UK Supreme Court clarifies the scope of Quincecare duty for financial institutions executing customer payments

Earlier this month, the UK Supreme Court in Philipp v Barclays Bank UK plc [2023] UKSC 25 addressed the scope of the Quincecare duty in the context of an "authorised push payment" (APP) fraud, where the victim was tricked into willingly authorising the bank to transfer funds into an account controlled by the fraudster.

The UK Supreme Court's judgment confirms that the general duty of skill and care owed by a bank when processing payment instructions from a customer is limited and applies to "interpreting, ascertaining, and acting in accordance with the instructions” of the customer. This means that the duty only arises where the validity or content of the customer’s instruction is unclear or leaves the bank with a choice about how to carry out the instruction. On the other hand, where the bank receives a valid payment order, the bank’s duty is simply to execute the order by making the requisite payment, and the duty of reasonable skill and care will not apply. The UK Supreme Court further confirmed that the Quincecare duty is an application of the general duty of care and skill, which only comes into play where an agent of the customer issues payment instructions, and the bank has reasonable grounds to suspect that this is an attempt to defraud the customer. The Quincecare duty therefore does not arise in a case of APP fraud, where the payment mandate is validly given by the victim.

In practical terms, the decision in Philipp v Barclays effectively aligns the English position with the position so far taken by the courts in Hong Kong (see our previous post here). Banks and financial institutions in the common law world will no doubt welcome this authoritative statement of law from an apex court.

For more information on the decision and its implications for financial institutions see this post on our Banking Litigation Notes blog.

For more information, please contact Gareth Thomas, Partner, Rachael Shek, Partner, Hannah Cassidy, Partner, Jojo Fan, Partner, Peter Ng, Senior Associate, or your usual Herbert Smith Freehills contact.