This ruling may be a crucial step in expanding a bank’s duties towards its customers. In upholding the Claimant’s appeal against the previous summary judgment, the Court of Appeal declared that the case needs to be put to full trial as there is a real prospect of the claim succeeding.
The Claimant and her husband fell victim to fraud in March 2018. The fraudster first contacted the husband by telephone and claimed to be a Financial Conduct Authority Operative working on a fraud investigation working for or with the FCA (Financial Conduct Authority) in conjunction with the NCA (National Crime Agency. He persuaded the couple to follow his instructions in order to protect their savings, and that the secretive FCA investigation required them to ignore their banks’ internal fraud departments and the police. Placing their trust in the fraudster, the couple transferred the balance of the husband’s investment portfolio to the wife’s bank account with Barclays, and from here paid a total of £700,000 to two bank accounts in the United Arab Emirates.
The wife lodged a claim against Barclays for failing to exercise reasonable care and skill in carrying out her instructions. This duty was pleaded as arising either from s13 Supply of Goods and Services Act 1982, or from tortious duty of care, a species of which is the “Quincecare duty” on banks established in Barclays Bank Plc v Quincecare Ltd [1992] 4 All ER 363. She argued that if the bank staff had acted properly when she went to the branches in person to make the transfers, they would have inquired more carefully about the transfers and either refused to execute them or recalled them before it was too late.
There are no beautiful surfaces without a terrible depth.”
Friedrich Nietzsche
Feeling confident of its legal position, Barclays applied for summary judgment in lieu of a full trial on the basis that the claim had no real prospect of succeeding. Barclays emphasised that its main obligation was to fulfil its customers’ instructions, and that a duty to scrutinise these instructions more closely would be “onerous and unworkable“, which is what the court had warned against in Barclays Bank Plc v Quincecare.
It helped Barclays’ case that the Quincecare duty had only ever been imposed once, in Singularis Holdings Limited v Daiwa Capital Markets Europe Ltd [2019] UKSC 50, and all cases that had even considered the duty involved an agent (usually a company director) operating on behalf of the customer. The present case, meanwhile, was one of authorised push payment or ‘APP‘ fraud, where the customer herself gives the instruction to pay.
Sitting in the High Court in October 2020, HHJ Russen QC granted Barclay’s application for summary judgment. He held that the dispute was “purely legal” rather than factual, thus lending itself to the summary procedure as it did not require detailed scrutiny of evidence. He agreed with Barclays’ submissions on the nature of Quincecare duty, stating that extending the duty to APP cases such as this would be “anything but of the incremental kind” of common law development. In the judge’s view, showing wariness towards a customer’s agents was a more realistic demand on bank staff than “second guessing” the clearly expressed intentions of the customer herself.
After hearing the Claimant’s appeal in February 2022, the Court of Appeal unanimously reversed the earlier ruling. Giving the judgment, Birss LJ criticised some key assumptions made by the High Court. Firstly, he noted that previous cases did not explicitly limit the Quincecare duty to cases involving customers and agents. The key question in each case was whether circumstances existed which would put bank staff on inquiry of possible fraud. Such circumstances are plausible, albeit less likely, in instances of APP fraud, and in the present case it was potentially relevant that the Claimant was asking to move very large sums to foreign bank accounts.
Secondly, Birss LJ argued that the issues of law and fact in this case are inseparable. The legal questions of duty of care and standard of care depend on facts regarding industry practices at the relevant time, in March 2018. Only by examining these facts can a court rule on what could have reasonably been expected of an ordinary, honest, prudent banker in the circumstances of the case. Therefore, expert evidence on banking practices is likely to assist the court, and this is only admissible in a full trial. Birss LJ said that “this point alone is enough to indicate that the court below erred in accepting the absence of the duty of care without a trial“.
This important ruling covers new legal ground by clarifying that the Quincecare duty can apply in cases of APP fraud. The Claimant, however, remains a long way from success. When the case comes to full trial, she will need to establish existence of duty, breach of duty, and causation, each a significant hurdle. This will be an interesting case to watch.
Link: Philipp v Barclays Bank UK Plc [2021] EWHC 10 (Comm) (18 January 2021)
Link to Court of Appeal Judgment: Philipp v Barclays Bank UK Plc [2022] EWCA Civ 318 (14 March 2022)
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