High Court considers for the first time whether and to what extent a bank is required to take steps to pursue recovery or retrieval of funds

CCP Graduate School Ltd v National Westminster Bank PLC & Anor [2024] EWHC 581 (KB)

In July 2023, following the significant Supreme Court decision in Philipp v Barclays Bank UK PLC [2023] UKSC 25 (“Philipp”), we asked the question “will we hear the term Quincecare duty again”? The answer has proven to be ‘Yes’. But, for those monitoring developments in authorised push payment (“APP”) fraud, it seems the focus, at least for the time being, will be on whether or not a “retrieval duty” exists and, if so, what the extent of it is.

In this recent decision, the High Court considered the defendant banks’ applications for reverse summary judgment / strike out of a claim brought by a victim of APP fraud who claimed against both its own bank (the sending bank) and the fraudster’s bank (the receiving bank). 

Over a one month period, the Claimant’s director instructed its bank to make 15 payments, together amounting to just over £415,000, to an account for which the Claimant provided the account number and sort code. At that time, in 2016, the account name was not required to make such transactions and the difference between the intended recipient “PGW Limited” and the actual recipient “PGW Consultants Limited” was not evident. Once funds reached the fraudster’s account, they were dissipated and just £14,000 was ultimately retrieved.

Limitation defences applied to the sending bank that did not apply to the receiving bank, such that it was not necessary for the Court to determine the claim against the sending bank based on the so-called Quincecare duty. However, the Court commented, obiter, that it would have struck out the claim against the sending bank, following Philipp. The Claimant in this case, as in Philipp, had given clear payment instructions and the bank had no doubts as to the validity of that instruction. Absent such doubts, the bank is not under a duty to exercise reasonable skill and care in carrying out the instruction; its duty is to carry out payment instructions in accordance with its mandate. The claim against the receiving bank, to the extent based only on the alleged Quincecare duty, was also struck out.

Of particular interest was the Court’s consideration of the alternative case left open in Philipp that a bank potentially owes a duty to the victim of an APP fraud to take reasonable steps to retrieve or recover sums paid out as a result of the fraud (the so-called “retrieval duty”). That argument was advanced in this case despite the Claimant victim of the fraud not being a customer of the receiving bank. The Claimant alleged that the receiving bank “could and should have taken certain steps to retrieve the sums which had been paid out to others”, arguing that the receiving bank was in a “special position” to take steps to recover the funds.

The Court rejected the receiving bank’s application to strike out, acknowledging the uncertainty of the law in this area, while also, interestingly, noting the force of the points made by the receiving bank. It therefore remains to be seen whether that claim can be successfully made out and whether and to what extent such a retrieval duty exists. This case will be one to watch.