Civil Fraud: Law, Practice & Procedure is designed to be the primary port of call for all practitioners conducting a civil fraud case. It deals with the subject in a comprehensive manner, combining in-depth legal analysis with a solidly practical approach.

The authors focus throughout on the real-life situations which litigants in this area regularly encounter and offer effective guidance on the complex practical and procedural issues which can arise.

The book starts with an examination of common factual and legal scenarios in a fraud case, which can be difficult to navigate even for the most experienced litigators. The remainder of the text develops the legal, practical and procedural issues flowing from such scenarios.

The authors, drawing on a wealth of experience in litigating fraud claims, bring together the disparate areas of the law that fall under the label “fraud”, from the substantive causes of action – common law, restitutionary and equitable claims and claims arising under statute – through to remedies. It provides a full and comprehensible treatmentof the myriad procedural swords and shields which can be used in fraud litigation, including freezing orders, proprietary and other injunctions, search orders, receivership, ancillary orders and the increasingly-used contempt jurisdiction.

The book also considers the key international aspects of civil fraud litigation. This is a primary ‘single source’ point of reference which avoids the need to navigate a whole series of texts in a field where practitioners often work under considerable time pressure.

Civil Fraud: Law, Practice & Procedure works as a road map to take the practitioner from the moment of initial instructions through to a completed legal and practical analysis, whether at the various interlocutory stages, or at trial.

Andrew Westwood is an Editor and Fiona Dewar is a Contributor.

The new edition of ‘Foskett on Compromise’ (9th edition, Sweet & Maxwell) has recently been published, 40 years after the first edition. The text has been updated in all areas and it contains a new chapter on ‘The Settlement of International Commercial Disputes’ which covers, amongst other things, the settlement of international commercial arbitrations and the implications of The Singapore Convention for international disputes that have been settled pursuant to mediation.

Catherine Addy KC and Rebecca Page are Contributors.

Auction house liability including of a new section on anti-money laundering, counter terrorist financing and sanctions compliance

Catherine Addy KC, Rebecca Page, Laurie Scher, Oliver Phillips, James Kinman and Rory Forsyth are Contributors.

Trustees hold'em? This week the Charity Commission published its inquiry into the Citygate Christian Outreach Centre, a registered charity whose former trustees (including the Church's senior Pastor) lent over £940,000 to an associate without receiving paperwork, taking any security, or seeking professional advice. While the gamble may yet result in a profit for the Church, the Commission found that the trustees' conduct constituted serious misconduct and/or mismanagement in the administration of the charity. Kendya Goodman has summarised the case and its implications for charity trustees in this article, by reference to the relevant duties applicable to trustees who engage in lending and other potentially risky investment practices.

Eoin MacLachlan has contributed an article entitled, ‘UK tools up for crypto related crime’ to ThoughtLeaders4 FIRE Magazine’s ‘Year in Review Edition 2023’ (Issue 15). The article addresses recent legal developments in combatting crypto related fraud. 

Summary

In the highly significant decision of Philipp v Barclays Bank plc [2023] UKSC 25, the Supreme Court has overturned the Court of Appeal’s decision as to the scope of the so-called Quincecare duty. The decision provides certainty for financial institutions as to the extent of their obligations to investigate a customer’s payment instructions.

Lord Leggatt (with whom the rest of the Supreme Court Justices agreed) held that the so-called Quincecare duty is no more than an application of orthodox principles of the law of agency. In so doing, the Supreme Court endorsed the narrow view of the Quincecare duty adopted by the first instance Judge, His Honour Judge Russen QC, sitting as a Judge of the High Court.

Accordingly, where a bank is on notice that a customer’s agent (otherwise authorised to give instructions to the bank) is acting fraudulently in giving instructions, the bank cannot rely on the agent’s apparent authority. Where, as in the case of Mrs Philipp, the customer was herself giving the instruction to make a transfer (and there was no question of apparent authority), the bank was not generally under a common law or implied contractual duty to stop the transaction, even where the recipient turned out to be a fraudster.

Facts

This case involved an authorised push payment (“APP”) fraud: “authorised” in the sense that Mrs Philipp herself gave instructions to her bank; a “push payment” because the relevant instructions were to make transfers out of her account.

Mrs Philipp (and her husband, Dr Philipp) were deceived by a fraudster purporting to be “Jonathan Watts” (“JW”). JW pretended to be part of an investigation by the Financial Conduct Authority and the National Crime Agency into fraud in the banking sector. He eventually persuaded the Philipps to transfer most of their life savings out of Dr Philipp’s investment account into Mrs Philipp’s current account, and thence to various allegedly “safe” accounts that were in fact controlled by JW and his associates. The sad tale of this fraud, detailed by HHJ Russen QC at first instance (at [27]-[71]), makes for sobering reading.

The underlying claim concerned payments totalling £700,000 which Mrs Philipp made, on JW’s advice, to two bank accounts in the United Arab Emirates. By the time the fraud was discovered, this money had become irrecoverable. Mrs Philipp advanced her claim against Barclays Bank plc (the “Bank”) on two main grounds as follows:

(i) the Bank should have spotted the “red flags” about the transactions and refrained from executing her instructions; and

(ii) the Bank should have tried to recover the money as soon as it was on notice that there had been a fraud.

Course of the proceedings

The Bank applied for summary judgment dismissing the claim, which was granted by HHJ Russen QC, sitting as a Judge of the High Court, in January 2021 ([2021] EWHC 10 (Comm), [2021] Bus. LR 451).

He accepted the Bank’s submission that the cases in which a Quincecare duty had been found were all of a type: a bank had been on notice that an agent for a customer of the bank (otherwise authorised to give instructions) was acting fraudulently in giving an instruction. Since Mrs Philipp was a customer giving genuine instructions (albeit procured through fraud) rather than an agent, the duty didn’t apply.

The High Court decision was reversed by the Court of Appeal in March 2022 ([2022] EWCA Civ 318, [2022] QB 578). The Court of Appeal disagreed. Lord Justice Birss accepted that the existing Quincecare cases fitted one factual pattern, but thought they rested on an underlying rationale of protecting bank customers from fraud (at [27]-[29]). He reasoned that (a) if the Bank knew that the transaction was an attempt to misappropriate funds, it would be liable under the “Quincecare duty” and that therefore (b) the issue in the case was really what level of knowledge would suffice (at [28]). That was an issue that could only be resolved after trial, not on summary judgment.

The case before the Supreme Court

Relying on a body of caselaw, including Barclays Bank plc v Quincecare Ltd [1992] 4 All ER 363, Mrs Philipp’s case was that the Bank was under a duty “to refrain from executing an order from Mrs Philipp if and for as long as it was put on inquiry, by having reasonable grounds for believing that the order was an attempt to misappropriate funds from Mrs Philipp”. This duty was said to be implied by the common law into the contract between Mrs Philipp and the Bank.

The central issue before the Supreme Court was whether this alleged duty was either already recognised by the common law, or could and should be recognised by a principled extension of the existing case law, as an ordinary incident of the contract between a bank and its customer.

The Supreme Court’s decision

The Supreme Court unanimously overturned the Court of Appeal and (subject to one aspect of the claim) restored the Order of HHJ Russen QC. Lord Leggatt JSC gave judgment, with which Lords Reed, Hodge, Sales and Hamblen JJSC all agreed.

Central to the decision was the Supreme Court’s conclusion that the so-called Quincecare duty was no more than the orthodox application of the law on the apparent authority of agents (see [5], [90]-[91]) and the Bank’s “general duty of care…to interpret, ascertain and act in accordance with its customer’s instructions” (at [97]).

Where a bank had reason to doubt the authority of its customer’s agent, it could not rely on that agent’s apparent authority to give instructions to the bank. A dishonest agent was not acting within his actual authority such that the question then arose whether the bank had made all reasonable inquiries as to his authority in the circumstances. However, so far as Mrs Philipp was concerned, these principles were irrelevant: she had herself given a genuine instruction to the Bank who had carried out its duty of following her instructions (at [100]).

Mrs Philipp and the Court of Appeal had heavily relied on dicta from the judgment of Steyn J in Quincecare, which (it was said) suggested a broader basis for the duty than simply the law of agency. Lord Leggatt JSC strongly criticised the judgment in Quincecare. He observed that that case was merely one of a longer line of cases, the rest of which were correctly rooted in agency principles, and (while reaching the right end-point on its own facts) “went down a wrong track because it proceeded from a false premise” (at [68]).

According to the Supreme Court, there were two fundamental flaws in the Quincecare decision. First, the judgment characterised the duty incorrectly. The duty is “to observe reasonable skill and care in and about executing a customer’s order”, from which it is “impossible” to construe “a duty not to execute the customer’s order” in certain circumstances (at [68]). The “duty” (as properly expressed) is “subordinate” to the bank’s main duty to follow its customer’s instructions.

The second flaw in the Quincecare judgment was in its method. Steyn J had set up a false conflict of duties between a duty to follow instructions and a duty not to execute an order in some circumstances and resolved this apparent conflict by resorting to “policy considerations”. The Supreme Court considered that this was “not an appropriate method for identifying what duty is owed by a party pursuant to a contract” (at [67]). Questions of social policy were “for legislators and other policy-makers”, not the courts in construing a contract. Significantly, Lord Leggatt JSC noted that the Financial Services and Markets Act 2023 (which received Royal Assent on 29 June 2023) provides for a mandatory reimbursement scheme to be imposed by the Payment Systems Regulator (at [21]). He added that courts lack the “institutional competence” and “constitutional…position” to make decisions of that kind (at [22]-[24]).

The judgment is not, however, the end of the road for Mrs Philipp’s claim. Her claim that the Bank was under a duty to attempt to recover the funds once the fraud was discovered continues. The Supreme Court did not think that issue could be determined on a summary judgment basis.

Potential for other claims?

The Supreme Court did, however, leave open the door for claims formulated on different basis in (at least some) cases of APP fraud. At [106]-[110], Lord Leggatt JSC cited the Australian case of Ryan v Bank of New South Wales [1978] VR 555, in which McGarvie J observed that, just as there might be a breach of contract by a carrier who (following his express instructions to the letter, regardless of circumstances) delivered goods into a burning building, a banker might incur a liability “if a reasonable banker properly applying his mind to the situation would know that the [account holders] would not desire their orders to be carried out if they were aware of the circumstances known to the bank” (at [108], underline added).

Thus, where the bank has (for example) received a tip-off that a transaction has been procured by fraud, the Supreme Court concluded that “it may be right for the bank to refrain from executing the instruction without first alerting the customer to this information” (at [109]). In the circumstances of Mrs Philipp’s case, however, all the “red flags” were circumstances known to Mrs Philipp and thus the Bank “had no reason to doubt whether, if its customer was aware of these circumstances, she would desire the Bank to make the payments”.

Furthermore, in some APP fraud cases where money is paid out of a joint account by one account holder, without the knowledge of the other, it may be possible to formulate a Quincecare claim. At [98], Lord Leggatt JSC stated that the orthodox principles he had identified applied in some such cases. However, any such claim would have to show: (a) that the instructions given by the account holder were outside their actual authority; and (b) that the bank had been “put on inquiry” as to the instructing account-holder’s apparent authority. In a typical APP fraud case, the first of those may prove difficult.

Finally, the Supreme Court has confirmed (at [89]) its view on the law of apparent authority, as formulated by the Privy Council in East Asia Co Ltd v PT Satria Tirtatama Energindo [2019] UKPC 30 such that: “a third party cannot rely on the apparent authority of an agent if it failed to make the inquiries that a reasonable person would have made in all the circumstances to verify that the agent had that authority.”

Concluding Comment

The Supreme Court judgment in Philipp v Barclays Bank plc will likely ease the concerns of banks and other financial institutions as to the potential broader scope of claims predicated upon the Quincecare duty following the Court of Appeal’s decision.

On the other hand, the Supreme Court clarified what a claimant in a true Quincecare claim must prove. Since the “duty” was merely an aspect of the bank’s mandate to carry out the customer’s instructions with reasonable care, a payment made in circumstances where the bank could not rely on the agent’s apparent authority “is not only a breach of the bank’s duty of care but is also outside the scope of its mandate” (at [96]). Therefore, where the claim is restricted to the sum transferred, “it is unnecessary for the customer…to prove that, if reasonable inquiries had been made, the agent’s dishonesty would have been revealed and the loss avoided” (ibid.).

More broadly, the judgment highlights the Supreme Court’s understandable reluctance to impose sector-wide regulation via the common law. Lord Leggatt JSC particularly highlighted (at [19]-[21]) the recent developments in financial services regulation to deal with APP and other types of fraud, including the voluntary “Contingent Reimbursement Model Code” (2019) and the new powers of the Payment Systems Regulator in the FSMA 2023. His judgment also expressly excluded such policy-based questions from judicial consideration. This approach may well have broader implications beyond banking and financial services claims.

This analysis was first published on Lexis®PSL on 26 June 2023 and can be found here (subscription required):

Restructuring & Insolvency analysis: The case focused on the proper interpretation of a limitation provision in the Financial Conduct Authority’s (FCA) Dispute Resolution Handbook (DISP) concerning the referring of complaints. The particular question was (when a customer is bankrupt) whose ‘awareness’ matters to start the time for making a complaint running under DISP 2.8.2R(2)(b)—the customer’s or the trustee in bankruptcy’s? The judge at first instance, giving judgment for Shop Direct, had declared that the relevant awareness is that of the official receiver (the OR) as trustee in bankruptcy. The Court of Appeal, on appeal by the OR, overturned that declaration. Written by Maxim Cardew, commercial chancery barrister specialising in insolvency, at Maitland Chambers.

The Official Receiver v Shop Direct Finance Company Ltd [2023] EWCA Civ 367

What are the practical implications of this case?

While the case focused on limitation in the context of payment protection insurance (PPI) complaints, the decision itself applies to all complaints made under DISP where the customer (or other complainant) has subsequently become insolvent. The decision is therefore likely to be of widespread interest to financial institutions, insolvency practitioners and their advisors.

The Court of Appeal re-emphasised that, when interpreting and applying DISP, the emphasis is on the consumer and a purposive approach is to be adopted–a point that will need to be borne in mind whenever advising a potential complainant or a respondent financial institution.

More directly, in overturning the first-instance decision that it was the trustee in bankruptcy’s awareness that matters, banks and other financial institutions may in future find it more difficult to rely on the potentially greater ‘sophistication’ of a trustee in bankruptcy to shorten limitation in such contexts.

However, the Court of Appeal decision does not finally resolve the dispute. Both Lord Justice Singh and (particularly) Lady Justice Carr (whose judgments represented the ratio) emphasised that limitation is generally best considered in the context of specific facts, not as an abstract legal question.

Finally, the decision, while it rejected an insolvency-heavy analysis, also contains useful guidance on the meaning of ‘property’ in the Insolvency Act 1986 (IA 1986) and the role of a trustee in bankruptcy in bringing complaints under DISP, which are likely to be of broader relevance.

What was the background?

The case arose against the backdrop of the PPI mis-selling scandal, which has been described by the FCA as by far the largest consumer redress exercise in the UK’s history.

The OR is the trustee in bankruptcy of hundreds of thousands of bankrupt customers of financial institutions and, in that capacity, has referred mis-selling complaints to a large number of institutions which sold PPI. These institutions included Shop Direct, which is the UK financial services arm of The Very Group, which from the mid-1980s to 2014 sold various forms of PPI to its customers.

Shop Direct brought proceedings seeking declarations. At first instance, it sought and obtained a declaration that it was the awareness of the OR (as trustee in bankruptcy) that was relevant. It also sought a declaration that the OR’s complaints were already time-barred. This latter argument was rejected by the judge at first instance and not appealed.

What did the court decide?

The central provision in the case was DISP 2.8.2R(2)(b), which provides that the Ombudsman cannot consider a complaint if the complainant refers it to the Financial Ombudsman Service (FOS) more than ‘three years from the date on which the complainant became aware (or ought reasonably to have become aware) that he had cause for complaint…’ (emphasis added). The issue in the case was whether the reference to ‘complainant’ in that provision is a reference to (1) the bankrupt, or (2) the OR, in his capacity as trustee in bankruptcy.

DISP also provides that a complaint may only be dealt with by FOS if it is brought ‘by or on behalf of an eligible complainant’ (DISP 2.7.2R). ‘Eligible complainant’ includes a consumer (DISP 2.7.3R(1)).

The ratio is found in the judgments of Lord Justice Singh and Lady Justice Carr. Lord Justice Singh, giving the main judgment (with which Lady Justice Carr agreed), held that the overall thrust of DISP, the definition of ‘complaint’, and the uses of ‘complainant’ (while the latter is not defined) was to focus on the underlying consumer, ie in this case the bankrupt.

He also held that the general nature of DISP was to create a relatively informal scheme for consumers that was not meant to involve highly complicated legal concepts. While Lord Justice Singh was ‘prepared to accept’ that a right to complain under DISP was ‘property’ for the purposes of insolvency law (particularly IA 1986, s 436(1)), the OR as trustee in bankruptcy was not himself the complainant. Instead, the OR was ‘authorised by law’ to bring a complaint ‘on behalf of’ a bankrupt.

A trustee in bankruptcy could bring a complaint ‘on behalf of’ a bankrupt without introducing the whole body of insolvency law, and without that being an agency relationship (as to the latter, see Plevin v Paragon Personal Finance Ltd [2014] UKSC 61; [2014] 1 WLR 422).

Lord Justice Singh made clear that, when construing legislation (including DISP, which was secondary legislation), earlier consultation materials could only be relied on to identify mischief and could not be used for a wider interpretative purpose (citing Re Lehman Brothers International (Europe) No 2 [2010] EWCA Civ 917).

Lord Justice Nugee agreed with the result but differed in his reasoning. He suggested that the relevant awareness was that of the person ‘who for the time being has the right to bring a complaint and an interest in doing so’. This had not been the subject of argument before the court, it not being either party’s case either at first instance or on appeal. His reasoning is not the ratio of the decision, and it is respectfully suggested that his approach cannot readily be reconciled with the reasoning of the majority (Lord Justice Singh and Lady Justice Carr) or the wording of the relevant provisions.

Case details

• Court: Court of Appeal, Civil Division

• Judges: Lord Justice Singh, Lady Justice Carr and Lord Justice Nugee

• Date of judgment: 5 April 2023

Rosanna Foskett has produced an article about a recent decision of the King’s Bench Division, OOO Nevskoe v UAB Baltijos Šalių Industrinio Perdirbimo Centras and Bilderlings Pay Ltd. This article is useful reading for practitioners in relation to judgment debt/ arbitration award enforcement in multijurisdictional disputes, particularly where there is a looming spectre of insolvency of the judgment/award debtor.

This article was first published in Issue 12 of the ThoughtLeaders4 FIRE Magazine.

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Many directors are facing difficult decisions as they try to keep their businesses afloat. Wrongful trading laws have been suspended. But other relevant laws remain unchanged. Critically directors remain subject to the creditors’ interest duty. Not only is this duty more easily engaged than the wrongful trading provisions but its precise trigger is the subject of an appeal pending before the Supreme Court. This article examines the current position and highlights other key issues to be kept firmly in mind by directors and those advising them in these challenging times.

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Parties to a contract dealing with rights over an asset may agree that the asset must not be transferred to anyone else except in particular circumstances. What happens if the asset is transferred to someone else in breach of those restrictions?

Can a claim be made against the transferee? Where the asset is land, lawyers tend to look for a remedy in property law, but that is not the whole story. If the asset is not land, or if property law cannot help, there can still be a claim. Andrew Walker QC discusses one of the main alternatives in the law of tort, and the potential for obtaining an injunction to unravel a wrongful transfer.

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In the December 2019 edition of the Butterworths’ Journal of International Banking and Finance Law, (2019) 11 JIBFL 715, Adam Smith examines the ambit of the Marubeni presumption in the light of the decision in Rubicon Vantage International Pte Ltd v. Krisenergy Ltd [2019] EWHC 2012 (Comm), and in particular the application of the Marubeni presumption in determining the extent of an admitted on-demand liability

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What effect will the recent Court of Appeal decision of Erste Group Bank AG v JSC 'VMZ Red October' have on jurisdictional issues in English law? Richard Morgan QC, one of the barristers who argued the case, says that although these types of issues may be litigated more frequently, the English courts are doing a good job acting as a gatekeeper in relation to the extent of their jurisdiction.

Source: Lexis®PSL Restructuring & Insolvency

How do the duties of non-executive directors differ from those of executive directors? And more importantly for practitioners, what differences are there - if any - in the liabilities they are exposed to?

Michael Gibbon QC has produced a video master-class for the Practical Law website, a short clip is available to view on YouTube.

Source: Thomson Reuters Legal UK & Irelan

This article reviews the English law on bribes with reference to the two recent cases of UBS AG v Kommunale Wasserwerke Leipzig Gmbh and Cedar Capital Partners LLC v FHR European Ventures LLP.

Source: Butterworths Journal of International Banking and Financial Law

This month, Lawyer Monthly takes a look at Company Law, and the legal implications surrounding it. They spoke to Catherine Newman QC, a leading silk at the commercial Chancery Bar who has a strong practice both domestically and internationally, from Maitland Chambers.

Source: Lawyer Monthly

Mediators John Dagnall and Beverley Vara have written an article that asks, whether one year after PGF II SA v OMFS Company 1 Ltd, “les autres” have been “encouraged”?

Source: Estates Gazette

This short article by Michael Gibbon QC examines some key principles in relation to set-off involving Crown departments in the context of liquidation. The subject often arises for consideration in a liquidation, normally with regard to tax debits and credits, but from time to time non-tax claims will be involved too.

Source: Corporate Rescue and Insolvency - New Law Journal - Lexis Nexis

Mediation has gained momentum following the Woolf reforms. Beverley Vara looks at its evolution and why, today, it’s hard to refuse.

Source: Estates Gazette

Nigel Thomas has had his article "After Etridge" published in Trusts and Estates Law and Tax Journal (2014)

Source: Trusts and Estates Law and Tax Journal (2014) No 154 March

The Court of Appeal case of Thomas v Jeffery reminds practitioners that even late disclosure does not fetter a judge's discretion on costs. Laurie Scher reports

Source: Trusts and Estates Law & Tax Journal

Rosanna Foskett examines the recent judgment in Hart and Samways v Burbidge, which illustrates how the courts will apply the principle of presumed undue influence, even where such influence was not intentional

Source: The Law Society: PS

An article written by two of our mediators Beverley Vara and John Dagnall on the recent case of PGF II SA V OMFS Company 1 Limited [2013] EWCA Civ 1288, which extended the obligations on litigants when offered the opportunity to mediate.

Source: Maitland Mediators

Charities are already required to pay all manner of fees to other regulators. Why shouldn’t they pay a fee to their own?

Source: Property Litigation Association Website

As the authorities probe the bond dealings of JSC BTA Bank’s ex-chairman, Catherine Newman QC highlights some legal aspects of the saga that appear to add up to a near-reversal of the burden of proof.

Source: The Lawyer

This article examines, from an English standpoint and by reference to Rosewood v Schmidt and Breakspear v Ackland, the court’s discretion to intervene in the administration of a trust to order disclosure of information to beneficiaries.

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Source: Trusts & Trustees

This seminar looks at "What is a sale and rent back scheme?".