Case Law Update: The Supreme Court considers Philipp v Barclays Bank UK Plc

On 1 and 2 February, the case of Philipp v Barclays Bank UK Plc was heard before the Supreme Court. The hearing follows the Court of Appeal's decision to grant Mrs Philipp's appeal against the High Court's summary judgment in favour of Barclays. The Court of Appeal's judgment garnered much attention from financial institutions, as it points to a potential broadening of the scope of the Quincecare duty.

The Quincecare duty was established in the case of Barclays Bank Plc v Quincecare Ltd. In essence, whilst a bank owes its customers a duty to observe reasonable care and skill in executing a payment instruction, where a bank has reasonable grounds to believe that an instruction is an attempt to misappropriate a customer's funds, it also has a duty to refrain from executing that instruction.

The Philipp case concerns an "Authorised Push Payment" fraud.

APP fraud occurs when a customer of a bank is deceived into instructing their bank to transfer money into an account controlled by a fraudster. In this case, Mrs Philipp was deceived by a fraudster posing as an FCA employee and, consequently, made three international payments to bank accounts in the Middle East. Further background can be considered (here).

The case has raised some interesting questions.

The Court of Appeal Decision

It has previously been thought that the scope of the Quincecare duty is limited to circumstances where an agent is acting on a customer’s behalf, for example, where a rogue employee of a company makes a payment instruction on behalf of that company. Where, however, would this leave victims of APP fraud, who have been tricked by a fraudster into making a payment instruction themselves?

The Court of Appeal, on an examination of the reasoning in various Quincecare cases, decided that whether the Quincecare duty applies does not in fact depend on whether an instruction is made by a customer or an agent. Accordingly, unless reversed, the Quincecare duty may be applicable to APP fraud victims (i.e. in circumstances where a fraudster is puppeteering their actions). Further consideration of the Court of Appeal’s decision can be found (here).

Barclays' Case

However, it is Barclays' case that the Court of Appeal's interpretation of the Quincecare duty is incorrect. It submits that where a customer makes a valid direct instruction to a bank, that instruction is one that the bank has to follow. Any relationship between the customer and a third-party fraudster occurs separately to the transaction and does not unravel the validity of the payment instruction. Further, where a valid instruction has been made, the bank's primary duty is to execute it promptly so as to avoid being in breach of mandate.

This argument is advanced on the basis that, when processing payments, the bank is providing an execution-only service to the customer, so the bank's duty to exercise reasonable care and skill is limited to the execution of the instruction only and does not extend to engaging in an assessment of the genuineness of the ultimate recipient of the funds. In this regard, it has been argued that banks cannot protect customers from their own decisions.

Barclays do, however, acknowledge that where a bank has actual knowledge of a fraud, an implied duty of honesty arises. Acceptance of this point only came in the Supreme Court hearing and may trigger some new considerations: What amounts to actual knowledge in this context? Is it enough for the bank to have access to information, or must this information have been in the mind of the bank at the time of receipt and execution of the instruction? If the latter, must the information have been in the mind of a natural person (which would seemingly require the pinpointing of particular employees), or is it enough for the information to have existed within a database or other system?


One intervening party, UK Finance argued, in support of Barclays, that the Court of Appeal’s formulation of the Quincecare duty would have ‘chilling’ practical ramifications which would ultimately impact customers, including delays to the processing of bona fide payments, and the costs of compliance and liability being passed on.

In contrast, the Consumers’ Association argues that an extended Quincecare duty allows banks to prevent a small number of high value payments where fraud is suspected, and further, that the Bank is in a better position than the customer to identify APP fraud. Banks, as part of their normal practice, already monitor transactions for different frauds, and as such the practical implications are minimal.

Philipp's Case

Hugh Sims KC, representing Mrs Philipp, agreed and noted that, by the services they provide, banks are better placed to identify when a customer is a victim of APP fraud and therefore also in a better position to avoid the loss.

Philipp further argues that, in light of the rise in APP fraud cases, the extension of the duty is necessary to promote public confidence in the industry, and already sits in harmony with the existing industry practice as the extended duty is only triggered where a bank has reasonable grounds to suspect fraud by reference to the already prudent banker.

It was therefore argued that Mrs Philipp's case did not wish to make the bank liable for fraud; instead, it seeks to make the bank liable only for the bank's own carelessness in proceeding with an instruction when it is implicit that a customer wouldn't want the bank to execute this. It is argued that this objective standard also manages conflict when it comes to delay considerations, as a "prudent banker" would have to take the essence of time into account.

The Court appeared wary of this argument and questioned whether an implied qualification can override an agreed contractual arrangement between the bank and customer. The Court further warned Hugh Sims KC against slipping into arguments which support a cause of action in professional negligence as opposed to under the Quincecare duty. Only time will tell, however, whether this scrutiny is indicative of the decision which might be reached, or whether it was intended to simply test the robustness of Philipp's case.

The Supreme Court has a wider remit than the Court of Appeal, and as stated by the Court during the submissions, is not restricted to following the analysis of the Quincecare duty as it was set out in Barclays Bank plc v Quincecare Ltd. Further, the Supreme Court has jurisdiction to consider any question necessary to be determined for the purposes of carrying out justice and, to this effect, may well consider the issues in this case through a wider public policy lens.

We await judgment to see how the Supreme Court determines the scope of the Quincecare duty, or indeed exercises its ability to redefine it. However, if you would like to discuss the issues which have been raised by this case, please do feel free to contact us using the details below.

We will post further commentary when the outcome of the case is decided.