Supreme Court rules in favour of Barclays in APP fraud case

In 2018 Mrs Fiona Philipp and her husband, Dr Robin Philipp, fell victim to a fraud after being deceived by criminals into instructing Barclays Bank to transfer £700,000 in two payments from Mrs Philipp’s current account bank accounts in the United Arab Emirates (UAE).

Mrs Philipp claimed that the Bank is responsible for this loss, contending that the Barclays owed her a duty under its contract with her or at common law not to carry out her payment instructions if - as was allegedly the case here - the Bank had reasonable grounds for believing that she was being defrauded.

The Bank 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. Judge Russen QC, sitting as a judge of the High Court, agreed with this submission and granted summary judgment in favour of the bank.

But an appeal by Mrs Philipp to the Court of Appeal was allowed in a judgment with which Sir Julian Flaux C and Coulson LJ agreed, accepted the claimant’s argument that, in principle, a bank owes a contractual duty to its customer.

However, in the Bank’s appeal at The Supreme Court, Supreme Court Judge George Leggatt found this judgement to be inconsistent with first principles of banking law.

He said, “It is a basic duty of a bank under its contract with a customer who has a current account in credit to make payments from the account in compliance with the customer’s instructions. This duty is strict. Where the customer has authorised and instructed the bank to make a payment, the bank must carry out the instruction promptly. It is not for the bank to concern itself with the wisdom or risks of its customer’s payment decisions.”