Following the Court of Appeal’s decision to allow the Philipp v Barclays Bank plc [2022] EWCA Civ 318 case to proceed to trial, the Privy Council has handed down its judgment in RBS v JP SPC 4 & Another, providing further insight into the scope of the Quincecare Duty.

JP SPC 4 (“the Fund”), an investment fund, established a scheme run by a company that was a customer of RBS (the Fund was not an RBS customer) and used its bank accounts with RBS to manage the scheme payments; however, the Fund alleged that monies were improperly diverted. The Fund commenced proceedings in the Isle of Man against RBS, alleging that money held in the company’s accounts with RBS belonged beneficially to the Fund and RBS knew this. RBS applied to strike out the claim. The Isle of Man court originally dismissed this application but on appeal, the decision was reversed and the claim was struck out.

The Fund subsequently appealed to the Privy Council, raising a question as to the scope of a bank’s duty of care in tort to a person who is known to be the beneficial owner of monies held in the account of a customer of the bank and who has been defrauded by the customer.

The Privy Council rejected the Fund’s argument that the alleged duty of care existed, finding that the Court of Appeal was right to draw attention to the “radical implications” of extending the case law as this would have “significant consequences for banking law” and that there is nothing in principle or in existing case law to support an extension of the duty to a third party with whom a bank has no contractual relationship, even if the bank knew or ought to have known that the third party was the beneficial owner of funds in the customer’s account. 

Parties continue to seek to push the boundaries of the Quincecare Duty. In this case, the Court found that an extension of the duty would go too far. It remains to be seen whether the outcome in Philipp will follow suit.