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At 9.45am yesterday, the Supreme Court handed down judgment in the case of Philipp v Barclays Bank UK PLC following a two-day hearing in February this year.
For a full low-down of the background of the case, please see our article from earlier in the year - The Quincecare Duty and Philipp v Barclays Bank UK: awaiting the Supreme Court judgment, which includes full details of the facts of the case and key case law around the Quincecare duty.
However, to summarise, the dispute arose in 2018 when Mrs Philipp and her husband were the victims of a complex and sophisticated advance push payment (“APP”) fraud, and were deceived into transferring £700,000 to bank accounts in the UAE. Mrs Phillip then brought a claim against her bank (Barclays) alleging a breach of the Quincecare duty in carrying out her instructions.
At first instance, Barclays applied for summary judgment which was granted. The Court of Appeal then allowed an appeal by Mrs Philipp that the Quincecare duty should be extended to cover contracts between individual customers and their bank.
The Judgment
The headline of the Supreme Court judgment is that Barclays’ appeal has been unanimously allowed.
The Justices gave the following reasons for their judgment:
- The Court found that whether a bank which has made or received payments on behalf of a defrauded customer should be required to reimburse that victim is “a question of social policy for regulators, government and ultimately Parliament to consider.” The Court noted that a mandatory reimbursement scheme for domestic payments only has now been included in an amendment to the Financial Services and Markets Act 2003.
- The Court disagreed with Mrs Philipp that that Barclays owed her a duty – established by the common law – to refuse to carry out her instructions in circumstances where it suspected those instructions were a result of fraud. Instead, it was held that Barclays only owed Mrs Philipp an ordinary duty to carry out her valid instructions promptly.
- The Court distinguished the case of Quincecare on the basis that the Quincecare duty is predicated on the bank receiving instructions from an agent of a customer, and where the bank has “reasonable grounds for believing that the instructions given by that agent is an attempt to defraud the customer, and is therefore given without the customer’s authority.” In such circumstances, if a bank proceeded to execute the instructions without first verifying their validity, the bank would be in breach of its Quincecare duty.
- As a result, the Court found that the Quincecare duty does not apply in cases such as that of Mrs Phillip, who was acting as an individual in her own capacity and without an agent. Unless there is an express provision to the contrary, the duty of a bank in relation to a contract with an individual is simply to carry out their instructions promptly.
The outcome
Lord Justice Leggatt said in the judgment, "where the customer has authorised and instructed the bank to make a payment, the bank must carry out the instruction promptly (…) it is not for the bank to concern itself with the wisdom or risks of its customer's payment decisions."
This will be a source of relief for the banking industry as it confirms the liability for banks in circumstances of fraudulent payments remains narrow. The judgment will no doubt be a serious disappointment to victims of APP fraud as they will not be able to turn to claims alleging a breach of the Quincecare duty.
APP fraud is now the most common type of fraud in the UK with hundreds of millions of pounds lost to fraudsters, and regulators and government are increasingly aware of the need to provide protection and compensation for victims. The Supreme Court referred, in its judgment, to the amended Financial Services and Markets Act 2023, which implements mandatory reimbursement for victims of APP fraud via the Faster Payments Scheme. Under this provision, a recipient bank would be liable for 50% of the reimbursement. However, the significant issue with this scheme is that it will not apply to international payments, such as the one made by Mrs Phillip.
Regardless, as anticipated, the judgment has provided important clarity on the application and limits of the Quincecare duty.
further information
For further information on the issues raised in this blog, please contact Laurence Clarke or Phoebe Alexander from our Dispute Resolution team.
about the authors
Laurence Clarke is a senior associate in the Dispute Resolution Team. He has broad experience as a general commercial litigator with a focus on complex large scale civil fraud and financial disputes. He often works as part of a team of global professional advisors on matters with multi-jurisdictional elements.
Phoebe Alexander joined Kingsley Napley in 2020. She is currently an Associate in the Dispute Resolution team. During her seat with the Dispute Resolution team, Phoebe assisted with a broad range of cases. These included probate and inheritance disputes; media, privacy and reputation management; as well as civil fraud and general commercial matters, including freezing injunctions and asset disclosure orders.
We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.
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