THE QUINCECARE DUTY OF CARE

The courts in Malaysia have also adopted and elucidated the ”Quincecare” duty in a few cases. These cases have somewhat, cast some light as to the test on what ought to and not to be done by the Banks to safeguard themselves from being held liable for breaching such duty.

The correct test to determine whether such duty shall be imposed is whether a reasonably prudent banker, faced with the same circumstances, would regard the course of action taken on the facts justifiable. This was affirmed in the case of Public Bank Bhd & Anor v. Exporaya Sdn Bhd  [2013] 1 MLJ 507 [CA] and further supported in the recent case of Alliance Bank Malaysia Bhd v Khee San Food Industries Sdn Bhd & Anor [2021] MLJU 1050.

In the case of Perwira Habib Bank (M) Bhd v. Wong Keng Fatt [2014] MLJU 1822 [HC], the court had enumerated a list of the circumstances which amounts to breach of the ”Quincecare” duty. Those circumstances are where:

1. the bank executes the order or instruction knowing it to have been dishonestly given or procured; 
2. the bank shuts its eyes to the obvious fact of the dishonesty;
3. the bank acts recklessly in failing to make such inquiries as an honest and reasonable man would make; or
4. the bank has been ‘put on inquiry’ in the sense that an ordinary prudent banker would have reasonable grounds for believing that there is an attempt to misappropriate money or that there is something otherwise amiss and does not carry out inquiries that were reasonable in the circumstances.

Vigilance against fraud is paramount in banking; the Quincecare duty ensures banks protect their customers by scrutinizing suspicious transactions.

Further, in the case of YATIN MAHMOOD v. MOHD MADZHAR SAPUAN & ORS [2010] 1 LNS 25, the court held that the bank ought to have been ‘put on inquiry’ by the unusual request of eight cash withdrawals of substantial amount within the space of two days. It had breached the ”Quincecare”  duty by failing to take any action to prevent the misappropriation of funds and to ensure that the customer’s interest is protected.

On the other hand, in the case of Public Bank Bhd & Anor v. Exporaya Sdn Bhd  [2013] 1 MLJ 507 [CA], the Court of Appeal found that the bank had complied with its duty to exercise reasonable skill and care by pre-emptively freezing the customer’s bank account. The bank had done so after it received a letter from the customer that was contradictory to its earlier request to change the signatories to the bank account.

Therefore, it can be concluded that if a Bank executes an order knowing it to be dishonestly given or shuts its eyes to an obvious fact of dishonesty, or acted recklessly in failing to disclose any information to its client, the Bank can be held liable. Hence, there is indeed an implied term between the bank and the customer that the bank will observe reasonable professional skill in and about executing customer’s mandate.