Tidal Energy Ltd v Bank of Scotland Plc [QBD]
| Jurisdiction | England & Wales |
| Judge | HHJ Havelock-Allan |
| Judgment Date | 13 September 2013 |
| Court | Queen's Bench Division |
| Date | 13 September 2013 |
Queen's Bench Division (Bristol District Registry).
HHJ Havelock-Allan QC.
Guy Adams (instructed by Capital Law LLP) for the claimant.
Neil Levy (instructed by Foot Anstey LLP) for the defendant.
The following cases were referred to in the judgment:
Clayton'sCase(1817) 1 Mer 572; 35 ER 781.
Customs & Excise Commissioners v FDR LtdUNK[2000] STC 672.
Customs & Excise Commissioners v National Westminster Bank plcUNK[2003] 1 All ER (Comm) 327.
Du Preez Ltd (formerly Habana Ltd) v Kaupthing Singer and Friedlander (Isle of Man) Ltd(2010) 12 IETLR 943.
Hazell v Hammersmith and Fulham London Borough CouncilELR[1992] 2 AC 1.
Jones v ChurcherUNK[2009] EWHC 722 (QB); [2009] 2 Ll Rep 94.
Libyan Arab Foreign Bank v Manufacturers Hanover Trust (No. 2)UNK[1989] 1 Ll Rep 608.
Mardorf Peach Co Ltd v Attica Sea Carriers Corporation (The Laconia)ELR[1977] AC 850.
Momm v Barclays Bank International LtdELR[1977] QB 790.
R v PreddyELR[1996] AC 815.
Razcom CI v Barry Callebaut Sourcing AGUNK[2010] EWHC 2598 (QB).
Rekstin v Severo Sibirsko Gosudarstvennoe Akcionernoe Obschestvo KomseverputjELR[1933] 1 KB 47.
Royal Products Ltd v Midland Bank LtdUNK[1981] 2 Ll Rep 194.
Tayeb v HSBC Bank plc[2005] 1 CLC 866.
TSB Bank of Scotland plc v Welwyn Hatfield District Council[1993] 2 Bank LR 267.
Banking Payments Operation of CHAPS Claimant giving wrong account number and sort code for customer Claimant said to be victim of fraud in relation to account details Whether defendant bank liable to re-credit claimant's account Whether payment required evidence of authorised acceptance Whether beneficiary's name formed part of identifier determining destination of CHAPS payment Whether bank complied with instructions Whether liability excluded by terms of CHAPS transfer.
These were cross-applications for summary judgment arising out of an instruction to make a payment through the Clearing House Automated Payment System (CHAPS).
The claimant company was a customer of the defendant bank's Cardiff branch. In January 2012, the claimant owed one of its suppliers, Designcraft Ltd, the sum of 217,781.57. It instructed the bank to pay that sum by CHAPS transfer out of its business account to an account number 13027309 at Barclays Bank with sort code 201612 which was the Bury St Edmunds branch. The receiving customer's name was stated as Designcraft Ltd. The payment details were given as Invoice 2638. The payment was duly processed through CHAPS.
The claimant soon afterwards discovered that the designated receiving account at Barclays did not belong to Designcraft Ltd but to a different company. The claimant said that it was the victim of a fraud in respect of the account details. The money had since been removed from the receiving account. The claimant claimed that the defendant was liable to re-credit its account with the money. Its case was 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 claimant said that its instruction to the bank to make a payment to Designcraft was not carried out, so it was entitled to have the money back.
Held, giving summary judgment for the bank:
1. The logical first step was to ask what the bank was authorised to do and then to examine whether the bank, as agent of the claimant, complied with that instruction. The instruction was to pay a sum of money to the beneficiary by CHAPS transfer to the account number and sort code specified. Although the identity of the beneficiary was important to the claimant, the evidence was that CHAPS did not operate in such a way that the beneficiary's name formed part of the identifier which determined the destination of the payment. The reason was a practical one. The volume of transactions conducted through CHAPS each business day meant that a process of manual checking would prevent payments being accomplished within the short timescale that was the hallmark of CHAPS. There was no requirement in the CHAPS Rules for the beneficiary's name to be included, and in practice CHAPS transfers were processed without reference to it. The evidence was unequivocal: the identity of the beneficiary was irrelevant to the way in which the payment was processed. It was the destination account number and sort code which mattered. The CHAPS Transfer Form included a box for naming the beneficiary, and mentioned the payee: but that was an anti-money laundering and counter-terrorism measure. The evidence of how CHAPS worked was that a receiving bank which was able to match the account number and sort code to one of its accounts would be expected to credit that account with the money and send an acknowledgment back to the paying bank to indicate acceptance of the payment. At that point the payment was complete. That was what happened. The claimant's argument that in the present case the payment was not completed because there was no authorised acceptance by or on behalf of the payee was rejected.
2. Whether the instruction was contractual or was simply an authority, the transfer to which it related was one which the bank undertook to carry out on the terms of the CHAPS Transfer Form. Those included the express acknowledgment by the claimant that no responsibility would attach to the bank for any loss caused by delays, interruptions or errors in transmission of payment, which were not directly due to the negligence or default of its officers or servants. There was no evidence that the bank was responsible for any error in transmission of the payment, nor that its employees were negligent. The bank faithfully discharged its mandate. The payment ended up with the wrong payee because the claimant gave the wrong sort code and account number.
HHJ Havelock-AllanQC:
1. Before the court are cross-applications for summary judgment.
2. 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.
3. 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.
4. 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 201612. 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.
5. 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.
6. 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.
7. 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... |
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Tidal Energy Ltd v Bank of Scotland Plc
...beneficiary's name made payment in accordance with instructions. This was an appeal by a bank customer (Tidal) against a decision ( [2013] 2 CLC 407) granting summary judgment to the bank on Tidal's claim that the bank had wrongly debited its account. Tidal owed its supplier, Designcraft Lt......