Philipp v Barclays Bank UK PLC [2023] UKSC 25

Mrs Philipp was deceived by fraudsters into instructing Barclays Bank to transfer £700,000 to accounts in the UAE. She claimed the Bank owed a duty not to execute her payment instructions if it had reasonable grounds to believe she was being defrauded. The Supreme Court held no such duty exists for authorised push payment fraud where the customer personally instructs the bank.

Facts

In 2018, Mrs Fiona Philipp and her husband Dr Robin Philipp fell victim to an authorised push payment (APP) fraud. Criminals, posing as Financial Conduct Authority and National Crime Agency officials, deceived them into believing their savings were at risk and needed to be transferred to ‘safe accounts’. On 10 and 13 March 2018, Mrs Philipp attended a Barclays branch and instructed transfers totalling £700,000 to bank accounts in the UAE. Before each transfer, the Bank telephoned Mrs Philipp to confirm her instructions, which she provided. The money was lost. Despite police warnings, the Philipps continued to believe the fraudsters until 26 March 2018. Mrs Philipp sued Barclays, claiming the Bank owed her a duty not to execute her payment instructions if it had reasonable grounds to believe she was being defrauded.

Issues

Principal Issue

Whether a bank owes a contractual duty to its customer not to execute authorised payment instructions where the bank has reasonable grounds for believing the customer is a victim of APP fraud.

Secondary Issue

Whether the so-called ‘Quincecare duty’ (requiring banks to make inquiries before executing payment instructions from agents suspected of fraud) extends to situations where the customer personally authorises the payment.

Judgment

The Supreme Court unanimously allowed the Bank’s appeal. Lord Leggatt, delivering the judgment, held that there is no duty on a bank to refuse to execute payment instructions validly given by its customer, even where the customer has been deceived by a third party.

It is a basic duty of a bank under its contract with a customer who has a current account in credit to make payments from the account in compliance with the customer’s instructions. This duty is strict. 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.

Lord Leggatt clarified that the Quincecare duty applies only where a payment instruction is given by an agent purportedly on behalf of the customer, and there are grounds to suspect the agent is defrauding the customer. The rationale is that such an agent lacks actual authority to give fraudulent instructions, and may also lack apparent authority if the bank is put on inquiry.

The law cannot coherently treat compliance with an authorised instruction as a breach of duty…

The Court rejected the argument that a customer deceived into giving instructions does not ‘really intend’ them:

Fraud does not negative intention. A person’s intention is a state of mind. Fraud does not negative a state of mind.

The Quincecare Duty Properly Understood

The Court held that the Quincecare duty is not a special rule but an application of the general duty of care to verify the authority of an agent where there are suspicious circumstances. It does not extend to cases where the customer personally gives clear instructions.

Where the bank receives a valid payment order which is clear and leaves no room for interpretation or choice about what is required in order to carry out the order, the bank’s duty is simply to execute the order by making the requisite payment. The duty of care does not apply.

Implications

This judgment confirms that victims of APP fraud cannot recover losses from their bank on the basis that the bank should have refused to execute their instructions. The allocation of risk in such cases remains with the customer unless modified by express contractual terms or regulatory intervention. The Court emphasised that policy responses to APP fraud are matters for Parliament and regulators, not for courts to impose through development of the common law.

The judgment does preserve a narrow claim regarding the Bank’s alleged delay in attempting to recall funds after Mrs Philipp reported the fraud on 27 March 2018, which was remitted for potential trial.

The Financial Services and Markets Act 2023, mentioned in the judgment, has since introduced a mandatory reimbursement scheme for APP fraud victims in certain circumstances, representing the legislative response the Court indicated was appropriate.

Verdict: Appeal allowed. Summary judgment restored in favour of Barclays Bank, dismissing Mrs Philipp’s claim that the Bank owed her a duty not to execute her payment instructions. However, summary judgment was refused in relation to her alternative claim that the Bank breached its duty by not taking adequate steps to recover the funds after she reported the fraud on 27 March 2018.

Source: Philipp v Barclays Bank UK PLC [2023] UKSC 25