High Court Considers Novel APP Fraud "Retrieval Duty" Claim Against Both Sending And Receiving PSPs

• Published date: 01 April 2024
• Subject Matter: Finance and Banking, Criminal Law, Financial Services, White Collar Crime, Anti-Corruption & Fraud
• Law Firm: Herbert Smith Freehills
• Author: Mr Chris Bushell, Jenny Stainsby and Ceri Morgan

In a significant decision in the context of claims brought by the victims of authorised push payment (APP) frauds, the High Court has considered whether a sending and/or receiving payment service provider (PSP) owes a duty, directly to the victim of the fraud, to take reasonable steps to retrieve or recover the sums paid out as result of the APP fraud (i.e. a 'retrieval duty'): CCP Graduate School Ltd v National Westminster Bank plc & Anor [2024] EWHC 581.

By way of background, the Supreme Court's decision in Philipp v Barclays Bank UK plc [2023] UKSC 25 (see our blog post) closed the door to so-called Quincecare duty claims by the victims of APP frauds, in which it was argued that a PSP owed a duty to its customer not to carry out payment instructions, if the PSP had reasonable grounds for believing the customer was being defrauded. However, the Supreme Court granted permission for Mrs Philipp to maintain an alternative claim, based on the PSP's alleged failure to take adequate steps after it was alerted to the fraud (even though it considered that the likelihood of successfully reclaiming the money transferred pursuant to the APP fraud was slim). In doing so, the Supreme Court left the door ajar for claims based on a potential duty of care on PSPs to take reasonable steps to retrieve or recover the sums paid out as a result of an APP fraud.

In the present case, the court considered this novel duty in the context of applications for reverse summary judgment/strike out, pursued by both the sending and receiving PSPs. While the court summarily dismissed the claim against the sending PSP (on the basis that it was statute-barred under the Limitation Act 1980), it refused to strike out the retrieval duty claim against the receiving PSP (which was not statute-barred).

The decision in this case is likely to cause frustration within the payment services market, given the emphasis by the Supreme Court in Philipp that the reimbursement model for victims of APP fraud is a question of social policy for regulators and the government, and not the role of the courts. This is particularly so in the context of the UK Payment Systems Regulator's reimbursement requirement for APP fraud, which was published at the end of 2023 in the Policy Statement 23/4 Fighting APP scams: Final decision (PS23/4) (see our blog post).

We understand that a consequentials hearing has taken place and the receiving PSP has been given permission to appeal. We will be following the progress of...