Alexia Knight (instructed by Clare Stothard and Rupal Nathwani of Dentons in the first instance, and subsequently TLT) acts for Barclays Bank UK Plc in its defence of a claim brought by a customer (represented by Hugh Sims QC), who fell victim to an APP fraud.
The Claimant was deceived into making two very substantial payments out of her account. She and her husband had been convinced that they were assisting an investigation by the FCA and NCA, and that the transfer of the monies from his account to hers, and onwards to “safe” accounts in the UAE, would protect the money.
The fraud was an “APP fraud” – an authorised push payment fraud. This was significant, because it meant the Claimant’s transactions were authorised by her. As between herself and the bank, they constituted a valid instruction, which pursuant to the terms of its mandate, it was prima facie required to execute.
By the time of the payments, which took place in March 2018, the Payment Services Regulator had provided several responses to the Which? Super-Complaint. The PSR’s February 2018 paper identified APP fraud as the second biggest type of fraud reported by UK Finance, but the industry had yet to agree on the Contingent Reimbursement Model Code (“CRM Code”). That was introduced in May 2019 and would not, in any event, have assisted the Claimant because the push payments were international.
The Claimant gave her instructions in person in branch, and accompanied by her husband. The fraudster is believed to have been listening in through the Claimant’s husband’s mobile. Her identity was verified, and her husband informed the bank staff that he had had previous dealings with the payee. The Claimant confirmed at the time, and in subsequent security calls, that she wished to make the payments. She and her husband were informed of the potential fraud by the police prior to making the first payment but declined all assistance. Even when the bank had cause to block her account, the Claimant insisted to the fraud department that she wished to make a third payment, but the account remained frozen.
The Claimant alleged that the bank had failed to exercise reasonable care and skill, and breached its Quincecare duty; alternatively should have followed the principles applicable to undue influence cases. In short, she argued that the bank had breached its duty to refrain from executing her order if and for so long as it was put on inquiry, by having reasonable grounds for believing that the order was an attempt to misappropriate funds from her. It was alleged that the presence of “red flags” required a myriad of questions to be asked and investigations to be undertaken, which it was said would have prevented or delayed the payments, and avoided the loss.
The Court confirmed that the Quincecare duty was subordinate to the bank’s contractual duty to act upon a valid instruction, and the same was true where the customer’s instructions are given under modern and substantially automated bank payment methods.
The Court determined that the Quincecare duty does not extend to a duty to protect a customer from the consequences of their own decisions, where (as between themselves and the bank) the payment instructions are valid, and not in and of themselves fraudulently given. Quincecare was confined to circumstances where the attempted misappropriation of funds is by the customer’s agent. Where the customer is an individual, the customer’s authority to make the payment is not only apparent but must also be taken by the bank to be real and genuine. There is no proper basis for imposing liability upon a bank in respect of alleged omissions which in reality relate to testing the genuineness of the recipient of the monies rather than the genuineness of the instruction to pay the monies. A bank is not an insurer of last resort and the Claimant had sought an unprincipled and impermissible extension of the Quincecare duty. The pleaded duties ignored the need for a clear (and probably statutory) framework of rules by reference to which any duty should operate.
Nor did the bank’s role in remitting the payments place it into the tripartite situation in which considerations of undue influence might arise: there was no need to free its conscience, because it was a disinterested party. Neither is there anything in the expenditure of a customer’s monies at a bank which, in and of itself, is disadvantageous to the customer, or which “calls for an explanation”.
The Court also opined on the role of, and weight to be attributed to, expert evidence adduced at a summary application without permission, as well as the relevance of statutory rules, industry and internal standards.
The judgment can be found here.