News

Partner Simon Fawell has commented on the news that the UKSC has overturned the Court of Appeal’s ruling in Philipp v Barclays Bank UK PLC and determined that the so-called Quincecare duty does not extend to circumstances where the customer is defrauded by a third party.

Simon’s comments were featured in The Telegraph, CDR News, New Law Journal and The Law Society Gazette, 12 July 2023, and can be found here, here, here and here respectively. This news was also published in The Legal Diary, 14 July 2023, here. 

So there we have it. The UKSC has overturned the Court of Appeal’s ruling in Philipp v Barclays and determined that the so-called Quincecare duty does not extend to circumstances where the customer is defrauded by a third party.

Some key points are as follows:

• The relationship between a bank and customer is a contractual one.
• Absent express wording, that contract requires the bank to follow payment instructions from its customer promptly and does not require the bank to concern itself with whether the payment is ill-advised.
• The original Quincecare decision on which the recent line of cases is based is restricted to circumstances in which an agent of the customer is itself defrauding the customer and the bank has reason to believe this may be the case. The logical rationale for that decision remains good; namely that an agent acting fraudulently exceeds the authority given to it by the company and, while the bank can usually rely on apparent authority to follow the instruction, it cannot do so where it has sufficient reason to suspect the agent’s authority has been exceeded.
• Whether banks should bear some or all of the victims’ losses in these circumstances is a matter of social policy and requires legislation if the position is to be changed.

Notably, the UKSC has allowed Mrs Philipp’s claim to proceed in one respect. Her claim that her bank owed her a duty to act more promptly in trying to recover the sums lost requires a full investigation and so must be determined at trial.

This brings to an end a recent line of cases which have suggested a widening of the Quincecare principal and, while entirely sound in its reasoning, reduces the avenues through which victims of fraud might recover their losses. The UK government has gone some way to redressing the issue in the Financial Services and Markets Act 2023 which was recently given royal assent but the mechanisms in that Act do not apply to international transfers.

Perhaps the biggest gap for victims of fraud currently is that claims against a fraudster’s bank remain difficult under English law, notwithstanding the measures in place requiring banks to diligence their customers and monitor for potentially fraudulent activity. There remain, however, a number of claims proceeding through the courts seeking to push the boundaries of when victims may be able to recover from the fraudster’s bank.