Santander UK plc v CCP Graduate School Ltd
Dispute Resolution analysis: On appeal, it has been held that a master should have struck out a claim brought by a victim of authorised push payment ('APP') fraud against a recipient bank, of which the victim was not a customer, alleging a tortious duty of retrieval. The pleaded claim was premised upon a misinterpretation of the decision of the Supreme Court in Philipp v Barclays Bank UK plc.
What are the practical implications of this case?
This is an interesting decision in what is a developing area of law in relation to the ability of victims of APP frauds to obtain redress by way of claims against ostensibly innocent banks whose accounts have become involved in the fraud. This decision identifies limitations upon what might otherwise be seen as increasing the scope for duties owed by and liabilities to be found against banks. The judgment observes that:
'The incremental development of a duty of care is not a purely academic exercise; determining what is fair, just and reasonable requires that regard is had to the relevant context. As Lord Leggatt noted in Philipp at [16], banks operate in a heavily regulated legal environment, which recognises the balance that has to be struck between the need for payments to be facilitated at speed and the desirability of increasing protections against fraud.'
This emphasises that whereas clear policy justifications may exist for assisting the victims of increasingly common APP frauds to recover the sums lost, the common law should be careful not follow a path of incremental expansion in favour of those victims, particularly in circumstances where Parliament was itself legislating concurrently to strengthen the protections available to victims.
What was the background?
CCP Graduate School Limited ('CCP') fell victim to an APP fraud when its director, Mr Pathirana was induced to make 15 payments from its account with NatWest into a Santander bank account. A short while after those payments were received into the Santander account, fraudsters caused the payments to be transferred on to a range of other accounts. Over £400,000 was lost in this way and, following the various dissipating payments, a sum of just over £5 was left in the Santander account. CCP issued proceedings against both NatWest and Santander. The claim against NatWest was brought in contract for breach of the so-called Quincecare duty. Due to the lack of contractual relationship between CCP and Santander, the claim against Santander was brought in tort, alleging alternatively that Santander had breached its duty of care to CCP by allowing the payments to be made out of the account by the fraudsters, or that Santander owed a duty of retrieval in respect of the payments which gave rise to a further breach of a duty of care to CCP. Master Brown struck out the claim against NatWest entirely and also struck out the part of the claim against Santander which was premised on the so-called Quincecare duty. However, the master held that the alternative claim premised upon the duty of retrieval was sufficiently arguable as to allow it to proceed. Part of the master's reasoning was that additional evidence might emerge prior to trial regarding the extent to which Santander had offered indemnities down the chain of banks and whether it could have taken other steps but failed to do so. Santander appealed.
What did the court decide?
The master erred both in his approach to the strike-out application and in relation to his conclusion. The claim against Santander was held to turn on a discrete point of law, namely in circumstances in which a customer of the paying bank has been fraudulently induced to make payments into an account held at the receiving bank (with which the customer otherwise has no relationship), when notice of the fraud is given to the receiving bank, whether it is under a tortious duty to take reasonable steps to retrieve or recover those payments for the customer of the paying bank. If the answer to that discrete point of law was that no duty was owed, there was no basis to allow that part of the claim to proceed in the anticipation that additional evidence might emerge. Contrary to the submissions of CCP and the decision of the master, it was not possible to read into the decision of the Supreme Court in Philipp v Barclays Bank UK plc [2024] AC 346, a freestanding duty upon a bank to take positive steps to unwind harm already caused to a third party by attempting to reverse payment orders previously entirely properly made on the instructions of its own customer. In fact, such a duty appeared directly to conflict with comments of Lord Leggatt at paragraph [117] of the judgment in Philipp. This conclusion accorded with the decision of Mr Justice Zacaroli in Larsson v Revolut Ltd [2024] EWHC 1287 (Ch). On the facts of this case, CCP's claim could not be considered anything other than fanciful and it ought properly to have been struck out. On appeal, that was the outcome.
Case details
- Court: High Court, King's Bench Division
- Judge: Mrs Justice Jennifer Eady DBE
- Date of judgment: 25 March 2025
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