In recent years much ink has been spilled opining on the so called 'Quincecare' duty of care, and the limits of it (see links to our recent insolvency law updates covering the topic below). The judgment in Barclays Bank plc v Quincecare Ltd  4 All ER 363 was a first instance decision on Steyn J, in which he found that a bank has a duty not to execute a payment instruction given by an agent of its customer without making inquiries if the bank has reasonable grounds for believing that the agent is attempting to defraud the customer. The duty was founded on an implied term to take "reasonable care in and about executing a customer's order to transfer money," with a coextensive duty also existing in tort.
The Supreme Court of the United Kingdom released its most recent statement on the Quincecare duty in a judgment in the summary judgment/strike application by the Bank in Philipp v Barclays Bank UK PLC  UKSC 25. The key points arising from the judgment are:
- The Supreme Court rejected the extension of the Quincecare duty to cases involving instructions given directly by individual customers. In other words, the duty is confined to cases involving a payment instruction issued to the bank by an agent of the bank's customer (company director, or CFO, for example).
- Citing the Supreme Court of New Zealand's decision in Westpac v MAPP, the UK Supreme Court held that the duty on a bank to execute its customer's payment instructions is strict. It is not for the bank to inquire into the wisdom of the customer's payment decisions.
- That said, it did recognise that the bank has a duty of care, if it is put on inquiry as to the bona fides of the customer's agent, not to act without checking that a payment instruction is indeed a valid instruction of the customer to transfer money. That is because the authority conferred on an agent by a customer to give payment instructions does not extend to authority to act dishonestly in a fraud on the customer. Any bank with information that ought to put it on inquiry that the agent is not acting honestly will need to satisfy itself by making proper inquiries that the agent has authority to execute the customer's instructions.
- The type of fraud which was carried out against Mrs and Dr Philipp is a significant social problem. Whether victims of fraud should be left to bear the loss themselves or whether a distributive justice approach should apply whereby the banks reimburse the victims of fraud, is a question ultimately for Parliament to consider. It is not the role of the Courts to impose on parties an obligation to which they have not consented, and which is inconsistent with their contractual bargain.
The relevant facts were as follows. Mrs Philipp, the Appellant, was a customer of Barclays Bank. She and her husband, Dr Philipp, fell victim to an authorised push payment fraud which was perpetrated by a third-party fraudster posing as an operative working for the Financial Conduct Authority in conjunction with the National Crime Agency. As a result of the fraud, Mrs Philipp was deceived into transferring via several payments £700,000 from her Barclays current account to two bank accounts in the UAE. Mrs Philipp sued Barclays claiming that Barclays owed her a duty to observe reasonable care and skill in and about executing her instructions, and that this duty required Barclays to refrain from executing her payment instructions if and for so long as it had reasonable grounds for believing that the instructions were an attempt to misappropriate funds from Mrs Philipp.
Essentially this case asks the question of whether the bank must decline a customer's direct instructions based on the suspicion that the customer has been deceived into making the payment. For Mrs and Dr Philipp, the argument was advanced based upon the duty of care (per Quincecare) to take "reasonable care in and about executing a customer's order to transfer money…".
The Supreme Court has firmly rejected the extension of the Quincecare duty in the manner argued for by Mrs and Dr Philipp, and in essence reformulated the test to be one focussed on whether the agent of the customer has apparent authority. Lord Leggatt has found that the extension of the duty, in the manner argued for by the appellant is "inconsistent with first principles of banking law". The proposition of Steyn J in Quincecare was better supported on the basis that the bank did not have proper authority from its customer in executing the payment instruction. Applying that formulation of the test to the Philipp case meant that the case must fail, because the payments in question were absolutely authorised by Mrs Philipp.
It is possible that the Supreme Court decision will nonetheless come in for criticism, in relation to the obligation on a bank to make inquiries to verify that an agent has authority, if the bank is on notice of circumstances that give rise to concern. Peter Watts KC, who has written on the Quincecare topic in a number of articles, and to whom the Supreme Court refers throughout the Philipp judgment, has argued that a bank must follow its customer's instruction unless it has actual knowledge of dishonesty (or is wilfully blind), see Peter Watts, "The Quincecare duty: misconceived and misdelivered"  JBL 403, 406. For now, the Supreme Court's judgment provides welcome clarity and certainty to banks operating in this very fraught environment.
Our recent updates on the topic of the limits of the Quincecare duty can be found here:
- Singularis Holdings Ltd v Daiwa Capital Markets Europe Ltd: legal update, July 2017; legal update, December 2019
- Nigeria v JP Morgan Chase: legal update, May 2019
- And see our - newsletter (pg.8), March 2023.