The case centres on whether Barclays owed the customer a duty of care when it came to authorising payments – instructed by the customer – which later turned out to be fraudulent.

Back in 2018, Fiona Philipp and her husband Robin fell victim to a scam whereby they made two payments totalling £700,000 to a ‘safe’ bank account in the United Arab Emirates.

This type of fraud – Authorised Push Payment (APP fraud) has been on the rise in recent years. It occurs when people are tricked into transferring money to a seemingly legitimate account which is in fact controlled by a scammer. In 2021 fraudsters pocketed £583.2m, a 39% increase on the previous year, while in 2022 losses to APP fraud reached £485.2m.

As in Mrs Philipp’s case, the instructions were carried out by Barclays and the money was lost. She claimed that Barclays was responsible for this loss and that the bank owed her a duty under its contract with her or under common law not to carry out the payment instructions if – as is alleged – “the bank has reasonable grounds for believing that they were being defrauded”.

Barclays applied for the claim to be dismissed on the ground that as a matter of law, it didn’t owe Philipp the alleged duty.

The High Court ruled in favour of Barclays, but at the Court of Appeal, she was allowed an appeal and it accepted that in principle, the bank owes a duty to its customers. Barclays appealed this and now at the Supreme Court it has sided with Barclays “holding that the bank did not owe the alleged duty to Mrs Philipp”.

However, she can chase an alternative claim based on the Bank’s “alleged failure to act promptly to try to recall the payments after the fraud was discovered”.

Why is this APP fraud case so significant?

In recent years, banks and building societies signed up to a voluntary reimbursement scheme when it comes to these money transfer (APP) scams.

However, under mandatory new rules to take effect next year, victims of APP fraud will receive their money back within five working days where the fraud occurred using Faster Payments. But a question mark remains over whether victims will need to pay a claims excess to get their money back, while a minimum loss threshold (£100 originally proposed) has been scrapped.

And the most important point is that the rules won’t apply to international payments, so even if these rules were in place at the time the married couple made the payment, they wouldn’t have been protected anyway.

Rocio Concha, Which? director of policy and advocacy, said: “The Financial Services and Markets Act protections do not apply to victims who send money abroad, as in this case, nor does it give them the right to redress in court.

“Banks should do the right by their customers and proactively extend enforceable reimbursement to all payments, and Government and regulators should act to close any loopholes to ensure all scam victims have equal and effective protection.”

For banking customers, it’s essential to check and double check the recipient, to stop and take five minutes before proceeding with a money transfer as despite the new rules, there are gaps in protections when it comes to reimbursement.

‘The bank’s duty is to execute instructions’

The judgment read: “It would be possible for a bank to agree that it is not to carry out a payment instruction given by its customer if it believes, or has reasonable grounds for believing, that the customer has been tricked by a third party into authorising the payment. But the standard terms of business on which Barclays expressly agrees to provide its services do not contain an express term of this kind. Mrs Philipp argues that no express term is needed because such a duty is either already recognised by the common law, or can and should be recognised by a principled extension of the existing law, as an implied term of the contract between a bank and its customer.”

It added: “The Court rejects this argument as inconsistent with the ordinary obligations owed by a bank to its customer. Provided the customer’s account is in credit, the ordinary duty of the bank when instructed by its customer to make a payment from the account is to carry out the instruction and make the payment. In making the payment, the bank acts as the customer’s agent. Its duty is strict. Unless otherwise agreed, the bank must execute the instruction and do so promptly. It is not for the bank to concern itself with the wisdom or risks of its customer’s payment decisions.”

Further: “The validity of the instruction is not in doubt. Provided the instruction is clear, no enquiries are needed to clarify or verify what the bank is authorized and required to do. Unless otherwise expressly agreed, the bank’s duty is to execute the instruction and any refusal or failure to do so will be a breach of duty by the bank.”

It noted that the couple had visited a branch in person and given instructions to transfer the money, with Mr Philipp telling the cashier falsely that he had previous dealings with the firm in UAE.

Before each of the two transfers, the bank called Mrs Philipp seeking confirmation which she supplied.

“It is beyond dispute, therefore, that she unequivocally authorised and instructed the bank to make the payments and, in these circumstances, it is impossible to say that the Bank owed her a duty not to comply with her instructions,” the Justices wrote.

A Barclays spokesperson said: “We welcome the Supreme Court’s decision in this case which provides certainty and clarity on an important issue of law and public importance regarding the obligation banks have to act on customers’ instructions.”