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PHILIPP v BARCLAYS – CLARIFICATION OF THE QUNICECARE DUTY
On 12 July 2023, in Philipp v Barclays Bank UK PLC  UKSC 25, the Supreme Court held that the scope of the Quincecare duty did not extend to Authorised Push Payment (APP) fraud.
The claimant, Mrs Philipp, was the victim of APP fraud after she and her husband were deceived into transferring £700,000 out of their Barclays Bank account. After the defendant, Barclays Bank, became aware of this fraudulent activity, they unsuccessfully attempted to recover the funds.
The claimant brought a claim against Barclays for its supposed breach of the Quincecare duty, under which financial institutions must refrain from carrying out their customers’ instructions when it is reasonably suspected to be fraudulent activity. The claimant argued that the defendant had reasonable grounds to believe her instructions consisted of misappropriation of funds and, therefore, that Barclays breached its duty when making the payments following the claimant’s instructions and failing to take the appropriate steps to recover the funds.
In the first instance, the claim was dismissed. On appeal, the Court ruled in favour of the claimant and extended the scope of the Quincecare duty; that the Quincecare duty could apply when a financial institution was put on inquiry that instructions given by their clients could be an attempt of fraudulent activity. Subsequently, the Supreme Court unanimously allowed Barclay’s appeal.
The critical issue was whether the Quincecare duty could apply in cases of APP fraud. The Court held that the Court of Appeal’s decision was ‘inconsistent with the first principles of banking law’ and denied that banks owe a duty to their customers not to follow their instructions if they have reasonable grounds to believe instances of the misappropriation of funds.
The claimant’s attempt to widen the scope of the Quincecare duty to include cases where customers directly made instructions to the financial institution rather than through an agent was unsuccessful. While Mrs Philipp’s first claim failed, the Supreme Court held that the bank had breached its duty of care to its customer after being notified of the misappropriation of funds.
The Supreme Court stressed the fundamental duty of banks to follow their customers’ instructions under contract law. It highlighted that banks were not to concern themselves with the appropriateness or riskiness of their customers’ financial decisions. Where customers leave clear instructions to banks, they can only be expected to carry these out, and no duty of care applies.
The Quincecare duty could not support contractual non-compliance and lead banks to be in breach of duty, except in very particular cases, which include banks acting unlawfully or facilitating money laundering. They also include cases where customers give banks latitude in the execution of their instructions or where these instructions are unclear, in which financial institutions are expected to carry out their services with reasonable care and skill, and their not doing so will constitute a breach of duty. The Philipps’ instructions were direct (not a situation of agency) and clear, and Barclays was under no obligation to verify its customers’ instructions or block the payment.
The Supreme Court established that the Quincecare duty should not be viewed as ‘some special or idiosyncratic rule of law’ but rather an application of the general duty of care owed by financial institutions.
By clarifying the scope of the Quincecare duty and limiting rather than widening its scope, the Supreme Court’s decision will give more security to financial institutions and their insurers by lessening the risks of litigation.
Had the Court of Appeal’s decision been upheld, this would have resulted in increased security for customers but would most certainly have opened the floodgates due to widespread APP fraud. This decision is less welcome for customers who are victims of fraudulent activity, as they are more exposed to ending up remedy-less.
Article written by Mahault Dignet