09 November 2019

Bank liability for fraud


Negligent bank responsible even if payments are authorised per the mandate


The Supreme Court has affirmed a decision that a bank is liable to refund a customer for a fraudulent transaction otherwise properly authorised in accordance with the bank mandate, if the bank was negligent in not recognising and blocking the fraud - the "Quincecare" duty: "the bank should refrain from executing an order if and for so long as it was put on inquiry by having reasonable grounds for believing that the order was an attempt to misappropriate funds."

In this case the company was being defrauded by its own controlling director, and it is hard to see what the bank could actually have done without risking being sued for not carrying out the director's instructions.

This case potentially opens the door to thousands of claims by victims of "push payment" frauds if they can show that the bank was negligent in accepting the customer's instructions.

Singularis Holdings v Daiwa Capital Markets


1 comment:

  1. The High Court has held that an individual tricked into making a transfer to a fraudster's account could not rely on the Quincecare duty to recover the money from the bank, distinguishing Singularis because it concerned a company's money : Philipp v Barclays Bank UK Plc [2021] EWHC 10 (Comm) (18 January 2021). The case could be appealed, but the facts were not the strongest and the claimant does not seem to have been able to point to what the bank should have done to prevent loss.

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