Quincecare duty can extend to authorised push payment fraud

In Philipp v Barclays Bank UK PLC [2022] EWCA Civ 318, the Court of Appeal has ruled that the Quincecare duty is capable of applying not only when a bank takes instructions from its customer’s agent (such as a company officer giving instructions on behalf of a company), but also to cases in which an individual customer issues a payment instruction on their own behalf.

Background

The case arose from an authorised push payment (APP) fraud in March 2018, in which the Claimant, an individual account holder (P), was deceived by fraudsters into thinking that her account was under threat, causing her to instruct her bank to make two payments to a bank account in the UAE which was under the control of the fraudsters. P transferred some £700,000 in total.

In Barclays Bank PLC v Quincecare Ltd [1992] 4 All E.R. 363, it was established that banks have a duty to refrain from executing a payment order in circumstances where an ordinary and prudent banker would be “on inquiry”. In other words, where there are reasonable grounds for believing that an order is an attempt to misappropriate funds the bank should refrain from executing the order whilst it makes further inquiries.

Most of the cases involving the Quincecare duty involved corporate accounts where an authorised company officer sought to misappropriate funds from the company’s account. The question that arose in this case was whether the same duty could apply in principle even where the payment instruction was coming from an individual customer on their own behalf.

At first instance, the High Court held that the duty did not apply in such cases and therefore awarded summary judgment in favour of the defendant bank. P appealed.

The Decision

The Court of Appeal overturned the High Court’s decision.

The Court of Appeal rejected the submission that the Quincecare duty was limited to cases involving an attempt to misappropriate funds by an agent of the customer and confirmed that the duty can apply in principle even where an individual, such as P, gives the bank a payment instruction relating to their own account.

The Defendant’s argument that it would be too onerous, and unworkable, in practice for such a duty of care to be imposed on banks was rejected. Each case would depend on its own facts. Banks will be expected to come up to the accepted standards of banking practice as they are at the time of the events in question.

The case will involve questions of fact and, as such, the issue was not capable of being resolved on a summary judgment application and should be allowed to proceed to trial.  

This forms part of series of decisions on the Quincecare duty in recent years. Please also see our posts on Singularis Holdings Ltd (In Official Liquidation) v Daiwa Capital Markets Europe Ltd [2019] UKSC 50 and Hamblin & Anor v World First Ltd & Anor [2020] EWHC 2383 (Comm).