The Supreme Court, the final court of appeal for civil court cases in the UK, has clarified the scope of banks' so-called 'Quincecare Duty' owed to their customers.
In 2018, claimant Mrs Philipp was convinced by fraudsters posing as City watchdog, the Financial Conduct Authority (FCA) that they were working with the National Crime Agency to instruct Barclays to make two substantial payments totalling £700,000 from her account to a bank account in the United Arab Emirates (UAE). The payments were made, the money was lost, and subsequent attempts to retrieve the funds were unsuccessful.
Mrs Philipp sued Barclays, claiming that the bank owed her a duty, under a 1992 High Court case called Quincecare, to refuse to execute her payment instructions if it had reasonable grounds for believing that the instructions were an attempt to misappropriate funds from her. Barclays argued that it had no such duty, and that Mrs Philipp was solely responsible for losing her money.
Ultimately, the Supreme Court found that the Quincecare ‘Duty’ and its related principles are not applicable in cases of APP fraud; instead, it found that the principles relate to a situation where a bank believes that an agent acting on behalf of its customer (such as a company director using the company’s credit card) is giving payment instructions in order to defraud the bank’s customer.
In Mrs Phillipp’s case, she willingly gave clear, concise instructions relating to the payments; therefore, the Supreme Court concluded that it was not Barclays’ responsibility to investigate whether the context of the payments was fraudulent or not, but instead to carry out the transactions as instructed.
Authorised Push Payment (APP) fraud refers to scams where scammers convince people to send money via instantaneous, faster payment bank transactions using social engineering techniques, often involving impersonation and manipulation.
This type of fraud can take many forms, including:
- Impersonation scams: where the victim is contacted by someone posing as a trusted individual such as someone from their bank, building society, or (in Mrs Philipp’s case) a representative from a police or Government organisation, who convinces them to move money, usually under the pretence of ‘protecting’ it.
- Romance scams: where the victim believes they are in an emotional relationship with the scammer and sends them money for ‘emergencies’ such as flights, medical bills, and family tragedies.
- Investment scams: where the victim is encouraged to transfer money for investments or to top up their pension pots and retirement income, often with the promise of ‘low risk, high return’.
- Cryptocurrency scams: Cryptocurrency, such as Bitcoin or Ethereum, is increasingly being used in transactions. In turn, scammers promise financial ‘quick wins’ to persuade would-be investors to transfer money to build cryptocurrency portfolios. Once the money has been sent and the victim realises they have been scammed, then there is little chance of getting the money back from the fraudsters.
In the UK, a number of banks are signatories of the voluntary Contingent Reimbursement Model (CRM) code under which they agree to reimburse APP scam victims, provided they fall within the parameters of the code. However, banks act as both judge and jury when it comes to implementing the code, so there is a lack of consistency, which can lead to the customer being denied compensation and the blame being put back on their shoulders.
In response to an epidemic of APP scams, the Government is considering several pieces of legislation on how to protect financial services customers from fraud, so the decision by the Supreme Court is certainly not the end of the line for victims.
Where there is a dispute between the bank and a victim of APP fraud, the victim can complain to the Financial Ombudsman Service (FOS), an independent Government-backed organisation that investigates disputes between consumers and businesses that provide financial services, such as banks.
When considering complaints against banks, FOS investigators take into consideration what the law and regulations were at the time of the complaint, but also weigh up what is fair and reasonable with regards to each individual claim’s circumstances.
FOS is increasingly ruling in favour of scam victims, concluding that banks have not carried out their safeguarding duties sufficiently and, in turn, have awarded considerable compensation to customers. In the wake of the recent Supreme Court ruling, it is reassuring that FOS is still accepting APP fraud claim applications, so the decision does not appear to have affected their approach.
There is a lot of media chatter around this decision from the Supreme Court, and it would be easy to think that it means the end of the road for APP Fraud compensation claims – but this is far from the case.
A number of banks remain signed up to the CRM code, and the Financial Ombudsman Service is still accepting compensation claims from fraud victims, so I would advise anyone who has been – or knows someone who has been – affected by an APP scam to get in touch with us for an initial discussion about your claim.
Our experienced team know that the circumstances of each case are unique and regardless of this recent decision or even if you feel embarrassed or ashamed about what has happened, get in touch and we can fully explore your options.
If you are an individual or business owner who has been the victim of a scam, the specialist Authorised Push Payment (APP) Fraud team at TLW Solicitors can help you make a compensation claim to recover your losses. We understand the processes involved and the time limits to be followed. We have robust case management systems, meaning that we keep progressing with your case and ensure that you are kept fully up to date.
We work on a ‘no-win, no-fee’ basis, so if your case is unsuccessful, we will not charge for the time we have spent.
If you or your business has been conned into making payments to fraudsters, please get in touch for a confidential, no-obligation discussion.
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