Santander UK Plc v National Westminster Bank Plc and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Birss |
| Judgment Date | 31 July 2014 |
| Neutral Citation | [2014] EWHC 2626 (Ch) |
| Court | Chancery Division |
| Date | 31 July 2014 |
[2014] EWHC 2626 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mr Justice Birss
Alexia Knight (instructed by Shoosmiths) for the Applicant
The Respondents did not appear and were not represented
Hearing dates: 24th June 2014
This judgment relates to numerous applications made by the bank Santander for Norwich Pharmacal orders.
In Norwich Pharmacal v Commissioners of Customs & Excise [1974] AC 133 the House of Lords decided that the court may make an order compelling a person caught up in the wrongdoing of another, even innocently, to identify the wrongdoer. That is because by being caught up in the wrongdoing the person is more than a mere witness. A Norwich Pharmacal order allows a claimant who cannot find out the identity of the wrongdoer but can identify a person caught up in the wrongdoing, to find out who to sue.
The circumstances of these applications are explained in a witness statement of Mr Gareth Howard, Head of Operational Support of Geoban UK Ltd. Geoban is part of the Santander group and has been appointed by Santander to manage the operational side of its business.
The applications all arise from mistakes made by Santander whereby payments had been made electronically into the wrong bank account. The payments were usually made using the Faster Payments interbank payment method but some occurred in BACS and CHAPS transfers. Typical errors include duplicate payments, the selection of an incorrect mandate and the insertion of an incorrect account number.
In this judgment the "customer" refers to the person from whose account the mistaken payment has been made and "beneficiary" and "beneficiary bank" refer to the person whose account received the money by mistake and the bank at which that account is held.
Although at one stage it was not clear whether the mistakes were necessarily all made by Santander itself rather than by its customers, Mr Howard's statement makes it clear that these applications do not relate to customer mistakes. The applications all and only relate to mistakes made by the bank itself.
Mr Howard explains that the number of mistakes by the bank is very small considering the volumes of transactions made. For example in May 2014 Santander sent 8.5 million Faster Payment transfers and there were 603 Santander errors relating to those payments in the same period.
Some of the applications relate to mistakes made in 2012 and some to later mistakes. The way Santander has dealt with this problem has developed over time. In early 2012, the way Santander dealt with errors was to send an email to the beneficiary bank asking them to contact their own customer to obtain the customer's authority for the payment to be returned. As a result of investigations and analysis by Mr Howard and his colleagues in 2012, significant changes were introduced in 2013 including a new database and staff training but the details of the changes do not matter.
Today Santander's has a dedicated team known as the Refunds and Recoveries team who work on recovering payments sent by mistake. The current process is:
i) All customer refund requests, following an incorrect payment out, are reviewed within 24 hours of the request.
ii) In many cases the mistake has led to payment to a beneficiary with whom the customer has a family or some other relationship which means that the matter can be resolved easily and without a refund. The customer may pay the beneficiary regularly anyway.
iii) If a refund is required, this is made and paid out to the customer from an internal Santander account used for refunding bank errors.
iv) When a refund is given by Santander, the bank then sends an email to the beneficiary bank asking to return the funds into Santander's bank error refund account. The beneficiary bank does not disclose the identity of the beneficiary to Santander. The beneficiary bank takes the view that it should not do so as a result of client confidentiality.
v) Before 1 st April 2014, the beneficiary bank needed the authority of its customer for the misapplied payment to be refunded. Since then the Faster Payments system has been changed and member banks may choose not to request debit authority from the beneficiary and return funds directly to Santander.
vi) Santander will chase the beneficiary bank if there is no response within 10 days and if, after a further 10 days, there is no response or the beneficiary declines to return the funds Santander contact its own customer for support.
vii) Santander's customer will sometimes cooperate if they know who has received the funds but sometimes the customer may not know who the beneficiary is. Also sometimes the customer may not be willing to help since the mistake was Santander's in the first place.
viii) If sufficient details of the beneficiary are provided then Santander will contact the beneficiary directly and seek recovery of the misapplied payment.
ix) If the details are not provided then Santander can either write off the loss or take some other step to identify the beneficiary. Santander's policy is that if the loss is less than a certain sum (which they regard as confidential) it will be written off but values more than that are transferred to the bank's solicitors to progress an application for a Norwich Pharmacal order. Mr Howard explains that Santander do not approach the court unless it has no other way of contacting the beneficiary.
x) Santander's external solicitors contact the beneficiary bank. The beneficiary bank generally adopts the position that it does not consent to nor does it oppose the making of a Norwich Pharmacal order. An application for a Norwich Pharmacal order is made to the court. If it is granted it is then served on the beneficiary bank, which then complies with the order and reveals the identity of the beneficiary. The beneficiary bank also confirms its costs of complying with the order, which are paid by Santander.
xi) A letter is sent to the beneficiary and if possible a settlement negotiated. If the beneficiary does not respond attempts may be made to trace them using enquiry agents.
xii) If no settlement is reached and the case is not worth fighting then the matter is dropped. Otherwise legal proceedings are commenced. I am told that the number of legal actions commenced is very small. There have been 3 or 4 county court actions.
In 2013 Santander started making applications for Norwich Pharmacal orders on a substantial scale to deal with mistaken payments. So far they have made 85 applications. I am told there are likely to be a further 250 within the following year. Each application is supported by a witness statement which is supposed to set out the relevant circumstances. The applications have all been to the Chancery Division of the High Court, some to masters and some to judges.
In February 2014 Master Bragge identified that a number of very similar Santander applications were being made before the masters as paper applications. He directed that the matter should be referred to a judge. In the same period a number of the paper applications were also being handled by judges. I received a number of them and independently came to the same conclusion as Master Bragge, that the applications raised common issues and would be best considered at a hearing. Santander welcomed this approach since from its point of view the applications were not being handled consistently. Santander does not believe there is any material difference between the applications but so far 55% have been approved and 8% have been refused while the remaining (36%) are still being considered. Moreover the approvals were not always the same since sometimes all the information sought by Santander was ordered to be provided and on other occasions some information was refused.
There have also been administrative difficulties in dealings between Santander's solicitors and the court. There are numerous applications with the same respondent bank and so identifying an application as for example " Santander v National Westminster Bank" does not uniquely identify which application is referred to. The applications are not given claim numbers as they have been brought as CPR Part 23 applications and not as Part 7 or Part 8 claims. That is why this judgment has no case number. Some applications have been given application numbers (e.g. I/A XX of 2014) but it has not always possible to cross-reference these numbers with the applications themselves. One of Santander's suggestions is that the solicitor's reference number, which uniquely identifies each application, should be used on the headings of any orders and other formal documents.
The matter came before me on 24 th June 2014, and Ms Alexia Knight represented Santander instructed by Shoosmiths. Mr Howard's witness statement to which I have already referred, was prepared for that hearing. One of the very real problems was to work out precisely which applications were before the court. I will return to this below.
I will take the first application which came before me. It is Santander v National Westminster Bank, solicitor's reference 218247.000805 issued on 3 rd Feb 2014. It is supported by a witness statement of Alexandra Philpott. She explains that on 8 thFebruary 2012 £10,005.22 was transferred from a Santander customer account to an account at the respondent bank. Both numbers are given in Ms Philpott's statement. Santander's customer had intended Santander to make a payment but the payment had gone to an account with the wrong details. The mistake was...
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