Bank liability for fraud – negligent bank responsible even if payments are authorised per the mandate

The Supreme Court has affirmed a decision that a bank is liable to refund a customer for a fraudulent transaction otherwise properly authorised in accordance with the bank mandate, if the bank was negligent in not recognising and blocking the fraud – the “Quincecare” duty: “the bank should refrain from executing an order if and for so long as it was put on inquiry by having reasonable grounds for believing that the order was an attempt to misappropriate funds”.

In this case the company was being defrauded by its own controlling director, and it is hard to see what the bank could actually have done without risking being sued for not carrying out the director’s instructions.

This case potentially opens the door to thousands of claims by victims of “push payment” frauds if they can show that the bank was negligent in accepting the customer’s instructions.

Singularis Holdings v Daiwa Capital Markets