Fiona Lorraine Philipp v Barclays Bank UK Plc

Held, allowing the appeal, that it was a basic duty of a bank under its contract with a customer who had a current account in credit to make payments from the account in compliance with the customer’s instructions; that that duty was strict and, therefore, where a customer had authorised and instructed a bank to make a payment, the bank had to carry out the instruction promptly without concerning itself with the wisdom or risks of its customer’s payment decision; that, although a bank had a duty not to execute a payment instruction given by an agent of its customer without making inquiries if it had reasonable grounds for believing that the agent was attempting to defraud the customer, that duty did not apply where the customer had unequivocally authorised and instructed the bank to make a payment; that, provided the instruction was clear and was given by the customer personally, or by an agent acting with apparent authority, its duty was to execute the instruction and any refusal or failure to do so would prima facie be a breach of duty by the bank; that the fact that a customer’s intention or desire resulted from a mistaken belief, including where it had been induced by another person’s deceit, did not make it any less real or genuinely held, and the fact that the customer’s payment instruction was induced by fraud did not invalidate the instruction or give rise to any claim against the bank; and that, accordingly, since it was beyond dispute that the claimant had unequivocally authorised and instructed the defendant to make the payments, the order of the judge giving summary judgment in favour of the defendant, in so far as it related to the claim that the defendant had owed the claimant a duty not to execute her payments, would be restored (post, paras 3–5, 25–26, 28–30, 97, 100–105, 110, 120).

Hambro v Burnand[1904] 2KB10, CA considered.

Selangor United Rubber Estates Ltd v Cradock (No 3)[1968] 1WLR1555, Karak Rubber Co Ltd v Burden (No 2)[1972] 1WLR602, Lipkin Gorman v Karpnale Ltd[1987] 1WLR987 and Barclays Bank plc v Quincecare Ltd[1992] 4All ER363 explained.

Per curiam. (i) It would be possible for a bank to agree as an express term of the contract that it will not comply with a payment instruction given by the customer if the bank believes, or if the bank has reasonable grounds for believing, that the customer has been tricked by a third party into authorising the payment. But in the absence of an express term, no obligation of this kind can be implied or said to be inherent in the relationship between a bank and its customer. To the contrary, such an obligation would be inconsistent with the normal contractual basis on which banking transactions are conducted (post, para 4).

(ii) Authorised push payment fraud is a growing social problem and can undoubtedly cause great hardship to its victims. Whether victims of such frauds should be left to bear the loss themselves or whether losses should be redistributed by requiring banks which have made or received the payments on behalf of customers to reimburse victims of such crimes is a question of social policy for regulators, Government and ultimately for Parliament to consider. It is in fact the subject of new legislation. But it is not a question for the courts. It is not the role of the courts to formulate such policy, still less to impose on the parties to a contract an obligation to which they have not consented and cannot reasonably be presumed to have consented since it is inconsistent with the normal and established allocation of risk and responsibility under contracts of the relevant type (post, paras 6, 22–24).

Decision of the Court of Appeal [2022] EWCA Civ 318; [2022] QB578; [2022] 2WLR872; [2022] Bus LR353 reversed.