I. INTRODUCTION 

 

As Lady Rose plainly put it, in Stanford International Bank Ltd v HSBC[1], the scope and content of Quincecare care was sufficiently applicable as a duty on the bank:

 

to refuse to comply with a payment instruction given by the person mandated by the customer to give such an instruction when the bank is on notice that the instruction may be part of a fraud on the customer, unless and until the bank's inquiries satisfy it that the instruction is validly authorised by the customer.[2]

 

The Supreme Court issued this judgment the same year as Philipp v Barclays[3], which saw the abolishment of the Quincecare duty as known, marking an immense change from a standard duty of care principle to an agency basis. But what was driving Lord Leggatt’s decision and why was he so keen to change the law? Philipp has created implications beyond banking and financial services, leaving the judgment open to scrutiny and sole account holders in an anomalous position.

 

Authorised push payment fraud (“APP”), where the victim instructs its bank to send money to the fraudster’s account, is among the most prevalent frauds in the UK. Indeed, levels of APP fraud rose by 12% to £460 million in the UK in 2023[4] and in 2024 there were 97,344 cases recorded[5]. Victims of APP fraud invariably realise too late and, once payment is made, victims will have little chance of recovering funds from the fraudster. Many therefore seek to recover funds from their bank. This begs the contentious question: who bears the resultant loss?​

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II. PHILIPP V BARCLAYS 

 

The Supreme Court in Philipp considered a sophisticated APP fraud claim. In March 2018, Mrs Philipp and her husband were deceived by a fraudster purporting to be “Jonathan Watts” into making two international payments from her account to separate bank accounts in the United Arab Emirates under the pretext of assisting an investigation for the Financial Conduct Authority and the National Crime Agency. She lost £700,000. By the time the fraud was discovered, Mrs Philipp’s funds had become irrevocable and she advanced claims against her bank. The case represents a ‘classic’ example of the techniques used by fraudsters.

 

The central issue before the Supreme Court was whether a Quincecare duty was owed to Mrs Philipp.[6] Lord Leggatt held that Mrs Philipp was not owed such as duty, the duty only existing in an agency context, where the agent had acted dishonestly.

 

III. THE QUINCECARE DUTY 

 

Established in Barclays Bank v Quincecare[7], the Quincecare duty prevents a bank from executing a payment instruction given by an agent of its customer where it has reasonable grounds to believe that the instruction is an attempt by the agent to defraud the customer.[8] If such reasonable grounds exist, the bank is ‘put on enquiry’ and must make inquiries to ascertain whether the payment instruction was actually authorised by the customer before executing it.[9] If the bank fails to carry out further inquiries and proceeds with executing the payment instruction, it will be in breach of its duty. Consequently, the customer will not be bound by the instruction, and the bank will have no right to debit the payment from the customer’s account.[10]

 

IV. PREVIOUS CASES 

 

A sudden flurry of recent decisions saw the Quincecare duty emerge from relative obscurity to assume newfound prominence in banking and finance litigation. Before Philipp, the duty was thought to be part of the bankers’ duty of care in and about executing its customer payment instructions. Lord Leggattt’s decision was, in fairness, foreshadowed by Lord Sumption in a Hong Kong Court of Appeal case[11], where he casted the Quincecare duty as one side of a coin, the first side being that a bank owes all ordinary duties to be expected from an agent to its customer, including the duty to exercise reasonable care and skill, and the other side involving the bank’s duty only to make payments out of its customer’s account only when authorised to do so.[12] Framing Quincecare this way suggested that the duty will be limited to instructions to a bank given by an agent to its customer.

 

But this was not an area devoid of authority in this jurisdiction. In the five years preceding Philipp, there were four significant cases. First, JP Morgan chase v Federal Republic of Nigeria[13], where Rose LJ held that the Quincecare duty is one aspect of a bank’s overall duty to exercise reasonable skill and care in the services it provides.[14] Second, Singularis v Daiwa Capital[15], where Baroness Hale found that there was a clear breach of Daiwa’s Quincecare duty of care to Singularis, and that was “incontrovertible”.[16] Baroness Hale did add that by definition this is done by a trusted agent to the company authorised to withdraw money from the account. Here we see this bifurcation coming in: does it have to involve agency?

 

Third, JP SPC 4 v RBS[17], where Lord Hamblen and Lord Burrows held that the Quincecare duty extends beyond a duty owed to the bank’s customer arising as an aspect of the bank’s implied contractual duty of care, to protect not only the customer against fraud but also innocent third parties.[18] Finally, Stanford International Bank v HSBC[19], where the Supreme Court accepted there was a Quincecare duty.

 

V. A WELCOME DECISION FOR THE BANKS 

 

The Philipp decision marked a sea change in the law, leaving sole account customers with limited protection against fraud[20] and banks with reduced responsibilities towards their clients, for four reasons. First, Lord Leggatt rejected the notion that the Quincecare duty exists as ‘some special or idiosyncratic rule of law’[21].

 

Second, the Supreme Court held that a bank’s strict and primary duty is to perform its mandate. Lord Leggatt stated that when a bank receives unequivocal instructions from its customer or customer’s agent, its only duty is to carry out the instruction promptly. However, the court in Philipp canvassed the exception in the Australian case of Ryan v Bank of New South Wales[22], that a bank should reject a payment instruction if a reasonable banker would know the account holders wouldn’t approve if aware of the circumstances.[23] No concluded view was expressed.

 

Third, the Supreme Court considered the circumstances when a bank would fall under a duty of care. It approved Selangor United Rubber Estates Ltd v Cradock (No 3)[24], by citing that a bank is only obliged to act with reasonable care and skill in acting in accordance with instructions if and only if there is ‘latitude’ in interpreting the instructions.[25]

 

Finally, the Supreme Court held that a bank will not be obliged to make inquiries unless a customer is acting through an agent.[26] However, Lord Leggatt gave an example towards the end of his judgment of the mentally incapable costumer. He said that if a customer is mentally incapable of operating the account there is apparently a duty on the bank to make inquiries if it is on notice. This is an internal contradiction to his judgment in that if it is all about agency, then this exception simply does not work because the mentally incapable customer is still acting within the terms of the mandate.

 

VI. UNVEILING LORD LEGGATT’S DECISION

 

To understand why this caused an enormous change in law, it is important to consider what was driving Lord Leggatt’s decision and why was he so keen to re-write the law. There are three factors.

 

First, he was persuaded on a philosophical level that it is not the role of courts to make policy, but for Parliament. This is inconsistent in the fact that core bank duties derive from caselaw. In Foley v Hill[27]the debt-creditor nature relationship was established. In Westminster Bank v Hilton[28], the relationship of the bank as the agent of the customer when executing payment instructions or remitting money. Tournier v National Provincial Bank[29], the bank’s duty of confidentiality. To suggest that it is not the role of the judges or the courts to circumscribe the bank’s duty is capricious.

 

Second, Lord Leggatt’s assertion that the liability in a customer bank relationship is solely governed by the contract does not reflect caselaw development. In Greenwood v Martin’s Bank[30], the court had no difficulty in saying that a customer has a duty to the bank to inform the bank where there is a fraud going on and to operate its account in a way that does not facilitate fraud. This is not in the terms and conditions; this is just a matter of caselaw derived or obligation.

 

Third, Lord Leggatt’s ‘latitude’ argument seems entirely contradictory. In his judgment in Philipp he stated that Barclays' terms and conditions entitled the bank to its discretion to refuse to execute the payment instruction if the bank is satisfied it would facilitate everyone.[31] He therefore considered that there was a latitude on the part of the banks to decide whether to comply with the payment instruction or not.

 

VII. IS THERE ANOTHER WAY? 

 

APP victims must now seek alternative routes, since the validity of their payment instruction is not in doubt following Philipp. Three recent cases consider other ways in which victims might obtain redress, including via a freestanding ‘retrieval duty’, unjust enrichment claims, and restitutionary claims.

 

The retrieval duty

 

In CCP Graduate v Natwest & Santander[32] Master Brown considered it at least arguable that a bank has a tortious duty to attempt the retrieval and/or freezing of a payment tainted by APP fraud.[33] Lord Leggatt in Philipp said that when Mrs Philipp reported the fraud to her bank, the bank should arguably have sought her instructions, which would surely have been to recover the payment.[34] However, he did not explain why the bank should have done so. Nevertheless, if a duty exists it is surely founded in contract, not tort. Considering Lord Leggatt’s ‘latitude’ argument in Philipp, this must be the underpinning of any ‘retrieval duty’. If that is correct it is a contractual obligation.

 

Unjust enrichment

 

In Terna v Revolut[35] HHJ Matthews waded into the debate as to whether the bank as an agent has a legal excuse for disobeying instructions of its customer/principal to make payment elsewhere.[36] The judge found that the bank’s status as a debtor of the customer is not an answer to an unjust enrichment claim, unless and until it is proved that the bank has paid away the money in accordance with its customer’s instructions, without notice of the payer’s claim.[37] That analysis was recently endorsed in D’Aloia v Persons Unknown[38]. If HHJ Matthews is correct it will put the burden on banks to establish, as part of their defence of ministerial receipt/good faith change of position, the extent to which they were on notice.

 

Dishonest Assistance

 

In Larsson v Revolut[39] the claim that Revolut dishonestly assisted in a breach of trust survives for now. Although controversial, it is arguable following Westdeutsche Landesbank[40] that a transfer of funds procured by fraud will exist as trust property. However, to construct the requisite level of dishonesty will doubtless be difficult.

 

VIII. WHAT SHOULD THE POLICY BE? 

 

It is part and parcel the bank’s duty, or ought to be, to protect its customers from fraud. Firstly, confidence fraud, persuading someone of something as untrue, is common and highly effective. The banks are uniquely placed to act as gatekeepers in this regard. Second, this will not impose an onerous duty on the banks. The Financial Crime Agency (FCA) principles already require banks to consider customer interests and treat them fairly. Banks also have robust Anti-Money Laundering (AML) measures and fraud-detection algorithms. Third, most banks do voluntarily assume responsibility so holding them to it makes eminent sense.

 

IX. CONCLUSION 

 

Philipp is an importance case, presenting a significant lacuna of implications and unanswered questions leaving victims unprotected. High-net worth accounts will not, however, be subject to the Philipp result, and it is expected that a few more cases will arise where victims will try and repackage a fraud-based claim following Philipp.

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[1] Stanford International Bank Ltd (in liquidation) v HSBC Bank plc [2022] UKSC 34.​

[2] Ibid, [4] (Lady Rose).​

[3] Philipp v Barclays Bank UK Plc [2023] UKSC 25.​

[4] N/A, ‘CRM Code for Authorised Push Payment fraud winds down having more-than trebled reimbursement rates, slashed average losses, and slowed scam growth’ (Lending Standards Board, 3 October 2024) <https://www.lendingstandardsboard.org.uk/crm-code-for- authorised-push-payment-fraud-winds-down-having-more-than-trebled-reimbursement-rates-slashed-average-losses-and-slowed-scam-  growth/> accessed 19 November 2024​

[5] N/A, ‘Over £570 million stolen by fraudsters in the first half of 2024’ (UK Finance, 18 October 2024) https://www.ukfinance.org.uk/news-and-insight/press-release/over-ps570-million-stolen-fraudsters-in-first-half-  2024#:~:text=Authorised%20Push%20Payment%20fraud%20losses&text=This%20comprised%20£166.5%20million,all%20categories%  20of%20APP%20fraud.> accessed 19 November 2024​

[6] Philipp v Barclays (n 3) 27 (Lord Leggatt).​

[7] Barclays Bank Plc v Quincecare Ltd [1992] 4 All ER 363.​

[8] Philipp v Barclays (n 3) 5, 90 and 97 (Lord Leggatt).​

[9] Barclays Bank Plc v Quincecare Ltd (n 7) p. 376g (Steyn J).​

[10] Philipp v Barclays (n 3) 90 and 97 (Lord Leggatt).​

[11] Pt Asuransi Tugu Pratama Indonesia Tbk v Citibank N.a. [2023] HKCFA 3.​

[12] Ibid, [13].

[13] Nigeria v JP Morgan Chase Bank NA [2022] EWHC 1447 (Comm).

[14] Ibid, [40].

[15] Singularis Holdings Ltd (In Liquidation) v Daiwa Capital Markets Europe Ltd [2019] UKSC 50.

[16] Ibid, [11]-[12] (Baroness Hale).

[17] Royal Bank of Scotland International Ltd v JP SPC 4 [2022] UKPC 18.

[18] Ibid, [44] (Lord Hamblen and Lord Burrows JJSC).

[19] Stanford International Bank Ltd v HSBC Bank plc (n 1).

[20] Philipp v Barclays (n 3) 98 (Lord Leggatt).

[21] Philipp v Barclays (n 3) 97 (Lord Leggatt).

[22] Ryan v Bank of New South Wales [1978] VR 555, 579.

[23] Ibid, [108]-[109].

[24] Selangor United Rubber Estates Ltd v Cradock (No.3) [1968] 1 WLR 1555.

[25] Philipp v Barclays (n 3) 35 (Lord Leggatt).

[26] Singularis Holdings Ltd v Daiwa Capital Markets Europe Ltd (n 15) 51.

[27] Foley v Hill (1848) 2 H.L. Cas. 28 | [1848] 8 WLUK 3.

[28] Westminster Bank Ltd v Hilton [1926] UKHL J1126-1.

[29] Tournier v National Provincial and Union Bank of England [1924] 1 K.B. 461.

[30] Greenwood v Martins Bank Ltd [1932] UKHL J0705-1.

[31] Philipp v Barclays (n 3) 114 (Lord Leggatt).

[32] CCP Graduate School Ltd v National Westminster Bank Plc [2024] EWHC 581 (KB).

[33] Ibid, [76]-[86] (Master Brown).

[34] Philipp v Barclays (n 3) 118 (Lord Leggatt).

[35] Terna Energy Trading doo v Revolut Ltd [2024] EWHC 1419 (Comm).

[36] Ibid, [66] (HHJ Matthews).