In 2018, Mrs Philipp and her husband fell victim to an Authorised Push Payment (“APP”) fraud.
Authorised Push Payment scams happen when someone is tricked into sending money to a fraudster posing as a genuine payee.
In Mrs Philipp’s case, she and her husband were deceived by criminals into instructing Barclays Bank to transfer £700,000 from Mrs Philipps current account to bank accounts in the United Arab Emirates. The instruction was carried out and the money was lost. Attempts to recall the funds were unsuccessful.
The Quincecare duty was established in the case of Barclays Bank Plc v Quincecare Ltd. In essence, whilst a bank owes its customers a duty to observe reasonable care and skill in executing a payment instruction, where a bank has reasonable grounds to believe that an instruction is an attempt to misappropriate a customer's funds, it also has a duty to refrain from executing that instruction.
The scope of the Quincecare duty was always considered to be limited to circumstances where an agent, acting on behalf of the bank’s customer instructs the bank to make a payment on that customer’s behalf.
For example, where an employee of a company makes a payment instruction on behalf of that company. It was not considered to apply to circumstances where the customer themselves instructs the bank to make a payment.
Mrs Philipp sued Barclays Bank (“the Bank”) claiming that the Bank was responsible for this loss. She contended that the Bank owed her a duty under its contract with her or under common law not to carry out her payment instructions if - as is alleged - the Bank had reasonable grounds for believing that she was being defrauded. Effectively, she argued that the Quincecare duty was applicable to her circumstances, despite that the payment instruction was made by herself, and not by any agent on her behalf.
At first instance, the High Court granted summary judgment in favour of the Bank, finding that, as a matter of law, it did not owe Mrs Philipp the duty alleged.
Mrs Philipp appealed, and the Court of Appeal, after an examination of the reasoning in various “Quincecare” cases, decided that whether the Quincecare duty applies does not in fact depend on whether a payment instruction was made by a customer directly, or an agent on behalf of that customer. Further, whether such a duty arose on the facts in Mrs Philipp’s case is a question which could only be decided at a trial. The summary judgment was therefore overturned. This was a landmark decision which would potentially result in widening the scope of the Quincecare duty.
From that decision the Bank appealed to the Supreme Court. The Supreme Court was asked to consider: -
On Wednesday 12 July, the Supreme Court handed down the final Judgment on Mrs Philipp’s case.
It was unanimously held that the Bank did not owe the alleged duty to Mrs Philipp. The Supreme Court restored the order of the Judge at first instance, granting the Bank summary judgment (but did vary it to permit Mrs Philipp to maintain an alternative claim based on the Bank’s alleged failure to act promptly to try and recall the payments after the fraud was discovered).
The Supreme Court therefore elected not to redefine the scope of the Quincecare duty and instead, determined the scope of it to be as previously understood – i.e. ringfenced to only apply where an agent, acting on behalf of the bank’s customer, instructs the bank to make a payment on that customer’s behalf.
Whether victims of APP frauds should be left to bear the loss themselves, or whether banks which have made or received the payments on behalf of customers should be required to reimburse victims of such crimes is a question of social policy for regulators, government and ultimately for Parliament to consider. It is in fact now the subject of legislation. The Financial Services and Markets Act 2023, which received Royal Assent on 29 June 2023, provides (in section 72) for a mandatory reimbursement scheme (although this scheme does not extend to international payments and therefore would not have applied to Mrs Philipp’s case). There is, therefore, still some hope for customers who instruct the bank to make a payment themselves.
For more information, please contact Claire Boucher.
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