Is Your Bank Account Safe From Fraud?

• Published date: 11 August 2023
• Subject Matter: Finance and Banking, Litigation, Mediation & Arbitration, Criminal Law, Debt Capital Markets, Financial Services, Arbitration & Dispute Resolution, Trials & Appeals & Compensation, White Collar Crime, Anti-Corruption & Fraud
• Law Firm: Shepherd and Wedderburn LLP
• Author: Mr Phillip Sewell

After transferring '700,000 to a sophisticated fraud scheme, a Barclays Bank customer sought reimbursement from her bank, raising concerns about their duty of care. This article breaks down the Supreme Court Judgment and highlights the scope of Quincecare duties.

In the Philipp v Barclays Bank plc case, Mrs Philipp was deceived by a fraudster who posed as a representative of the FCA. This person persuaded her to transfer '700,000 from a joint account with Barclays Bank to a bank account in the UAE via Authorised Push Payment (APP) instruction.

This judgment clarifies the scope of the Quincecare duty owed by a bank to its customers, and specifically customers who are Companies, Trusts, Partnerships, and Joint Account Holders.

The Quincecare duty requires the bank to observe reasonable skill and care in and about executing its customer's instructions. The original intention of the Quincecare duty was to protect an account holder from dishonest directors and other alleged authorised agents seeking to commit fraud on the company.

Banks still of course owe account holders a duty not to carry out a payment instruction where the bank has reasonable grounds to believe that the customer is being scammed. The burden of proof falls on the customer to show that the bank failed in this duty, which can be difficult in practice.

The Importance of the Philipp Case

The Supreme Court determined that earlier judicial attempts in Quincecare were wrong to try to balance countervailing duties to:

1. Execute a valid order to transfer money promptly
2. Exercise reasonable care in and about executing a customer's order to transfer money

The Supreme Court has now determined that the first duty is usually paramount: if the customer's order is clear or doesn't give the bank a choice on how to perform it, then there is no conflict between these duties.

If the bank carries out the customer's instructions and makes the payment accordingly, then the second duty won't apply in those circumstances.

The Supreme Court gave a unanimous judgment against Mrs Philipp, who had been deceived into transferring funds to accounts controlled by swindlers based in foreign jurisdictions. This was because the bank was required to carry out her clear APP instructions.

While the bank's Quincecare duties apply to companies with a separate legal persona or in circumstances where an agent claims to act on behalf of an organisation, the duty does not apply to individuals such as Mrs Philipp acting for...