Barclays wins UK Supreme Court case over push payment fraud - but it's not over, yet!

Barclays wins UK Supreme Court case over push payment fraud - but it's not over, yet!

Wednesday 12th July 2023 - Barclays wins UK Supreme Court case over push payment fraud - but it is not over until the fat lady sings!

Definitely important for Irish banks, #fintech &consumers alike when it comes to #paymentfraud. This is especially so because Ireland doesn't have the exact equivalent of the new UK's FCA 'consumer duty', which to my mind is not detrimentally impacted by the decision.

While English court decisions are not binding in Ireland, Irish courts may be persuaded by English (and other jurisdiction's courts) decisions. English decisions are very often cited in Irish courts. Thus this decision by the UK Supreme Court is very important.

Details:

• In 2018 Mrs Fiona Philipp & her husband, Dr Robin Philipp, fell victim to a fraud, deceived by criminals into instructing Barclays to transfer £700,000 in two payments from Mrs Philipp's current account with the Bank to bank accounts in the United Arab Emirates. The instructions were carried out & the money was lost.
• Mrs Philipp claims that the Bank is responsible for this loss, contending that the Bank owed her a duty under its contract with her or under common law not to carry out her payment instructions if the Bank had reasonable grounds for believing that she was being defrauded.
• Barclays applied to have the claim summarily dismissed on the ground that, as a matter of law, it did not owe Mrs Philipp the alleged duty. In 2021, the High Court granted summary judgment in favour of Barclays.
• The Court of Appeal subsequently allowed an appeal by Mrs Philipp in 2022 & accepted her legal argument that, in principle, a bank owes a duty to its customer of the kind alleged: whether such a duty arose on the facts in this case is a question could only be decided at trial. From that decision the Bank appealed to the Supreme Court.
• Today, 12th July 2023, the Supreme Court unanimously allowed Barclay's appeal, deciding that it did not owe the alleged duty to Mrs Philipp.

​Upshot:
The UK Supreme Court stated that the order of the judge in previous proceedings granting Barclay's summary judgment stands.

Mrs Phiilipp's is done but not out in her attempts to recover the £700,000:
Mrs Philipp is permitted to maintain an alternative claim based on the Bank's alleged failure to act promptly to try to recall the payments after the fraud was discovered.

In the Court's view, the questions (i) whether the Bank owed such a duty and (ii) whether there was any realistic chance that the money would have been recovered if attempts had been made to recall the payments sooner cannot be decided without a fuller investigation of the facts. This alternative claim should therefore not have been summarily dismissed. Mrs Philipp has an alternative claim that the Bank was in breach of duty in not acting promptly to try to recall the payments made to the UAE after being notified of the fraud. In the Court's view, the questions (i) whether the Bank owed such a duty and (ii) whether there was any realistic chance that the money would have been recovered if attempts had been made to recall the payments sooner cannot be decided without a fuller investigation of the facts. This alternative claim should therefore not have been summarily dismissed.

New UK FCA Consumer Duty:
By the way, under the UK Consumer Duty, firms must take proactive & reactive steps to avoid causing harm to customers through their conduct, products or services where it is in a firm’s control to do so.

The FCA has specifically stated that an example of 'causing harm' is where consumers become victims of scams relating to their financial products for example, due to a firm’s inadequate systems to detect/prevent scams or inadequate processes to design, test, tailor and monitor the effectiveness of scam warning messages presented to customers. In fact on page 99 of its final guidance, the FCA provides a 'good example' of circumstances of how a payments firm should consider how it can best design its processes to help identify suspicious payments and mitigate the risk of poor customer outcomes.

• Link to Supreme Court Decision
• Link to Linkedin Post by Peter Oakes