Fiona Lorraine Philipp v Barclays Bank UK Plc

JurisdictionEngland & Wales
JudgeLord Justice Birss,Lord Justice Coulson
Judgment Date14 March 2022
Neutral Citation[2022] EWCA Civ 318
CourtCourt of Appeal (Civil Division)
Docket NumberCase No: CA-2021-000501 (Formerly A4/2021/0509)
Between:
Fiona Lorraine Philipp
Appellant
and
Barclays Bank UK Plc
Respondent

and

The Consumers' Association
Intervening Party

[2022] EWCA Civ 318

Before:

THE CHANCELLOR OF THE HIGH COURT

Lord Justice Coulson

and

Lord Justice Birss

Case No: CA-2021-000501 (Formerly A4/2021/0509)

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM High Court Business and Property Courts of

England and Wales, Circuit Commercial Court (QBD)

HHJ Russen QC

CC-2020-BRS-000004

Royal Courts of Justice

Strand, London, WC2A 2LL

Hugh Sims QC (instructed by Squire Biggs Law Ltd) for the Appellant

Patrick Goodall QC and Alexia Knight (instructed by TLT LLP) for the Respondent

David McIlroy (instructed by Pennington Manches Cooper LLP) for the Intervening Party

Hearing dates: 8th and 9th February 2022

Approved Judgment

Lord Justice Birss
1

There is a recognised kind of fraud called “APP” fraud. APP stands for “authorised push payment”. When the customer of a bank is a victim of APP fraud, they have been deceived by a fraudster to instruct their bank to transfer money from their account into an account controlled by the fraudster. It is called a “push” payment as a contrast with “pull” payments. A push payment occurs when the customer instructs the bank to pay money to someone else, whereas with a pull payment, the receiving party instructs the bank to transfer the money from the payer's account (e.g. by direct debit). APP fraud is referred to as “authorised” because, from the bank's point of view, the payment is authorised by the customer.

2

The question on this appeal relates generally to the question of whether the bank owes the customer a duty of care in these circumstances. Inevitably a lot depends on exactly what question the court is being asked to decide. I believe that part of what went wrong in the court below is explicable by examining what precisely is the issue to be resolved.

3

The case arises because the claimant (appellant) Mrs Philipp became the victim of an APP fraud in March 2018. Mrs Philipp is a music teacher and her husband Dr Philipp is a retired consultant occupational and public health physician. The couple were thoroughly deceived by a fraudster known as JW. As a result they moved over £700,000 of their savings into an account in Mrs Philipp's name with the defendant (respondent) bank Barclays and then Mrs Philipp instructed Barclays to transfer that money, in two payments of £400,000 and £300,000, to separate bank accounts in the United Arab Emirates. The couple believed that what they were doing was moving the money into safe accounts in order to protect it from fraud. They had been convinced by JW in a series of calls starting in late February 2018 that they were cooperating with the Financial Conduct Authority and the National Crime Agency to bring fraudsters to justice. Part of the deception involved Dr Philipp telephoning what he thought was the Fraud Department within HSBC Bank Plc and being re-directed to JW. On another occasion JW arranged for a different individual to telephone Dr and Mrs Philipp from what appeared to be the NCA's telephone number shown on the NCA website (which JW had encouraged Dr Philipp to look up on the internet). The caller said he had worked with JW for 9 years and that he was a senior person in the FCA who could be trusted.

4

The first attempt to transfer funds was on 9 th March 2018 when the couple went into the bank's Thornbury branch. That transfer did not go ahead because the bank had problems with the international payment system. Then on 10 th March Mrs Philipp went into the bank's branch at Broadmead in Bristol. The first transfer was made on that occasion. The second transfer took place on 13 th March when the couple went into the Westbury-on-Trym branch. By the time the fraud was discovered the money had gone. It had represented the bulk of their life savings.

5

There is an issue of fact about whether any safeguarding questions or scam warnings were given on these occasions. Mrs Philipp says none were given but that is not accepted by the bank.

6

Mrs Philipp brings this action against the bank for breach of duty. On her behalf it is argued that the bank owed her a duty of care at common law in tort or implied into the contract between her and the bank, or by statute under s13 of the Supply of Goods and Services Act 1982. The duty is characterised as a duty to observe reasonable care and skill in and about executing her instructions. It is also said to be a species of the duty identified by the High Court in Barclays Bank v Quincecare [1992] 4 All ER 363.

7

Part of Mrs Philipp's case is that by March 2018 the bank ought to have had in place policies and procedures for the purpose of detecting and preventing potential APP fraud and reversing or reclaiming moneys subject to it. The full pleaded case as to what the alleged policies and procedures should be is set out below.

8

The argument is that there are various features of the payments and of Mrs Philipp's situation which would have alerted an ordinary prudent bank to the problem, with the result that what a bank acting with reasonable skill and care would have done in those circumstances is delayed the transfers and asked questions to get to the bottom of what was going on. The details of what is said ought to have taken place do not matter. They include alerting Mrs Philipp to the risks with “impactful” warnings, possibly arranging for a meeting with the police and Mrs Philipp in the presence of a bank employee, and carrying out further investigations. It is then said that the result ought to have been that the risk of fraud would have been revealed and no payments would have been made. Since the payments in fact went ahead the appellant's case is that that was the result of a breach of duty by the bank, making the bank liable (in tort or contract).

9

There is a separate point arising from a telephone call from the police to the bank two days after the payments had been made but there is no need on this appeal to examine that any further.

10

The bank applied to strike the case out on the basis that the court could decide without a trial that as a matter of law there was no duty of care in these circumstances. The judge HHJ Russen QC, sitting in the Circuit Commercial Court in the Business and Property Courts in Bristol, accepted the bank's case that it did not owe the duty and so struck out the action. Mrs Philipp appeals with the permission of the judge.

11

Before the judge the bank also relied on a second ground for striking out, relating to causation. This was on the basis that regrettably Mrs Philipp and her husband had been so thoroughly deceived that they did not trust the police or the bank and were lying to the bank about the purpose of the transfers. Thus even if the steps alleged not to have been taken had been taken by the bank, Mrs Philipp would have gone ahead anyway. The judge decided (judgment paragraph [182]) that even if he rejected the bank's case on duty of care, he would not have decided the causation issue at this stage. It was a matter for trial. There is no appeal from that finding.

12

The judge summarised the events which happened and the background up to paragraph 71 of the judgment. There is no suggestion he made any error in doing so. Then he addressed the law from paragraph 72. He considered Paget's Law of Banking para 22.52 and then turned to the authorities, starting with Quincecare which recognised what is now called the Quincecare duty. The judge also addressed Lipkin Gorman v Karpnale [1989] 1 WLR 1340 in which May LJ approved Steyn J's decision in Quincecare. Note that Quincecare was decided in 1988 but only reported in 1992. The judge also addressed Tidal Energy v Bank of Scotland [2014] EWCA Civ 1107 which concerned the extent of a bank's obligations when processing a CHAPS payment request. He then turned to Singularis Holdings v Daiwa Capital Markets [2019] UKSC 50 in which Lady Hale summarised the decision in Quincecare at paragraph [1]. I will come back to these cases below.

13

In his judgment the judge then accurately summarised the parties' arguments from paragraph 84 to 112 and turned to his analysis and conclusions at paragraph 113. The analysis is detailed but the conclusions can be summarised quite briefly. In paragraphs [183] and [184] the judge expressed his conclusion as follows:

“183. One cannot reasonably feel anything other than acute sympathy for Mrs and Dr Philipp who have fallen victim to the dishonesty of JW and any of his partners in crime. They have lost a very significant part of their personal savings to the fraudster.

184. However, it would not be fair, just or reasonable to impose liability on the part of the Bank in respect of the APP fraud perpetrated upon Mrs Philipp. For the reasons expressed above, such liability could only rest upon what I regard to be an unprincipled and impermissible extension of the Quincecare duty.”

14

An important reason why the judge came to that conclusion was that he accepted the bank's submission that the duty contended for by the appellant would be unworkable in practice (paragraph [170]). Similarly he held that it would be commercially unrealistic to expect bank staff to ask the kind of questions contended for by the appellant whenever any payment instruction was authorised by the customer attending the bank in person, regardless of the sum involved (paragraph [171]).

15

Part of the argument involved references to a “Super-Complaint” made by the Consumers' Association (Which?) to the Payment Systems Regulator (PSR) in September 2016 entitled “Consumer Safeguards in the Market for Push Payments”. This Super-Complaint raised the problem of APP fraud. As the judge explains at paragraph [5]:

“A later paper published by the PSR in February 2018 referred to APP fraud as being the second biggest type of fraud reported by UK Finance...

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