Following on from our Blog post and article from November of last year that looked at the potential liabilities of banks and related parties in the context of authorised push payment (“APP”) frauds, the recent decision of Master Brown in CCP Graduate School Ltd v National Westminster Bank PLC & Anor [2024] EWHC 581 (KB) has again seen the court grappling with the question of the liability of receiving banks, this time considering the potential existence of a “duty of retrieval”.

This question arose in CCP in the context of one limb of an application by the First and Second Defendant banks for summary judgment/strike out. In resisting this aspect of the application the Claimant relied upon the final paragraphs of the judgment of Lord Leggatt in Philipp v Barclays Bank plc [2023] UKSC 25, specifically where he had refused to override the decision of the first instance judge not to give summary judgment against Mrs Philipp’s claim that her bank’s delay in taking steps to try to recover her transfers of money had caused her to lose a substantial chance of getting any of her money back.

The Claimant’s position in CCP was that if such a duty might apply to the defrauded customer’s sending bank in an APP fraud, it is at least arguable that it would be anomalous if the bank that operated the account of the alleged fraudster i.e. the receiving bank, was not also to be regarded as under a similar duty.

Having considered the parties’ arguments on this point, and “not without some hesitation”, Master Brown declined to strike out the Claimant’s case that there existed a “retrieval duty”, this being in large part because the Master regarded there to be some uncertainty as to whether any such duty might be said to lie on the part of the bank of those who might be assumed to have perpetrated a fraud. 

In their reasoning the Master also noted the following matters:

  • the Claimant’s argument that where it might be assumed that the receiving bank had at least some measure of control over the relevant payments and the movement of money from the account held by a fraudster, the receiving bank in turn might be said to be in a special position to take steps to recover the sums due;
  • that based on the parties’ arguments around causation, there seemed to be at least some basis for arguing that if the retrieval duty recognised in Philipp was effective it might be because the sending bank could provide an indemnity to the receiving bank, with such indemnity then being passed on to any other bank(s) to which the funds are subsequently transferred, with this continuing until the funds were located and frozen;
  • that the effectiveness of any steps taken by the sending bank to retrieve sums paid out would likely be dependent on the co-operation of any receiving bank(s);
  • that while there might be concerns as to the potential exposure of a bank to liability, if it was recognised there was a triggerable requirement on banks to retrieve or recover payments made as a result of fraudulent scheme, these concerns might in fact go to the issue as to whether it was fair and reasonable for any retrieval duty to be recognised; and  
  • that the evidence produced thus far hinted at there already being in place a system for retrieval, that any such system might be presumed to be capable of operating without difficulty, and the possible existence of any such system also might be relevant to considering whether a duty of retrieval should be recognised.

As is clear, however, this was a decision made at the summary judgment/strike out stage, and so we will likely need to wait on a trial of the case for any final answers.  Nevertheless, the case certainly would appear to provide the court with an interesting opportunity to more fully consider the extent and possible application of the concept of a “retrieval duty” on banks, and particularly as to receiving banks in the context of the growing problem of APP fraud.