August EWJ 24 - Flipbook - Page 54
Perhaps understandably, some concern has been
expressed by small PSPs and electronic money institutions (“EMIs”) that the scheme may negatively impact their profitability, therefore undermining
competition in the sector. Indeed, on 11 July 2024, the
Payments Association shared a letter to the new Economic Secretary to the Treasury and City Minister,
Tulip Siddiq, expressing similar concerns3. However,
the PSR is keen for these regulations to come into
force without delay and the new government seems
likely to favour consumer protection over PSP and
EMIs’ commercial interests.
unjust enrichment (subject to the question of “unjustness” and potential defences which would have to be
determined at trial).
What next? Government policy?
As the courts have made clear (as expressed by Mr
Justice Zacaroli), despite novel legal arguments, there
is only so far that they can go in holding payment institutions to account. It is likely to be regulatory and
government policy that delivers any major future
change. One candidate might be an expansion of the
PSR reimbursement scheme, perhaps to CHAPS or
other payment systems.
The courts
The courts have also been grappling with the
problem of APP fraud in a series of recent High Court
cases. Since the Supreme Court’s decision in Philipp v
Barclays Bank UK plc4 which resisted the extension of
a duty of care for banks in cases of APP fraud, attempts
have been made to create alternative inroads for
recovery of losses. Notably, those attentions have
focussed on receiving PSPs.
Details were also recently leaked of Labour’s draft
plans to force tech companies to reimburse victims of
online fraud.7 The draft proposals allegedly also consider other measures such as statutory implementation of the “Online Fraud Charter” (which is currently
a voluntary agreement between the government and
the technology sector to reduce fraud on their platforms and services),8 and potential expansion of the
Economic Crime Act.
In April 2024 Revolut Limited ("Revolut") (an EMI)
applied for summary judgment and/or strike out of a
claim made by the claimant ("Mr Larsson"). Mr Larsson was a customer of Revolut and had fallen victim to
an APP fraud. He made five payments by way of bank
transfer from his UBS bank account, to separate Revolut accounts held by fraudsters. Separately, Mr Larsson held his own account with Revolut which was not
involved with the scam. Mr Larsson argued that even
if banks receiving the funds on behalf of customers did
not owe a duty of care to third party victims of fraud,
they did owe a duty of care to customers who held an
account with the bank (even where that
account
had no involvement with the fraud).
There is little sign of these proposals in the new
government’s initial policy agenda and it remains to be
seen whether they are put into action. Either way, the
UK is certainly taking robust steps to challenge the
fraudsters, with the aim of obtaining compensation for
their victims, and ultimately preventing these damaging crimes from occurring in the first place. However,
legal practitioners will increasingly need to think of innovative and creative legal arguments when considering how to frame what their client’s course of action is
and against whom to bring a claim.
Authors
James Evison, Partner
+44 (0)1483 406993
James handles a wide range
of commercial
disputes, including both
High Court litigation and arbitration.
James joined Stevens &
Bolton on qualification in 2014 and became a partner in 2024. Prior to pursuing a career in law, James
worked as a policy adviser at the Home Office and
has also worked in the wine industry, in which he
maintains a keen interest.
The Court disagreed and truck out the claims relating
to duty of care. Mr Justice Zacaroli took the view that
it should be for Parliament and regulators to consider
the appropriate policy response, and not the courts:
“…to impose a duty on a bank to take reasonable care to protect third parties who make payments to an account of one of
its customers from that customer’s fraud, would be to cross the
line between the proper role of the courts, and the role of the
legislator and regulator.” 5
On 12 June 2024, Revolut was involved in another
similar case in the High Court (Terna Energy Trading
doo v Revolut Ltd)6. In this case, a company brought an
unjust enrichment claim against Revolut. As a result of
an APP fraud, the claimant had instructed its bank to
make a payment to an account held with Revolut and
the funds were immediately dissipated. Revolut applied for reverse summary judgment and/or strike
out of the claim.
Miranda Joseph,
Senior Knowledge Lawyer,
+44 (0)1483 406965
Miranda delivers technical
legal expertise and support
to the commercial litigation
team, providing guidance,
insights and practical solutions to complex legal issues.
This time, the Court refused the application and held
that whether or not one looked at this as a case of
agency (i.e. the EMI being the agent for the company)
or as a series of co-ordinated transactions as between
the company, the EMI and the bank, either way, it involves an enrichment of the applicant at the expense
of the respondent thereby satisfying the legal test for
EXPERT WITNESS JOURNAL
Miranda joined Stevens & Bolton in 2024, having
qualified and worked at City firms. She has advised
clients on a broad range of commercial disputes
from High Court litigation to arbitration.
Stevens & Bolton - www.stevens-bolton.com
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AUGUST 2024
