The Supreme Court Settles The Scope Of The Bank-Customer Relationship

• Law Firm: Norton Rose Fulbright
• Subject Matter: Finance and Banking, Criminal Law, Financial Services, White Collar Crime, Anti-Corruption & Fraud
• Author: Mr Adam Sanitt, James Lockwood, Harriet Jones-Fenleigh and Radford Goodman
• Published date: 25 July 2023

In this eagerly awaited decision, the Supreme Court in Philipp v Barclays Bank UK plc [2023] UKSC 25 has rejected a claim against a bank for breach of an extended Quincecare duty and reset the entire basis of that duty. Banks should analyse their bank-customer agreements in light of the guidance in the judgment.

The Quincecare duty states that a bank must not execute a payment instruction given by an agent of its customer without making inquiries if the bank has reasonable grounds for believing that the agent is attempting to defraud the customer. The Supreme Court rejected an argument that this duty should be extended to instructions given directly by the customer.

Background

The claimant made a payment via her account at the defendant bank to an account in the UAE. She had been induced to do so by fraud (an 'APP', authorised push payment, fraud). The claimant argued that the bank owed a duty of care not to carry out her instructions when it had reasonable grounds to believe that she was being defrauded.

In the Supreme Court, the claimant was supported by the Consumers' Association and the bank by UK Finance Ltd.

No Quincecare duty between a bank and customer

Lord Leggatt, giving the judgment of the Court, held that there was no Quincecare duty between a bank and its customer:

"It is a basic duty of a bank under its contract with a customer who has a current account in credit to make payments from the account in compliance with the customer's instructions. This duty is strict. Where the customer has authorised and instructed the bank to make a payment, the bank must carry out the instruction promptly. It is not for the bank to concern itself with the wisdom or risks of its customer's payment decisions." (para. 3)

The Court of Appeal's extension of the Quincecare duty (covered in a previous blog post here) from a situation where the instruction is given by an agent of the account holder to the account holder themselves was therefore incorrect. In the absence of an express duty, there was no implied duty and no duty inherent in the banker-customer relationship.

APP fraud losses a matter for legislation and regulation

Lord Leggatt stated that allocation of losses for this sort of fraud was a question of social policy and a matter for legislation and regulation, not for the Courts. And in fact there was now a mandatory reimbursement scheme which applied in some but not all circumstances - for instance, it applies only to payments under the Faster Payment...