Article originally published in Issue 20 of ThoughtLeaders4 Disputes Magazine, March 2026.

The Commercial Court has recently considered summary judgment and strike out applications in two Quincecare claims brought by two Arena companies and Sentinel Broadcast against Bank of Scotland (BoS) and Lloyds Bank. Although some aspects of each party's case were disposed of summarily, key issues now remain to be determined at trial.

Who's who and what happened?

The Arena proceedings were brought by Arena Television Limited and Arena Holdings Limited (both in liquidation) against BoS and Lloyds. Arena TV was an outside television broadcaster; Arena Holdings was its parent company. The banks provided Arena's GBP and USD current accounts. The Sentinel proceedings were brought by Sentinel Broadcast Limited (in administration) against Lloyds in relation to Sentinel's account.

Both cases arise from a large-scale asset‑backed lending (ABL) fraud. Arena's former directors and Sentinel's sole director allegedly ran a scheme under which Arena "sold" non‑existent broadcast equipment to intermediaries (often Sentinel), which then sold it on to lenders. The intermediary would receive the purchase price, take a commission and pass the proceeds to Arena. Arena would then enter into a hire-purchase agreement with the lender, so it could purportedly use the equipment in return for monthly payments. 

However, most of the equipment did not in fact exist or was subject to prior lending. Over £1.2 billion of ABL is said to have been obtained for 8,196 pieces of equipment, but only 66 actually existed. The claimants say the monies were not used in the Arena companies' businesses but were misapplied for personal benefit and to conceal and perpetuate the scheme in a Ponzi‑like fashion. 

The claims at a glance

The Arena companies allege that BoS and Lloyds breached their banking mandates by executing instructions that lacked Arena's actual authority. They also argue that the banks could not rely on the former directors' apparent authority as authorised signatories, as they had notice of facts which would cause a reasonably skilful and careful banker to make enquiries (and they failed to do so). They seek reconstitution of Arena's accounts or damages in the alternative. 

Similarly, Sentinel alleges that payment instructions made by its director to Lloyds in respect of the payments of proceeds of 'sales' made to Arena were given without Sentinel's actual authority. It is also argued that Lloyds cannot rely on the director's apparent authority because it ought to have been apparent to Lloyds that the payments to Arena indicated or involved wrongdoing. Sentinel seeks reconstitution of Sentinel's bank account (up to £1.078 billion) or damages for breach of duty. 

The banks made applications for summary judgment or strike out. 

The applications before the court

Three applications were heard together:

1. By the banks in Arena: strike out/summary judgment in respect of certain parts of the Particulars of Claim to confine Arena's claims to payments to or for the directors' direct personal benefit.
2. By Lloyds in Sentinel: strike out/summary judgment of Sentinel's entire claim.
3. Cross-application by Arena: strike out/summary judgment in respect of, (i) the banks' pleas that the directors had actual authority by reason of their control of the companies and/or the mandates and terms applicable to the accounts; and (ii) the banks' counterclaims in deceit and unlawful means conspiracy.

One of the key arguments by the banks was that where a company's directors fraudulently transact with third parties as part of the company's business (a fraud by the company), their instructions are given with the company's actual authority, save where monies are diverted for their own benefit (a fraud on the company).

How the court approached "actual authority" 

The court noted the importance to the applications of the Supreme Court decision in Philipp v Barclays Bank UK Plc [2024] AC 346, which concerned an authorised push payment fraud.  The court summarised key concepts from this case including, importantly, the fact that the court in Philipp approved the principle stated in Article 23 of Bowstead & Reynolds on Agency (23^rd ed), which was relied upon by Arena:

"Authority to act as agent includes only authority to act honestly in pursuit of the interests of the principal."

An agent who does not have actual authority in accordance with the above principle may nevertheless have apparent authority unless the bank is put on inquiry – in other words, it has reason to believe that the agent is acting without authority and fails to make inquiries that a reasonable person would have made in the circumstances. 

Within that context, the judge held that whether or not the directors had "actual authority" is not a short point that could be decided summarily and is a matter for trial. 

He considered it arguable with a realistic prospect of success that Bowstead Article 23 accurately states the law and therefore that "at least in the absence of express agreement of the principal otherwise, an agent only has actual authority to act honestly in pursuit of the interests of the principal". 

It was also arguable with a realistic prospect of success that there is no realistic or workable distinction which can be drawn, as proposed by the banks, between frauds by and frauds on the principal (and that the authorities relied on did not support this proposition). As submitted by Arena, the ABL scheme both deceived lenders and inflicted serious liabilities on the companies and it is arguable that there was an overarching purpose of the dishonest extraction of funds for the benefit of the former directors, with all payments being a necessary or ancillary part.

The court also considered there to be a realistic argument that actual authority of a company director derived from the articles of association which comprise Table A is not extended to acts done in breach of the directors' duty under section 172(1) of the Companies Act 2006 (duty to promote the success of the company).

What the court decided on the applications

Accordingly, the banks' attempts to summarily defeat Arena's and Sentinel's claims based on "actual authority" failed. The court also dismissed part of Arena's cross application on this basis, finding that the issue of control was closely bound together with the wider issues of actual authority. 

The banks did succeed in trimming Arena's "continuation loss" claim. Arena had pleaded damages for further liabilities it says it incurred to lenders after dates in 2008/2009, on the footing that the banks' inquiries (which should have been made at that time had there not been a breach of duty) would have stopped the scheme. The court found that (unless a contract or the nature of their relationship takes the case 'out of the norm'), the scope of the duty owed by a bank to a customer with a current account is limited to protecting the customer from unauthorised payments and might extend to consequential losses arising from those payments such as interest, overdraft fees or currency losses. However, the court concluded that the scope of the bank's duty does not extend to authorised payments out of the account or transactions with others, even if those payments/transactions would not have been made due to the account being frozen pending the bank's inquiries into a suspected unauthorised payment. 

Arena's cross‑application succeeded in part on the mandates issue. The court found it unarguable by the banks that the account mandates and terms agreed with Arena had the effect of conferring actual authority on Arena's former directors to conduct fraudulent transactions which did not amount to fraud on the companies themselves. The clauses identified gave the banks authority to act on instructions without inquiring into purpose or circumstances; they did not confer, or recognise, any actual authority in the directors to run fraudulent schemes.

However, Arena's attempt to knock out the banks' counterclaims in deceit and unlawful means conspiracy failed. The judge accepted that if the counterclaims had relied only on the same payment instructions which, on Arena's case, the banks should not have acted upon, the counterclaims would have been susceptible to being struck out. However, the banks pleaded reliance on other representations, not just the payment instructions, causing the court to conclude that the issues must be resolved at trial.

It is also worth noting that the banks have applied for permission to appeal.

Commentary

Catherine Hammerson-Jones, Partner in our Dispute Resolution team with a leading practice in banking litigation, specialising in Quincecare claims, comments:

"The judgment underscores how difficult it remains to dispose of Quincecare disputes at a summary stage, with the court declining to determine "actual authority" issues without a trial and questioning any workable distinction between frauds by and frauds on the company in this context. Although the banks succeeded in trimming Arena's claimed "continuation losses" by confirming the bank's duty focuses on protecting against unauthorised payments (and only consequential losses flowing from those), they failed in efforts to rely on mandates or articles to establish actual authority for the alleged fraudulent scheme. The survival of the banks' deceit and conspiracy counterclaims, premised on representations beyond the payment instructions, further highlights the fact-intensive nature of these disputes and the court's inclination to resolve them at trial."