Tidal Energy Ltd v Bank of Scotland Plc

JurisdictionEngland & Wales
JudgeHis Honour Judge Havelock-Allan
Judgment Date13 September 2013
Neutral Citation[2013] EWHC 2780 (QB)
Docket NumberClaim No. 2BS90956
CourtQueen's Bench Division
Date13 September 2013

[2013] EWHC 2780 (QB)






His Honour Judge Havelock-Allan QC

Claim No. 2BS90956

Tidal Energy Limited
Bank of Scotland Plc

Guy Adams (instructed by Capital Law LLP) for the claimant

Neil Levy (instructed by Foot Anstey LLP) for the defendant

His Honour Judge Havelock-Allan Q.C.:


Before the court are cross-applications for summary judgment.


The point at issue is whether an instruction to make a payment through the Clearing House Automated Payment System ("CHAPS") is satisfied by funds being sent to, and accepted by, the bank which maintains the account with the number and sort code identified in the instruction as the destination of the payment, albeit that the holder of that account is not the beneficiary named in the instruction.


The facts giving rise to the applications can be very shortly stated. The claimant, Tidal Energy Limited, is a customer of the defendant, Bank of Scotland plc ("the bank"). It has a business account at the bank's branch at One Kingsway in Cardiff. In January 2012, the claimant was indebted to one of its suppliers, a company called Designcraft Limited ("Designcraft"). It owed Designcraft a sum of £217,781.57 under an invoice No. 2638. On Tuesday, 31 January 2012 the claimant gave an instruction to the bank to pay the debt.


The instruction was given on one of the bank's standard printed CHAPS Transfer Forms. The Form was signed by two authorised signatories of the claimant. Section 1 of the Form was headed "Details of the CHAPS Transfer". The various boxes were completed in manuscript so as to instruct the bank to pay a sum of £217,781.57 out of the claimant's business account to an account number 13027309 at Barclays Bank with sort code 20–16–12. The receiving customer name was stated as: "Designcraft Ltd". The Payment details were given as: "Invoice 2638". The date written on the Transfer Form for the payment to be processed was 31 January 2012.


Section 2 of the CHAPS Transfer Form was headed: "Your CONFIRMATION (terms and conditions set out overleaf)". Above the boxes containing the claimant's name and authorized signatures was the following wording:

"You are hereby authorised to effect these instructions either by transmission through the Clearing House Automated Payments System or by such other method as you may in your sole discretion decide.

I/We agree that no responsibility is to attach to you for any loss caused by delays, interruptions or errors in transmission of payment, which are not directly due to the negligence or default of your own officers or servants.

Please debit the payment from my/our account number detailed in Section 1.

Neither this instruction for a CHAPS transfer nor your acceptance of it shall be enforceable by the payee or any other third party. …"


The terms and conditions on the reverse of the Transfer Form mainly concerned the timing of the payment and cancellation and amendments. CHAPS is a fast payment mechanism. If the instruction is received before 3pm on a business day, it is normally executed that day. If it is received after 3pm, it is deemed received the next business day. The terms and conditions on the reverse of the Transfer Form made clear that the bank could only undertake to comply with an amendment or cancellation of the instruction if it was received by 3pm on the business day before the agreed date for payment. On this occasion the instruction was sent to the bank early on the day it was to be processed and was executed through the CHAPS system the same day.


The sequence of events on Tuesday, 31 January 2012 was as follows:

0938 CHAPS Transfer Form received at the bank's office at St William House, Tresilian Terrace in Cardiff.

1143 Transfer Form forwarded by fax to the bank's CHAPS processing team in Gillingham.

1520 The processing team effected the transfer through CHAPS by sending the funds from the bank's account at the Bank of England to the account of the receiving bank at the Bank of England. A "FUNDSFLOW — CHAPS DAILY ACTIVITY Form and Form MT03 (which was a record of the payment instruction) were immediately generated. All of the payee information on the Transfer Form (receiving customer's account number at Barclays, sort code of Barclays, receiving customer's name and the invoice number in respect of which the payment was being made) was reproduced in both documents.

After 1520

The bank debited the claimant's account at the Cardiff branch and Barclays credited the funds to account number 13027309 at sort code 2016–12 (which was its branch in Bury St Edmunds).


The claimant says that, unbeknown to it at the time the instruction was sent, the information it had been given about the receiving account was false. The designated receiving account at Barclays did not belong to Designcraft Ltd but to a different entity called "Childfreedom Ltd". It says that it was the victim of a fraudulent misrepresentation by an unnamed third party that account number 13027309 at sort code 20–16–12 was the account of Designcraft to which the payment should be made. The defendant has put the claimant to proof of these matters: but accepts, for the purposes of the present applications, that the named receiving account did not belong to Designcraft, although neither the claimant nor the bank knew this at the time the transfer was made.


Around 1pm on the following Monday, 6 February 2012, the claimant telephoned the bank's Cardiff branch to say that it had been induced by fraud to pay the funds to the account number and sort code given on the CHAPS Transfer Form. The claimant asked the bank to get the money back. About 5 minutes later, the bank rang Barclays with this information and requested that the customer holding account number 13027309 at sort code 20–16–12 should not be allowed to draw on the funds until further notice. The bank made two further telephone calls to Barclays the same afternoon repeating this request. Barclays declined to put a stop on the funds unless required to do so by Court Order.


The bank says that, sometime by close of business on 6 February, Barclays allowed the holder of account 13027309 (presumably Childfreedom Ltd) to withdraw £217,000 of the funds, although the bank did not know this when it made the telephone calls. The implication is either that the money transferred (or £217,000 of it) represented the only money standing to the credit of account 13027309 on 6 February or that it was the last money to be credited to the account so that the withdrawal of £217,000 from the account is to be regarded as withdrawal of part of the transferred money on the "first in first out" principle (the rule in Clayton'sCase: see Jones v Churcher [2009] 2 Lloyds Rep. 94 at paragraph 72). Whichever is correct, by close of business on 6 February almost all of the money had gone.


By the present action, commenced on 19 September 2012, the claimant seeks the following relief: 1. "A declaration that the claimant was entitled to have its account sort code 1223–11 a/c no. 06970938 re-credited with the sum of £217,781.57 on 31 st January 2012 or such other declaration as the court shall think fit" 2. "An order that the Defendant re-credit to such account the sum of £217,781.57 with effect from 31 st January 2012 and re-state the said account accordingly".


The way the claim is put is that Barclays had no authority to accept the CHAPS payment on behalf of Designcraft because that was not the name of the customer who held account number 13027309 at its Bury St Edmunds branch. Accordingly, no valid acceptance of the payment was ever given and Barclays ought to have rejected the transfer and returned the funds the same day "… or at such other time as may be provided by the CHAPS Rules". The claimant's case in summary is that its instruction to the bank to make a payment to Designcraft was not carried out, so it is entitled to have the money back.


The bank served a Defence on 28 November 2012 which is to the following effect: (1) the instruction was to make payment of a sum of £217,781.57 via CHAPS using the information on the CHAPS Transfer Form; (2) the bank did not undertake to ensure that Designcraft received the money; (3) it is normal banking practice for banks to process payments through CHAPS on the basis of the payee's account number and sort code and not the name of the payee; (4) the bank was authorised by the claimant to process the transfer through CHAPS in accordance with normal banking practice and did so; (5) therefore the bank complied with its instruction and was entitled to debit the claimant's account; (6) further or alternatively it was an implied term of the instruction that the bank would be entitled to debit the claimant's account if it made a CHAPS transfer to the account number and sort code named in the CHAPS Transfer Form regardless of whether that was an account in the name of the payee specified in the Transfer Form: such an implied term is necessary to give the instruction business efficacy by reason of (a) the banking practice already referred to, and (b) the fact that the paying bank in a CHAPS transfer has no means of knowing whether the account with the number at the branch with the sort code specified in the instruction is held by the payee named in the instruction; (7) as a matter of "banking law and practice", there is no doctrine of strict compliance (such as that applicable to documentary credits) which applies to CHAPS payments: provided the bank acted reasonably in interpreting the claimant's payment instruction, it was entitled to debit the claimant's account.


Not surprisingly, the claimant made a Part 18 request for further particulars of (3) (the assertion that it is normal banking practice for banks to process payments through CHAPS on...

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4 cases
  • Tidal Energy Ltd v Bank of Scotland Plc
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 31 July 2014
    ...FROM THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION BRISTOL DISTRICT REGISTRY MERCANTILE COURT HIS HONOUR JUDGE HAVELOCK-ALLAN QC [2013] EWHC 2780 (QB) Royal Courts of Justice Strand, London, WC2A 2LL The Master of the Rolls Lord Justice Tomlinson and Lord Justice Floyd Case No: A3 2013 2......
  • Tidal Energy Ltd v Bank of Scotland Plc [QBD]
    • United Kingdom
    • Queen's Bench Division
    • 13 September 2013
    ...EWHC 2780 (QB)" class="content__heading content__heading--depth1"> [2013] EWHC 2780 (QB)Queen's Bench Division (Bristol District Registry).HHJ Havelock-Allan Tidal Energy Ltd and Bank of Scotland plc. Guy Adams (instructed by Capital Law LLP) for the claimant. Neil Levy (instructed by Foot ......
  • Tidal Energy Ltd v Bank of Scotland Plc
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 31 July 2014
    ...the defendant, Bank of Scotland plc, (the sending bank) by Judge Havelock-Allan, QC, sitting as a judge of the Queen's Bench Division ([2013] Bus LR 1379), on the ground that a CHAPS transaction was complete when the receiving bank matched the account number and sort code on the CHAPS trans......
  • Tidal Energy Ltd v Bank of Scotland Plc
    • United Kingdom
    • Court of Appeal (Civil Division)
    • Invalid date
1 firm's commentaries
  • CHAPS Transfers
    • United Kingdom
    • Mondaq United Kingdom
    • 15 October 2013
    ...with the correct account number and sort code but the incorrect name on the account. In Tidal Energy Ltd v Bank of Scotland plc ([2013] EWHC 2780 (QB)), the court looked at the CHAPS rules and the terms of the CHAPS transfer form which had been completed by the bank's customer. The customer......

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