The eagerly awaited Supreme Court decision in Philipp v Barclays Bank UK Plc  UKSC 25 will come as a blow to victims of fraud who are duped into sending monies to third parties.
This judgment confirmed that a bank is not liable to reimburse a victim of fraud who instructs their bank to make a payment to a fraudster’s account unless the payment is made by an agent of its customer and the bank has reasonable grounds to believe that the transaction may be fraudulent.
The issue in the case was whether the so called “Quincecare” duty of care principle should be broadened. In Barclays Bank Plc v Quincecare Ltd  4 All E.R. 363 it was held that a bank owes a duty care to a customer not to carry out instructions from an “agent” of the customer where the bank has reasonable grounds for believing that the instructions are an attempt to misappropriate the customer’s funds. Typically, the agent will be a director or other officer of a company who is transferring funds other than for the legitimate business of the company customer. The duty was designed to encourage banks to take action to prevent fraud.
The facts of the Phillip case are quite heartbreaking. Mrs Philipp and Dr Philipp fell victim to a fraud and were deceived into instructing Barclays Bank to transfer £700,000 from Mrs Philipp’s account with Barclays to foreign accounts in the United Arab Emirates. This type of fraud in known as an “authorised push payment” (APP) fraud, in which a “victim is induced by fraudulent means to authorise their bank to send a payment to a bank account controlled by the fraudster.” This is distinguished from fraud that is perpetrated by a payment being taken out of a victim’s bank account without the victim’s authority by an agent. The critical element of an APP fraud is that the customer knowingly instructs their bank to make the transfer. Barclays had even telephoned Mrs Phillip to confirm that she wished to make the transfers and, on both occasions, she had confirmed that she did.
The High Court summarily dismissed the claims put forward by Mrs Philipp on the basis that, as a matter of law, the bank did not owe any duty of care in circumstances where it was carrying out a payment instruction given to it by its customer. The Court of Appeal disagreed and allowed Mrs Philipp’s appeal, finding that the Quincecare duty was not dependent on the instruction being given by agent but that it was “capable of being applied in equal force to instructions given by a customer who is an unwitting victim of APP fraud” .
The Supreme Court overturned the Court of Appeal decision and restored the summary judgment in favour of Barclays. The Supreme Court declined to extend the application of the Quincecare principle, finding that a bank has a strict duty to make payments in compliance with its customer’s instructions and that it was not “for the bank to concern itself with the wisdom or risks of its customer’s payment decisions.” Mrs Philipp gave clear instructions for payments to be made, and Barclays therefore had a strict duty to do what they were instructed to do by its customer, namely to make the transfers in accordance with those instructions.
However, customers who are victims of APP fraud are not without any recourse. The Financial Services and Markets Act 2023, which received Royal Assent on 29 June 2023, has now established a mandatory reimbursement scheme for victims of APP fraud, under section 72 of the Act. However, this scheme does not extend to international payments and so wouldn’t have assisted Mrs Phillip.
There is still a glimmer of hope for Mrs Phillip. The Supreme Court found that her alternative claim that Barclays were in breach of duty for not acting promptly to recall the payments that were made to the accounts in the UAE after being notified of the fraud, should not have been summarily dismissed. That issue has been directed to trial, so the Philipp case is not over just yet.