Collyer Bristow LLP | Jean-Martin Louw

A recent High Court decision has examined the responsibilities of banks to retrieve funds lost in authorised push payment (“APP”) fraud scams.

CCP Graduate School Ltd v National Westminster Bank Plc and Santander UK Plc (“CCP v Natwest and Santander”)

Readers will recall the 2023 case of Philipp v Barclays, in which the Supreme Court declined to extend the banks’ “Quincecare duty” to assist victims of APP fraud. The Supreme Court held that if a customer unambiguously authorises and directs their bank to execute a payment, then the “Quincecare duty” does not require the bank to prevent the payment if it is linked to APP fraud. But what happens after the payment has been made and do banks have a duty to retrieve lost funds?

In CCP v Natwest and Santander, the Claimant lost over £415,000 to APP fraudsters in 15 separate payments between September 13 and October 12, 2016. The payments were made from its Natwest account to a Santander account controlled by a criminal gang (despite the Claimant’s belief that the funds were being transferred for investments). The claimant flagged a fraud alert with Natwest around October 22, 2016, with Santander being notified the same day. However, only £14,000 of the Claimant’s funds were recovered.

The court held that any claim against Natwest based on a failure to prevent the payments would be statute barred, as the last payment occurred on October 12, 2016, and the claim was not filed until October 18, 2022. Even if not time-barred, the Court stated further that it would have struck out the claim following the Supreme Court’s decision in Philipp v Barclays.

The Claimant sought to amend its case to plead in the alternative that, even if the banks involved had no duty to prevent payments out, there is still a duty on banks to take reasonable steps to retrieve or recover the sums paid out as result of APP fraud. This was referred to as a “retrieval duty”.

The amendment was grounded in some evidence to suggest that NatWest had been alerted to the possibility of fraud after the transactions were completed. A fraud investigator from a third bank, Lloyds, had reached out to NatWest expressing concern around a particular Lloyds account, which had received large sums of money from the fraudster’s Santander account, originating from the Claimant’s Natwest account.

The Court held that there was at least a reasonable inference from the available facts that more could have been done by Natwest and Santander to retrieve the sums paid out. Although the Claimant’s amendment was not allowed as against Natwest due to limitation issues, the Court held that a claim against Santander based on the “retrieval duty” had in fact already been pleaded (with some deficiencies). Master Brown commented: “Whether or not it could be described as a developing area of law, there is to mind … some uncertainty as to whether any such duty lies on the bank of those who can be assumed to have perpetrated the fraud.” The Court, however, declined to summarily dismiss the claim against Santander based on the “retrieval duty”, leaving it open.

The ruling suggests a shift towards assessing banks’ efforts in retrieving funds in APP fraud cases, even though banks are not strictly under a duty to prevent fraudulent transactions. This leaves open the possibility of APP fraud victims bringing claims against their own banks, as well as the recipient banks, if evidence exists to show that more could have been done by either to retrieve their funds.

A recent High Court decision has examined the responsibilities of banks to retrieve funds lost in authorised push payment (“APP”) fraud scams.

CCP Graduate School Ltd v National Westminster Bank Plc and Santander UK Plc (“CCP v Natwest and Santander”)

A recent High Court decision has examined the responsibilities of banks to retrieve funds lost in authorised push payment (“APP”) fraud scams.

Readers will recall the 2023 case of Philipp v Barclays, in which the Supreme Court declined to extend the banks’ “Quincecare duty” to assist victims of APP fraud. The Supreme Court held that if a customer unambiguously authorises and directs their bank to execute a payment, then the “Quincecare duty” does not require the bank to prevent the payment if it is linked to APP fraud. But what happens after the payment has been made and do banks have a duty to retrieve lost funds?

In CCP v Natwest and Santander, the Claimant lost over £415,000 to APP fraudsters in 15 separate payments between September 13 and October 12, 2016. The payments were made from its Natwest account to a Santander account controlled by a criminal gang (despite the Claimant’s belief that the funds were being transferred for investments). The claimant flagged a fraud alert with Natwest around October 22, 2016, with Santander being notified the same day. However, only £14,000 of the Claimant’s funds were recovered.

The court held that any claim against Natwest based on a failure to prevent the payments would be statute barred, as the last payment occurred on October 12, 2016, and the claim was not filed until October 18, 2022. Even if not time-barred, the Court stated further that it would have struck out the claim following the Supreme Court’s decision in Philipp v Barclays.

The Claimant sought to amend its case to plead in the alternative that, even if the banks involved had no duty to prevent payments out, there is still a duty on banks to take reasonable steps to retrieve or recover the sums paid out as result of APP fraud. This was referred to as a “retrieval duty”.

The amendment was grounded in some evidence to suggest that NatWest had been alerted to the possibility of fraud after the transactions were completed. A fraud investigator from a third bank, Lloyds, had reached out to NatWest expressing concern around a particular Lloyds account, which had received large sums of money from the fraudster’s Santander account, originating from the Claimant’s Natwest account.

The Court held that there was at least a reasonable inference from the available facts that more could have been done by Natwest and Santander to retrieve the sums paid out. Although the Claimant’s amendment was not allowed as against Natwest due to limitation issues, the Court held that a claim against Santander based on the “retrieval duty” had in fact already been pleaded (with some deficiencies). Master Brown commented: “Whether or not it could be described as a developing area of law, there is to mind … some uncertainty as to whether any such duty lies on the bank of those who can be assumed to have perpetrated the fraud.” The Court, however, declined to summarily dismiss the claim against Santander based on the “retrieval duty”, leaving it open.

The ruling suggests a shift towards assessing banks’ efforts in retrieving funds in APP fraud cases, even though banks are not strictly under a duty to prevent fraudulent transactions. This leaves open the possibility of APP fraud victims bringing claims against their own banks, as well as the recipient banks, if evidence exists to show that more could have been done by either to retrieve their funds.

This article was originally featured on Compliance Angle and can be found here.