The Supreme Court has 'closed the doors' opened by the Court of Appeal for certain fraud victims to bring claims against their banks, in a closely watched case that could have rocked the financial services sector.

In Philipp (respondent) v Barclays Bank UK Plc (appellant), the UK’s highest court held that the bank did not owe Fiona Philipp a duty under its contract with her or under common law not to carry out her payment instructions if, as was alleged, the bank had reasonable grounds for believing she was being defrauded.

In 2018, Philipp and her husband were deceived by criminals into instructing Barclays Bank to transfer £700,000 in two payments from Philipp's current account to bank accounts in the United Arab Emirates - a so-called authorised push payment fraud.

Barclays

Allowing Barclays' appeal, the court restored the High Court's order giving summary judgment in favour of the bank, but limited it to the dismissal of Philipp's claim insofar as it was based on the allegation that the bank owed her a duty not to execute her payment instructions. The court refused summary judgment in relation to Philipp's alternative case in relation to steps taken by the bank to attempt to recover the money.

David Greene, a former president of the Law Society, tweeted that the Supreme Court’s ruling 'closes the doors for victims opened by the Court of Appeal'.

Ceri Morgan, committee member of the London Solicitors Litigation Association, said: ‘The Supreme Court has used the platform provided on this appeal to re-cast the so-called "Quincecare duty", clarifying that what has become known as the "Quincecare duty" relates solely to the validity of a customer's payment instruction. Only where the validity or content of an instruction is unclear, will the bank have a duty of reasonable skill and care to check that the order is valid.

'In other words, where a bank receives a valid payment order which is clear and leaves no room for interpretation or choice, the bank must execute the order. Applying this rationale to the case in Philipp v Barclays, the validity of the instruction was not in doubt because the customer herself gave the payment instruction. The bank was therefore required to execute the payment.'

Simon Fawell, a partner at commercial litigation firm Signature Litigation, said the ruling reduces the avenues through which fraud victims might recover their losses. However, claims are currently proceeding through the courts 'seeking to push the boundaries of when victims may be able to recover from the fraudster’s bank'.

 

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