The decision suggests a basis for APP fraud victims to bring claims against their own banks, provided the alleged breach of duty is rooted in the sending bank's failure to take adequate steps after being alerted to fraud
The High Court has ordered partial strike-out of a claim brought by the alleged victim of an authorised push payment (APP) fraud against the sending bank: Dawn Barclay-Ross v Starling Bank Limited [2025] EWHC 2158 (KB).
This decision will be of broader interest to retail banks with a customer base susceptible to APP fraud. It illustrates the application of the Supreme Court's decision in Philipp v Barclays Bank UK plc [2023] UKSC 25 (see our blog post), which is taken as authority for the proposition that it is at least arguable to the strike-out standard that banks owe a duty to seek a customer's instructions to recover monies paid once notified that the relevant payments have been induced by fraud. This (arguable) "retrieval duty" arises from the contractual obligation owed by a sending bank to its customer to exercise reasonable skill and care (per Santander UK plc v CCP Graduate School Ltd [2025] EWHC 667 (KB) – see our blog post).
This decision demonstrates that even post-Philipp, APP fraud victims have a basis upon which to bring claims against their own banks, provided the alleged breach of duty is rooted in the sending bank's failure to take adequate steps after being alerted to a fraud, rather than the duty owed by the bank when processing the payment instruction itself. As confirmed by Philipp, a bank's general duty to act with reasonable skill and care when processing customer payments will only arise where there are questions about the validity of the payment made. As such, the duty cannot arise in an APP fraud context, because by definition the mandate is validly made by the victim of the fraud.
Interestingly, the court confirmed that any claim based on the so-called "retrieval duty" could only be a claim for the loss of a chance of recovering the money that has been paid out. This is significant, because it departs from the characterisation of claims founded on breach of the duty of reasonable skill and care when processing payments. The Supreme Court in Philipp confirmed that breach of the latter duty gives rise to a debt claim, which has practical consequences for any litigation (in terms of limitation, causation and contributory negligence). In contrast, it seems that any "retrieval duty" claims will be for damages for breach of a duty of care or contract. The practical implications flowing from the characterisation of such claims was considered by the Hong Kong Court of Final Appeal in PT Asuransi Tugu Pratama Indonesia TBK (formerly known as PT Tugu Pratama Indonesia) v Citibank N.A. [2023] HKCFA 3 (see our blog post).
In the present case, the court adopted a relatively permissive approach to allowing a vulnerable claimant (without representation) to make substantial amendments to their claims and refused to strike them out entirely. Simultaneously, the decision illustrates the limits of the court's permissiveness. The court will not seek to improve inarguable points: breaches of non-binding FCA Handbook provisions are not actionable; a payment to a foreign recipient is not caught by the contingent reimbursement model code (CRM Code) simply through the involvement of a UK-domiciled intermediary; and claims against banks for distress, inconvenience and emotional damages remain bad in law. Although the court said it lacked sufficient evidence to decide the point, it also queried whether alleged breaches of the voluntary CRM code are actionable.
We consider the decision (on which permission to appeal has been granted by the Court of Appeal) in more detail below.
Background
The claimant held two personal current accounts with Starling Bank Limited (the Bank). The claimant was the alleged victim of an APP fraud in relation to two sets of payments made from these accounts:
- Over several weeks, the claimant made a series of payments in US dollars to an account held with the Community Federal Savings Bank in the United States. On multiple occasions, the claimant wrote to the Bank to chase them to make the payments promptly (emphasising that the recipient entity was "not a new contact of mine"). Just over a month after the first payment was made, the claimant asked the Bank to stop the payments on the basis that she had discovered the recipient entity to be "fake".
- A few weeks after stopping these payments, the claimant made a separate payment in Euros to an account in the name of a different recipient held with an entity domiciled in Belgium. The claimant alleged that this payment was also made because of fraud.
The claimant was also the sole shareholder and director of a company which held a further two accounts with the Bank (the Company). The claimant claimed that the Company had also been affected by the alleged fraud, causing it to make a further payment.
After being alerted to the fraud, the Bank asked Community Federal Savings Bank to return the payments made at the claimant's instruction, but there was no response to the requests for repayment despite follow ups.
The claimant brought a claim against the Bank, seeking £120,000 paid to the alleged fraudsters plus damages for distress and inconvenience. The claimant alleged that the Bank:
- breached the CRM Code, a voluntary agreement entered into by some banks (including the Bank) under which customers may be reimbursed for losses caused by APP fraud;
- breached Principle 6 of the FCA Handbook, which provides that a regulated firm (like the Bank) must pay due regard to the interests of its customers and treat them fairly; and
- negligently handled the attempts to recover the claimant's payments.
The Bank applied for the claim to be struck out or, in the alternative, for summary judgment to be granted in its favour. Before the hearing took place, the Bank accepted that its application notice was defective in respect of its claim for summary judgment – meaning that this hearing concerned the Bank's strike-out application only.
Decision
As a litigant in person, the court noted (and the claimant accepted) that the claimant's particulars of claim were defective in several key respects. The court struck out several parts of the same:
- The court agreed with the Bank that the CRM Code's scope is confined to GBP-nominated payments between UK-domiciled accounts. This did not describe any of the alleged fraudulent payments, and the court rejected the claimant's argument that the fact of the payments being made via a UK-domiciled intermediary was sufficient to engage the CRM Code. The court therefore determined that the CRM Code was irrelevant, and the claim disclosed no reasonable grounds for making a claim against the Bank on this basis. Although the Bank further argued that the CRM Code is a voluntary arrangement (and not a mandatory regulatory duty creating liability to individual customers), the court concluded that the one-page extract from the CRM Code submitted in evidence was insufficient to allow it to determine the point (though it observed that this "may well be" correct).
- Read together, the court held that s. 138D(3) of the Financial Services and Markets Act 2000 and Schedule 5 to the FCA principles in the FCA Handbook mean that a breach of Principle 6 is not actionable by an individual.
- The court held it was well established that a claim for damages for distress, inconvenience and emotional harm is bad in law and bound to fail.
The Bank accepted that, were the claim to be properly pleaded, it would have amounted to an allegation the Bank breached its contractual and/or tortious duties to execute its mandate with due care and skill (by failing to seek the claimant's instructions to recover the monies paid once it was notified that payment had been induced by fraud). Following Philipp and Santander, the court held that the existence of this type of recovery duty is at least arguable to the strike-out standard. Both the court and the parties agreed that, were the claimant to properly plead such a claim, it would not be summarily determinable or strikable on the evidence.
Although the court therefore allowed the claim to proceed, it also held that the following points in the claimant's particulars of claim would need to be amended:
- Whilst the claim also sought to recover monies paid by the Company, the Company was not a party to the claim. If that element of the claim were to be pursued, the court noted that the Company should be joined as a second claimant.
- The claimant's alleged loss (£120,000) exceeded the total sums paid at the claimant's instructions (£54,898.31), even where the payment of £15,366 made by the Company was included. No explanation had been given for the discrepancy, and the court held that the particulars of claim would need to be amended to allow the claimant to plead quantum in a way that was consistent with the evidence.
- The court accepted the Bank's submission that the claim can only be a claim for the loss of chance of recovering the monies paid out, and that the claimant should therefore plead that she had lost a real and substantial chance of recovering the monies because of the Bank's alleged breach. This contrasted with the existing pleading, which (amongst other things) did not plead the specific legal obligations said to have been breached by the Bank, the essential facts relied upon, or all of the claims that the claimant indicated she wished to bring against the Bank.
Particularly, as the claimant was unrepresented, the court determined that the claimant should have a final opportunity to plead the case properly. The court thus granted the claimant permission to amend her particulars of claim to respond to the Bank's points within 28 days. In reaching its decision, the court took into account the impact of the fraud on the claimant and her family and the time required for the claimant to find and retain legal counsel.
The court concluded that the Bank's application was necessary in order to address the claimant's defective pleading. The claimant was therefore ordered to pay the Bank's costs of making the application.
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