Potential significant expansion of banks Quincecare duty of care

The Court of Appeal handed down a judgment earlier this week which has the potential to significantly expand the scope of banks' Quincecare duty of care to their customers.

The Quincecare duty requires banks to refrain from executing a customer's instructions if the bank has reasonable grounds for believing that those instructions may be an attempt to misappropriate the customer's funds.

Until now, the scope of that duty has been limited to protecting customers from the risk of fraud by their own directors or agents.

Facts

In this case, the payment instructions were given by an individual customer directly (Mrs Philipp, who, with her husband, were the victims of a sophisticated authorised push payment ("APP") fraud). The couple were ultimately deceived into transferring £700,000, the majority of their life savings, to an account in the UAE, which then disappeared. 

Mrs Philipp was appealing a High Court decision in which reverse summary judgment had been granted in favour of the bank on the basis that the Quincecare duty did not operate in the context of APP fraud to protect her from her own actions (see our previous briefing here).

Decision

Allowing the appeal and setting aside the summary judgment, the Court of Appeal held that, as a matter of law, the Quincecare duty of care, "which is a duty on a bank to make inquiries and refrain from acting on a payment instruction in the meantime", does not depend on whether the bank is instructed by an agent of the customer of the bank.

Lord Justice Birss examined the reasoning in previous Quincecare cases. Although those cases all concerned fraud by agents of customers, Birss LJ found that the duty is capable of applying with equal force to a case in which the instruction to the bank is given by a customer themselves (such as Mrs Philipp) who is the unwitting victim of APP fraud, provided the circumstances are such that the bank is on inquiry that executing the order would result in the customer's funds being misappropriated.

Implications 

This decision was an appeal against summary judgment only, so the case will go back to the High Court for a full trial, which Birss LJ said was the right place to determine whether such a duty does in fact arise. The bank had argued that imposing a duty would be onerous and unworkable in practice which would require expert evidence and detailed examination. 

But regardless of the outcome in the High Court, the key point is that the Court of Appeal found that ,in principle, a Quincecare duty of care could arise in these circumstances.

Given the prevalence of APP fraud, this judgment may be encouraging to victims of fraud who are considering potential actions against financial institutions and wish to fight their case at trial, particularly Birss LJ's comment that  "the purpose of the duty…is to protect the customer…It does not exist to protect the bank."

Authors: Thomas Connor, Partner and Fraser Collingham, Solicitor

Case reference: Philipp v Barclays Bank UK Plc [2022] EWCA Civ 318