In the latest in a series of cases concerning claims against receiving banks arising out of authorised push payment (APP) fraud, the High Court has permitted a potential claimant to use documents received from a financial services firm under a Norwich Pharmacal Order to found a claim against that same firm as the receiving bank in an APP fraud: Babco Chemicals Inc v HSBC UK Bank plc [2025] EWHC 1749 (Comm).
Following the Supreme Court's decision in Philipp v Barclays Bank UK plc [2023] UKSC 25(see our blog post), victims of APP fraud are effectively barred from bringing a claim against their own bank for breach of the so-called Quincecare duty. Philipp clarified that this is a limited duty to act with reasonable skill and care when processing customer payments, which applies only to "interpreting, ascertaining, and acting in accordance with the instructions" of the customer. Accordingly, the duty cannot arise in an APP fraud context, because by definition the mandate is validly made by the victim of the fraud.
The decision in Philipp has resulted in many and varied attempts to bring innovative APP fraud claims against both sending and receiving banks. The present case highlights an additional area of risk for receiving banks in an APP fraud scenario, where potential claimants do not have the necessary information available to them to fully plead their claim. While the Norwich Pharmacal jurisdiction has safeguards to prevent fishing expeditions for what is in essence pre-action disclosure via the back door, this case evidences that those safeguards are not cast iron.
In terms of potential alternative avenues for claims arising from APP fraud, the Supreme Court in Philipp identified an arguable "duty of retrieval", requiring banks to take adequate steps after being alerted to a fraud to recover payments made, albeit the existence of such a duty being owed by receiving banks has been recently rejected in CCP v Santander [2025] EWHC 667 (KB) (see our blog post). However, the risk of APP claims for receiving banks remains through other heads of claim. For example, the decision in Terna Energy v Revolut [2024] EWHC 1419 (Comm) (see our blog post) is a recent example of an APP fraud claim relying upon unjust enrichment as the primary cause of action. The High Court in Terna refused to strike out/give reverse summary judgment on the claim.
This decision is therefore of interest in the context of APP fraud claims against receiving banks, and wider payment processing risks for banks and other payment service providers.
We consider the decision in further detail below.
Background
The claimant asserted it was the victim of an APP fraud as a result of which monies were transferred into the account of the defendant bank (the Bank).
The judgment concerns an application by the claimant to discharge an undertaking not to use the documents or information obtained from the Bank via a prior Bankers Book Evidence Act 1879 / Norwich Pharmacal Order (the Order) save in the limited circumstances permitted by the Order (ie only for the purposes of commencing or progressing proceedings against the fraudster / tracing the misappropriated funds).
It was the claimant's primary case that they had not breached the terms of the undertaking in utilising documents provided by the Bank (pursuant to the Order) to draft a letter of claim and accompanying draft particulars of claim which were sent to the Bank. The claimant argued that the intimated claim was, in part, a tracing claim (or extension thereof) which was permissible under the terms of the undertaking. In fact, the draft particulars of claim sought a wide variety of forms of relief, namely, declaratory, restitution and damages, including for conspiracy, fraud and/or breach of duty. In the alternative, the claimant asked for the undertaking to be discharged to ensure that no continued or further breach of the undertaking would take place.
Decision
The court found it was not necessary to determine if the claimant's acts had already amounted to a breach of the undertaking in the circumstances, given any breach was not material (the documentation provided by the Bank had simply been provided back to it in the form of draft particulars of claim). Moreover, had an application been made at an earlier point in time, the undertaking would likely have been discharged.
The court acknowledged that it did not have the necessary material before it to judge the strength of the claimant's allegations against the Bank. However, if the claimant was able to make out the matters alleged in the draft particulars of claim, then it would be contrary to the interests of justice to prevent it from doing so simply because of the existence of this undertaking.
In this regard, the court took comfort from the fact that if the claimant was able to make out an arguable case without using the material provided to it under the Order, it would almost certainly be entitled to disclosure of the material in any event. The court accepted, however, that this mere fact cannot justify the improper use of the Norwich Pharmacal regime to mount a fishing expedition against a financial institution to find prejudicial material to commence a claim.
The undertaking was therefore discharged with a more limited undertaking being instituted, to prevent documentation provided under the Order being used for any extraneous purpose beyond the intimated proceedings against the Bank (or those similarly provided for in the original undertaking, namely, to trace the misappropriated funds or to advance claims against the fraudster).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
