, exist, and left Arena heavily insolvent.
In the proceedings, Arena is seeking to recover in excess of £280m pursuant to claims that the Banks breached their banking mandates and duties of care by processing unauthorised payment instructions given by the directors of Arena when the Banks were on notice of evidence of the fraud.
In December 2024, the Banks applied to strike out a significant part of Arena’s claims, which, if successful, would have reduced the amount claimed to around £50m. The central issue to be determined was whether payments made by fraudulent directors from Arena’s bank accounts pursuant to the fraud were authorised by Arena (with the legal consequence that they could not be subject to Arena’s claims). In response to the Banks’ application, Arena made a cross-application to strike out parts of the Banks’ defence and counterclaim.
In addition to the central question of whether claimed payments were unauthorised, the application and cross-application raised a range of issues, including the scope of the Banks’ duty of care to Arena and whether the fraudulent conduct of the directors could be attributed to Arena or whether Arena was vicariously liable for the same.
The hearing of the strike-out applications took place over four days in October before Mr Justice Butcher in the Commercial Court. Judgment was handed down on 19 November 2025, and the key points are as follows:
- Critically, the judge dismissed the Banks’ application to strike out on the ground that certain payments made pursuant to the fraud were authorised by Arena.
- This aspect was the central theme of the Banks’ application. If successful, it would have significantly reduced the amount of the claim. It would also have implications for the scope of payments that can be claimed in this type of case.
- The judge determined that the scope of the Banks’ duty of care to Arena (a secondary line of argument advanced by the joint liquidators) did not extend to losses caused by authorised payments or transactions Arena entered into with third parties.
- The question of whether the directors’ fraudulent conduct should be attributed to Arena and/or whether Arena should be vicariously liable for that conduct will be a matter for trial.
The judge refused the Banks’ application for permission to appeal. As matters stand, the proceedings will continue to trial with the claim for in excess of £280m remaining intact.
Alex Jay, Elaina Bailes and Harry Spendlove are acting in this claim and instructing Lance Ashworth KC of Serle Court and William Day of 3VB as counsel.
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