Supreme Court rules that APP fraud victims cannot rely on Quincecare Duty

The Supreme Court's judgment in Philipp v Barclays Bank UK Plc was handed down on 12 July 2023. Given the rise in authorised push payment fraud (APP Fraud) with a reported £485.2 million being lost in the UK in 2022, this case has been closely watched. APP fraud involves a fraudster tricking a victim into willingly making payment transfers to the fraudsters account, making the victim think the transfer is genuine (hence 'authorised') with the funds typically long gone before the victim realises what has happened.

Mr and Mrs Philipps were APP Fraud victims, tricked into transferring £700,000 to "safe" accounts in the UAE. Reimbursement was sought from their bank, claiming that it owed what has become known as the "Quincecare duty" after Quincecare Limited v Barclays Bank [1992]: that a bank has a duty not to execute a payment instruction given by an agent of its customer without making enquiries if the bank has reasonable grounds for believing that the agent is attempting to defraud the customer (eg where a director of a company issued the payment instruction in relation to the company's account as part of a fraud on the company).

The Supreme court held that: 

• the Quincecare duty, properly understood, is the application of the general duty of care owed by a bank to interpret, ascertain and act in accordance with its customer's instructions and arises where an agent makes the payment instruction to ensure that the bank does not make a payment which the customer has not authorised. The duty applies wherever one person is given authority to sign cheques or other payment instructions to a bank on behalf of another, but it has no application in the cases of APP fraud. The Bank could undertake or contract to owe such a duty expressly or impliedly, but didn't do so in this case.
• whether victims of APP fraud should bear the loss or banks should reimburse customers is a question of social policy for Regulators, Government and Parliament and not one for the courts. The court referred to steps being taken to help victims of APP fraud including the Financial Services and Market Act which received royal assent on 29 June 2023 and which makes provision for a mandatory reimbursement scheme for victims of APP fraud (there is currently a voluntary Contingent Reimbursement Model Code, which payment service providers can sign up to).

This decision will be a relief for banks with the potential floodgate on these type of claims by APP fraud victims remaining closed. While the decision will be disappointing to victims, they may be able to seek redress under the reimbursement schemes providing they fall within the applicable criteria (for example, they apply only to the Faster Payments Scheme and to transfers made within the UK and so wouldn’t apply in the Philipps' case).

The Supreme Court gave Philipp permission to proceed with an alternative claim that the bank delayed and did not act properly in trying to recall the payments once made – as the question of whether the bank owes such a duty and whether there was any realistic chance it would have recovered the payments cannot be considered without full investigation of the facts which requires a trial. There therefore remains a possibility of recovering losses from APP fraud from a bank other than by reference to Quincecare, and the trial will continue to be watched closely.