Valya Georgieva & Charlotte Hill

As the traditional, financial industry continues to embrace crypto assets, the English courts are increasingly being asked to resolve disputes that sit at the intersection of traditional legal duties and new digital realities.

One such case, Hamblin v Moorwand Ltd [2025] EWHC 817 (Ch), offers a timely and important development in this space. In that case, the High Court confronted a novel set of circumstances: a derivative claim brought by victims of fraud on behalf of a company in administration against a regulated payment service provider operating a crypto-linked wallet.

The judgment is an interesting development in two key areas: the scope of the Quincecare duty and the procedural flexibility of derivative claims in the context of insolvency and crypto-related fraud. The case is notable not only for its facts, an authorised push payment (APP) fraud involving a crypto-linked wallet, but also for the court’s willingness to permit a derivative claim to be brought by non-shareholders on behalf of a company in administration. The judgment provides a rare example of a successful Quincecare claim and offers valuable guidance for financial institutions, insolvency practitioners and victims of fraud alike.

The Facts

Mr and Mrs Hamblin were victims of an APP fraud. Believing they were making a legitimate investment, they transferred £160,000 to RND Global Ltd (RND), a company that was found to be incorporated and controlled by fraudsters. RND held an electronic wallet with Moorwand Ltd (Moorwand), a regulated payment service provider offering an “electronic wallet” capable of holding and transferring funds in both fiat and bitcoin.

The funds were credited to RND’s wallet and quickly dissipated on the instructions of a fraudster impersonating an individual registered on Companies House as RND’s director but who had, in fact, been the subject of identity theft. The transactions included bitcoin purchases and the purchase of a £34,500 luxury watch. RND is now in administration with no known assets and uncertain prospects of any dividend to unsecured creditors.

The First Instance Decision: A Triple Defeat

At first instance, the Hamblins brought three claims:

1. A personal claim to recover the £160,000 they had transferred to RND.
2. A derivative Quincecare claim on behalf of RND against Moorwand for breach of mandate and duty.
3. A claim under the Payment Services Regulations 2009 (PSRs) arguing that the payments were unauthorised.

To put the second claim into context, a Quincecare claim arises from the duty established in Barclays Bank plc v Quincecare Ltd [1992] 4 All ER 363, which requires banks or payment service providers to refrain from executing payment instructions if they are “put on inquiry” that the instructions may be an attempt to misappropriate funds. If there are reasonable grounds to suspect fraud or lack of authority the bank must investigate before proceeding.

All three claims were dismissed. The personal claim failed because the Hamblins had voluntarily authorised the payment to RND and Moorwand had no direct relationship with them. The derivative Quincecare claim was dismissed on the basis that Moorwand had not been “put on inquiry” and therefore had no duty to investigate the authority of the person giving instructions on behalf of RND.

Finally, the PSR claim also failed as Moorwand had complied with the mechanical requirements of the payment instructions. The judge held that the payments were authorised in the narrow sense required by the PSRs even if they were procured by fraud.

The Appeal: A Rare Success for Quincecare

On appeal, Mr Justice Marcus Smith overturned the dismissal of the derivative Quincecare claim. He held that the judge at first instance had erred in law by conflating the knowledge of the fraudulent agent with that of the company. The fraudster’s knowledge could not be attributed to RND which was the innocent principal. This led the judge to overlook three key facts that should have put Moorwand on inquiry:

• The suspicious nature of the documents used to open the account, including a utility bill with a mismatched name.
• Internal concerns raised by Moorwand staff about the legitimacy of the account.
• The inconsistency between RND’s stated business, a marketing consultancy, and its actual transactions (bitcoin trading and luxury purchases).

The appeal court found that these red flags should have triggered Moorwand’s duty to investigate whether the payment instructions were genuinely authorised. By failing to do so Moorwand breached its duty to RND and was required to restore the misapplied funds to RND’s account.

Importantly, the court rejected Moorwand’s reliance on an exclusion clause in its terms of business. The clause excluded liability for damages but did not apply to claims for restitution or breach of mandate. The court held that the claim was not for damages but for the restoration of funds wrongly paid out and therefore the exclusion clause did not apply.

This decision is particularly significant in light of the Supreme Court’s ruling in Philipp v Barclays Bank plc [2023] UKSC 25. In Philipp, the court clarified that the Quincecare duty does not apply where a customer gives a clear and authorised instruction, even if that instruction was induced by fraud. This effectively closed the door on most APP fraud claims brought by individual victims against their banks.

Derivative Claims by Non-Shareholders

One of the most striking aspects of the case is the court’s acceptance of a derivative claim brought by non-shareholders. Under English law, derivative claims are typically brought by shareholders under Part 11 of the Companies Act 2006. The statutory framework is designed to allow shareholders to enforce the company’s rights where the company itself is unable or unwilling to act, usually because the wrongdoers control the company. Here, the Hamblins were not shareholders of RND but the court allowed them to bring the claim on its behalf.

This procedural innovation reflects a pragmatic approach to justice in the face of corporate fraud and insolvency. The court recognised that RND, being in administration, was unable to pursue the claim itself. The administrators had not taken action and the Hamblins had a legitimate interest in recovering the funds they had lost.

While the court did not set out a general principle allowing non-shareholders to bring derivative claims, the decision suggests that such claims may be permitted in exceptional circumstances, particularly where the company is insolvent, the wrongdoing is clear and the claimant has a direct interest in the outcome.

A Pyrrhic Victory?

Despite the appellate success, the final paragraph of the judgment sounds a note of caution:

“I very much hope that this does not prove to be a pyrrhic victory for the Appellants. RND, as I understand it, is in administration, and its assets must be distributed properly in accordance with the rules. To whom those monies go is not a matter for this appeal.”

This reflects a harsh reality: even if Moorwand is ultimately required to restore the funds to RND, the Hamblins may not recover the full amount. As unsecured creditors in an insolvent estate they will rank alongside other creditors in the same class and may receive only a fraction of the restored funds, if any, after the costs of the administration are deducted and any preferential and secured creditors are paid.

The administrators’ statement of proposals confirms that RND has no known assets, no secured or preferential creditors and estimated unsecured claims of £305,900 comprising £305,000 from consumer creditors and £900 from HMRC. However, only £160,900 in claims had been received at the time of the administrators’ last progress report (which would appear to be the HMRC £900 claim and Hamblins' claim for £160,000).

If no other creditors come forward, the Hamblins may ultimately receive most of the funds, subject to the administrators’ fees and expenses which to date exceed £20,000. If additional creditors come forward the recovery will be diluted further.

The administrators have not yet confirmed whether the debt will be paid and their investigations into potential claims are ongoing.

Practical Implications 

The case offers several important takeaways:

1. Quincecare duties extend beyond banks: The judgment confirms that payment service providers offering crypto-linked wallets may owe Quincecare-type duties to their customers. Institutions must be alert to red flags and cannot necessarily rely on mechanical compliance with payment instructions to avoid liability.
2. Insolvency practitioners should be proactive: Administrators should consider whether claims against third parties, particularly financial institutions, could yield recoveries for the estate.
3. Victims should consider strategic use of derivative claims: While the route is complex and fact-sensitive, derivative claims may offer a viable path to recovery in cases of crypto-related fraud. However, as the court acknowledged, such claims may ultimately benefit the insolvent estate rather than the individual victim. Early engagement with insolvency practitioners and legal advisors is essential.

Conclusion: A Cautious Step Forward

Hamblin v Moorwand Ltd is a rare example of a successful Quincecare claim and a creative use of the derivative action procedure. The court’s willingness to permit a derivative action brought by non-shareholders on behalf of a company in administration reflects a pragmatic and flexible approach to justice in the face of crypto-related fraud. However, it also highlights the limitations of such remedies in the context of insolvency.

For victims of crypto fraud, the case not only offers a glimmer of hope but also a warning. Even a successful claim may not lead to full recovery. For financial institutions, the message is clear: red flags must be taken seriously and the boundaries of liability are shifting.

While not a revolution, Hamblin may mark the start of a more nuanced judicial engagement with crypto-related fraud as courts continue to adapt established doctrines to new financial realities.

Appeal Pending

At the time of writing, Moorwand has applied to the Court of Appeal for permission to appeal. While the High Court ordered Moorwand to repay £159,992.81 plus interest of £48,758.80 (to 9 June 2025) to RND, enforcement of that order has been stayed pending the outcome of the permission application and any subsequent appeal. The funds have been paid into Moorwand's solicitor’s client account in the interim. The final outcome and the Hamblins’ prospects of recovery therefore remain uncertain.