The so-called Quincecare duty has come under consideration for the first time since the Supreme Court’s ruling in Philipp v Barclays Bank UK plc[1] in July 2023.
As we set out in our article here, the ruling in Philipp was widely seen as a welcome clarification of the scope of the Quincecare duty owed by financial institutions, particularly as the level of online fraud continues to soar. This most recent judgment, handed down on 14 March 2024, suggests that, following the ruling in Philipp, focus will turn to the adequacy of a bank’s efforts to recover funds from second and third generation recipients.
The decision
In CCP Graduate School Ltd v National Westminster Bank Plc and Santander UK Plc[2], CCP Graduate School Ltd (CCP) claimed that it had been the victim of an “authorized push payment” (APP) fraud. CCP argued that criminal actors fraudulently induced it to transfer money from its account with National Westminster Bank Plc (NatWest) to an account held with Santander UK Plc (Santander). CCP argued that, at the time the payments were made, and unbeknownst to CCP, the Santander account was under the control of the criminal actors.
CCP argued that NatWest owed it a contractual and / or tortious duty not to carry out its payment instructions, without first taking steps “to ensure that the same was not an attempt to defraud [it]”.[3] This claim was based on the so-called Quincecare duty, as recognized in Barclays Bank plc v Quincecare Ltd.[4] That case established that a bank has a duty not to execute a payment instruction given by an agent of its customer, without first making inquiries if there are reasonable grounds for believing that the agent is attempting to defraud the customer in a transaction.
As against Santander, CCP claimed that the bank owed it a duty to take reasonable care to prevent accounts held with Santander from being used as instruments of fraud. CCP alleged that Santander breached that duty by allowing the funds received into its account to be transferred out.
Both NatWest and Santander sought the summary dismissal of the claims against them by way of (reverse) summary judgment of the claim, and / or the summary dismissal by way of striking out of the Claim Form and the Particulars of Claim.
After those applications were issued, but before they were heard, the Supreme Court handed down its ruling in Philipp. The Supreme Court remitted Mrs Philipp’s claim to the High Court to decide her alternative case that Barclays was in breach of duty in not taking adequate steps to recover the money transferred to the United Arab Emirates. In light of the Supreme Court’s ruling in Philipp, therefore, and in response to NatWest’s and Santander’s applications, CCP cross-applied for permission to amend its claim to plead an alternative case that, even if there is no Quincecare duty to prevent payments out, there is a duty in law at a certain point to take reasonable steps to retrieve or recover the sums paid out as a result of the APP fraud, by immediately contacting the banks into which CCP’s money had been transferred and either seek a recall of those payments, or warn the receiving bank that there were strong grounds for suspecting that criminal activity was involved and to not allow any further movements of the money until such time as an investigation had been carried out (i.e. a “retrieval duty”).
Master Brown struck out CCP’s claim against NatWest on the basis that it was time-barred (for whatever reason, CCP had waited more than six years after the last payment was made to the Santander account before issuing its claim), and because the claim had no prospect of success. The Master dismissed CCP’s amendment application against NatWest on the basis that it represented a new claim brought outside the relevant limitation period, which did not arise on the same or substantially the same facts as the existing claim against NatWest.
The Master did, however, decline to summarily dismiss the retrieval duty claim as against Santander, on the basis that the claim was already pleaded, and that it was at least arguable that Santander owed such a duty to CCP, notwithstanding that CCP was not a customer of Santander’s (at least part of the claim was not time-barred, with some money remaining in the Santander account within six years of the date on which CCP issued its claim).
As such, and unless it is settled or otherwise resolved ahead of trial, we can expect further guidance from the Court (in both CCP’s case against Santander, and Mrs Philipp’s case against Barclays Bank UK Plc) on the existence and scope of this so-called “retrieval duty”.
The full Judgment can be found here.
[1] [2023] UKSC 25.
[2] [2024] EWHC 581 (KB).
[3] Judgment, paragraph 9.
[4] [1992] 4 All ER 363.
