Court of Appeal offers APP fraud victims a route to argue banks' duties include refusing valid payment instructions

The Court of Appeal has allowed the APP fraud victim in the Philipp v Barclays case to appeal that decision.

In an earlier article, we reported on the High Court's dismissal of Mrs Philipp's claim against Barclays Bank for the £700,000 she lost to an APP fraudster. Despite forceful submissions from Mrs Philipp, the High Court held "it would not be fair, just or reasonable" to apply (or even extend) Barclays' duties under Quincecare (or otherwise under s13 of the Supply of Goods and Services Act 1982).

The Court of Appeal has allowed Mrs Philipp's appeal on two bases:

  • An incorrect application of the law relating to the Quincecare duty as this "does not depend on the fact that the bank is instructed by an agent of the customer"
  • It was wrong to dispose of the matter on a summary basis as analysis/application of the relevant duty required a detailed examination of the facts both of wider banking practice at the time and the parties' knowledge

Until Mrs Philipp's claim is considered at trial or any higher authority considers the extent of the Quincecare duty in modern banking payments (perhaps in the forthcoming Supreme Court judgment of Stanford v HSBC), payment services providers and banks may see more claims arguing that they (a) have a duty to refuse to make payments in accordance with their mandate when they are put "on enquiry"; and (b) in light of the standards of ordinary banking practice at the time, they were "on enquiry", breached that duty and should refund defrauded customers.

An increase in complaints by (non-refunded) APP fraud victims against their banks seems possible given the intervention of Which? in the case and the prevalence of APP fraud, which is one of the largest categories of financial crime fraud.

Parties should be mindful that such matters often depend on the fact sensitive nature of each case (or the fraud itself) before drawing any wide-ranging conclusions of a step-change in such matters. That said, the treatment of this decision by the FOS and banks not yet party to the Contingent Reimbursement Model Code are obvious areas to watch.