Finance litigation update - July 2022

FINANCE LITIGATION UPDATE – JULY 2022 21 properly be undertaken at trial. However, the Court of Appeal outlined that the sort of steps a bank might be required to take would be delaying the requested payment and making further inquiries. In this particular case, it is difficult to assess what the outcome of those further inquiries would have been. Mrs Philipp and Dr Philipp were so completely taken in by the fraudsters that they told false stories to the bank about the purpose of the transfer and believed that visits by the police warning them of the fraud were actually part of a deception which the fraudsters were protecting them from. The tension between a bank's primary duty to execute its customers instructions and the duty not to carry out those instructions when on notice of a potential fraud would therefore have been particularly high in this scenario as Mrs Philipp (on the fraudster's instructions) sought to make the transfer as quickly as possible. Since 2018, banks' policies in relation to APP fraud and the kind of inquiries that must be made have developed. In particular, the industry-wide CRM code now applies specifically to reimburse victims of APP fraud. However, the decision is still a significant one because it may open the way for further Quincecare claims based on any alleged breach of relevant policies. In such claims, banks will need to disclose not only relevant policies from the time but records relating to how decisions on compliance with those policies were taken. 1 [2022] EWHC 1447 (Comm) The future of Quincecare While the judgment in Federal Republic of Nigeria v JP Morgan Chase Bank1 has provided some guidance for banks on the way in which the Quincecare duty works in practice, the conclusion in that case was that the bank's customer had not been defrauded. The outcome of any eventual trial in Philipp v Barclays (where there clearly was a fraud) is therefore eagerly awaited. Although the Court of Appeal's decision in Barclays v Philipp suggests that the scope of the Quincecare duty may grow wider, rather than narrower, the judgment in Tulip Trading Ltd v Bitcoin Association for BSV2 confirms that whatever its scope, the duty is owed only to the bank's customer, not a wider class. In that case, the court rejected an attempt to draw an analogy between a bank's contractual relationship with its customer and the relationship between a developer of digital crypto-asset networks and the customers that use them. In the former, obligations are owed to specific and identifiable customers. In the latter, the potential class is unknown and unlimited. The court concluded there was nothing in the Court of Appeal's judgment in Philipp v Barclays to modify the careful calibration of the Quincecare duty on that point Sue Millar and Harriet Campbell 2 [2022] EWHC 667 (Ch)