Gareth Anthony Hamblin & Anor v Moorwand Ltd & Anor [2025] EWHC 817 (Ch)

[2025] EWHC 817 (Ch)Case No CH-2024-000226IN THE HIGH COURT OF JUSTICEBUSINESS AND PROPERTY COURTS OF ENGLAND AND WALESAPPEALS (ChD)Venue 7 Rolls Buildings, Fetter LaneLondon EC4A 1NLDate 4 April 2025
Before
MR JUSTICE MARCUS SMITH
Between
GARETH ANTHONY HAMBLINAppellantMARILYN DELINA HAMBLINAppellantMOORWAND LTDRespondentRND GLOBAL LTDRespondentGARETH ANTHONY HAMBLIN MARILYN DELINA HAMBLIN Appellants (Claimants below)-and-MOORWAND LTD RND GLOBAL LTD Respondents (Defendants below)Hearing Heard on 17 and 18 March 2025
Alexander Hill-Smith (instructed by Knights Professional Services Ltd for AppellantsAlexia Knight (instructed by the Keystone Law) for First Respondent
Approved Judgment
[1]The First Respondent, Moorwand Ltd (Moorwand), is, and at all material times was, a payment service provider and Electronic Money Institution regulated by the Financial Conduct Authority. Although it is tempting to refer to Moorwand as a “bank”, Moorwand is no such thing. Moorwand did, however, offer amongst other services, an “electronic wallet” under the name “UPayCard”, which recorded stored value and allowed users to make electronic transactions in a variety of currencies as well as in bitcoin. Because “payment service provider” is a mouthful, this judgment will refer (as did the parties and the court below) to Moorwand as a “bank” but without losing sight of the true nature of Moorwand.[2]The Second Respondent, RND Global Ltd (RND) is a company registered in England and Wales under company number 10632010. It was incorporated on 22 February 2017, subsequently dissolved, then restored to the register, and is now in administration. RND held an account with Moorwand and was permitted by Moorwand to operate an “electronic wallet” enabling it to make and receive payments in £ sterling, € Euros and bitcoin. RND took no part in the proceedings below, nor in the appeal before me: however, RND was joined as a defendant for the purposes of a derivative action, as I shall come to describe.[3]Mr and Mrs Hamblin – who I shall refer to as the Appellants, even though one of the matters that this judgment determines is whether they should have permission to appeal – were victims of a fraud whereby they were induced to make a payment (thinking it an investment) in the amount of £160,000, which was paid away to RND and held (for a time at least) as a credit in RND’s “electronic wallet” with Moorwand. In other words, this amount constituted a debt owed to RND by Moorwand and was capable of being dealt with by RND in accordance with the agreement between Moorwand and RND by way of the “electronic wallet”. These monies were paid away by Moorwand pursuant to payment instructions given by RND to Moorwand.[4]The fraud on the Appellants is what is commonly termed a “push” fraud, where the Appellants’ consent to payment was extorted by a fraud against them. The consequence of this is that the Appellants’ bank, in making the payment pursuant to the Appellants’ instructions, acted properly and within the terms of its mandate. A “push” fraud is to be contrasted with a “pull” fraud, where it is the bank that is duped into exceeding its mandate by the fraudster and where any debiting of the customer’s account by the bank will generally have to be reversed. Thus, the real difference between “push” and “pull” frauds lies in the identity of the victim.

CLAIMS ADVANCED BY THE APPELLANTS

[5]The Appellants commenced proceedings against Moorwand and RND seeking to recover the £160,000 that had been extracted from them by fraud. Their claim was put variously: i) First, the Appellants articulated a claim in their own right for repayment of the £160,000 paid by them to RND. The nature and details of this claim do not matter. In an ex tempore judgment rendered after a four-day trial (the Judgment), His Honour Judge Mark Raeside, KC (the Judge) dismissed this claim for reasons given in the Judgment. This part of the Judgment is not appealed by the Appellants and it is (for this reason) unnecessary to say anything more about this claim and the facts underlying it. ii) Secondly, the Appellants sought permission to bring a “derivative” action on behalf of RND. Derivative actions are cases where a claim vesting in a company is brought by a claimant other than the company whose claim it is, the company being joined as a defendant so as to be bound. The Judge gave the Appellants permission to pursue a “derivative” action against Moorwand on behalf of RND. It will be necessary to articulate in some detail the nature of RND’s cause of action against Moorwand (the Derivative Claim). For present purposes, two points are to be noted: a) First, the Judge’s decision to give the Appellants permission to bring the Derivative Claim is not appealed by Moorwand, and requires no further consideration in this judgment. b) Secondly, the Judge dismissed the Derivative Claim for reasons given in his Judgment. The Appellants seek permission to appeal this decision. Edwin Johnson J ordered that there be a “rolled up” hearing of the application for permission to appeal and the appeal itself, and these matters came before me on 17 and 18 March 2025. iii) Thirdly, the Appellants contended that the Judge had wrongly held that RND had consented to the withdrawals from the account for the purposes of Regulation 61 of the Payment Services Regulations 2009. This, too, was a claim brought derivatively, but I shall refer to it as the Payment Services Claim.

GROUNDS OF APPEAL AND THE STRUCTURE OF THIS JUDGMENT

[6]Three broad areas arise for determination in this appeal:(i) whether the Judge was correct to dismiss the Derivative Claim;(ii) whether the Judge was correct to hold that, even if the Derivative Claim was well-founded, it was nevertheless excluded by an exclusion clause in the terms of business between RND and Moorwand;(iii) whether the Judge was correct to dismiss the Payment Services Claim. These three areas are considered in this order in the following paragraphs. THE APPEAL IN REGARD TO THE DERIVATIVE CLAIM The manner in which the claim was (said to be) put

THE APPEAL IN REGARD TO THE DERIVATIVE CLAIM

[7]The Appellants contended that the Derivative Claim involved assertions(i) that Moorwand had breached its mandate by debiting RND’s account when it (Moorwand) was on inquiry that the payment instructions made on behalf of RND might be unauthorised by RND (ie were being made by RND’s agent in breach of their duty to RND) and/or(ii) that Moorwand had acted in breach of contract or other duty in debiting RND’s account. The difference between these two claims is that whereas the first goes to the question of whether Moorwand was entitled to debit the account, the second involves a claim for damages for breach of contract and/or breach of duty in tort. The difference in remedy is significant because of the terms of an exclusion clause in Moorwand’s terms and conditions.

The grounds of appeal

[8]The Appellants’ amended grounds of appeal plead that the Judge erred in concluding (as he did) that Moorwand was not put on inquiry, so as to trigger the duty of care in ascertaining whether the payment instructions that were given to Moorwand by an agent on behalf of RND should or should not be followed. Although the grounds of appeal are far more specific than this, it is unnecessary to set them out in any greater detail at this point.

A pleading point

[9]Moorwand asserted that the allegation that Moorwand was not entitled to debit RND’s account had not been pleaded by the Appellants, was not before the Judge at the trial, and could not now be put forward in this appeal. It is therefore necessary to consider the Amended Particulars of Claim which plead the Appellants’ case. I disregard aspects of the claim that are irrelevant for the purposes of this appeal: i) Paragraph 18 pleads that it was a term of the agreement between RND and Moorwand that “the only person authorised to give instructions for the transfer of monies out of the digital wallet was Mr Stanfield acting on behalf of [RND]. Further or alternatively, Moorwand operated the account as the agent of [RND] and the only person authorised to give instructions in relation to the Account on behalf of RND was Mr Stanfield”. ii) Paragraph 19 pleads an alternative case that “[Moorwand] owed a duty of care, in contract and/or tort and/or agency, to take reasonable skill and care not to execute a payment instruction in circumstances when [Moorwand] was put on inquiry that the payments were not duly authorised by [RND]. The standard applicable in deciding whether [Moorwand] should reasonably have been put on inquiry was that of the reasonable payment service provider”. iii) It is thus clear that the Amended Particulars of Claim assert two distinct causes of action, namely the two alternative ways of putting the Derivative Claim described at paragraph 7 above. iv) Paragraphs 20 to 26 and 28 to 29 plead the relevant facts and matters that inform the success or otherwise of the two claims pleaded, and I will not set these out. They informed the evidence before the Judge, and the Judge’s consideration in his Judgment. v) Paragraph 31 pleads the transfers out of the Account which according to the Appellants were made without authority or in breach of duty. Paragraph 32 specifically pleads the lack of authority for these payments and asserts that Moorwand should not have made them. That assertion is expanded upon in paragraph 34. Paragraph 35 pleads the contention of breach of duty.[10]It is plain that the Appellants’ case has been clearly articulated in the pleadings, and was before the Judge. Moorwand’s contention to the contrary is wrong when the terms of the Amended Particulars of Claim are considered.[11]Moorwand had a number of other – altogether more minor – pleading points, whereby it was suggested that the Appellants were running points on appeal which were not run before the Judge and/or not contained in the grounds of appeal. I do not consider that these points are right or that they warrant any detailed consideration. My approach will be to consider the Judgment on its own terms. I will consider whether, based on the pleaded grounds of appeal, permission to appeal should be given on those grounds, and then (if so advised) I shall decide the appeal. I will not give attention to any points raised on appeal which were not squarely before the Judge. I should also say that I will consider the substantive appeal and the question of permission on a “rolled up” basis, since that is how I was addressed by the parties.

Respect towards a first instance judge’s assessment of factual matters

[12]Ms Knight, who appeared for Moorwand, submitted that the Appellants’ appeal was challenging findings of fact made by the Judge. She made the point that the Judge’s findings of fact could only properly be interfered with so as to allow an appeal on the basis of a challenge to such a finding where the appellate court determines that the “finding of fact is unsupported by the evidence or where the decision is one which no reasonable judge could have reached”: Haringey LBC v Ahmed & Ahmed, [2017] EWCA Civ 1861 at [29]–[31].[13]I accept that this is a correct statement of the approach that I must take in regard to questions of fact that are being appealed. In Re Sprintroom, Prescott v. Potamianos, [2019] EWCA Civ 932 at [72]-[78], quotation from [76], it was stated that “…on a challenge to an evaluative decision of a first instance judge, the appeal court does not carry out a balancing task afresh but must ask whether the decision of the judge was wrong by reason of some identifiable flaw in the judge’s treatment of the question to be decided, such as a gap in logic, a lack of consistency, or a failure to take account of some material factor, which undermines the cogency of the conclusion”. I agree.[14]An appellate court should be extremely slow to interfere with pure findings of fact, even where (as is the case here) the evidence was uncontentious. Furthermore, an appellate court should be appropriately respectful of the inferences that a judge draws from findings of primary fact. In cases of discretion, the question is not whether the appellate court agrees with the judge at first instance, but whether the judge has exercised their discretion in a manner which goes outside the range of options or choice that the judge reasonably could adopt. It is only in the case of questions of law that it may be appropriate for an appellate court to consider the point on appeal with full latitude.

The Judgment

[15]It is necessary to begin by identifying the findings made by the Judge. All paragraph references in this paragraph are to the Judgment: i) At [60], it is recorded that on 21 March 2017, an email was sent from the address [ redacted ] to a Ms Miller of Moorwand (then known as UPayCard). Ms Miller was the business account manager at Moorwand. The email sought to open an account – the Account – at Moorwand. The purpose of the application was this: I have a marketing consultancy, I would like to be able to receive funds from my clients and also pay suppliers of particular aspects of my business. Monthly predictions in turnover will be around £100,000 per month. Please advise how to proceed once submitted. ii) Ms Miller responded, asking “[c]ould you please first let me know exactly what you intend to use your business account for?...which countries do you focus on?” No reply was made to this question (at [60]. An application form was completed apparently by Mr “Stanfield”, giving RND as the company name, an address as “99 3 Riverlight Quay, London”. Mr “Stanfield” gave as his home address “12 Priestley Close, Lincolnshire”, giving details of a passport number (462156504) and a utility bill as proof of address. The application form described RND’s business at “online marketing and lead generation. Freeland IT/web development”. Documents evidencing RND’s incorporation were provided, and a utility bill confirming the company’s address (at [61]). iii) There were a number of issues with the documents, which the Judge described in the following terms: [61] …The application form listed attached documents, including the incorporation document of RND andMemorandum and Articles, proof of the principals, utility bill in the name of the company for the address above. But the utility Bill from Unicom showed someone with an entirely different name on its face, together with the company details of Mr Stanfield at RND. (A subsequent email of 1 February 2018 from Anastasia Rudo to John Mayor refers to the documents that were missing and which would be expected to be supplied). [62] As a matter of fact the real John Stanfield had a birthday of 29 September 1961, not November 1961 as shown at Companies House, as appears from passport number 462156504. The real John Stanfield’s address is 12 Priestley Close, Lincolnshire. According to his Annual Mortgage Statement dated 19 August 2016, he has a mortgage with NatWest Bank at their Birmingham branch, in respect of which there is 12 years 1 month remaining, opening balance £40,322.34, monthly repayments £1124.86, closing balance £37,742.33. It would appear that both the mortgage details and the passport are of the real John Stanfield, but that he had nothing to do with the fraudsters involved with RND. [Moorwand] rightly admit that they failed to identify that the person purporting to be John Stanfield on the Application Form was not the real John Stansfield, but contend that this is part of the regulatory process and is not relevant to any proper common law claim once the account was operated and instructions given and communications made between [Moorwand] and “John” on all the relevant transfers as set out below. [63] On 9 February 2017, RND supplied ML with a copy of a Unicom invoice said to be addressed to John Stansfield, but close inspection showed a different name on the face of the invoice, Ms Mehegan. On 22 March 2017, “Liliana B” emailed Tatiana Miller in respect of the new merchant, RND and said:
“Please do not assign the programs until the documents aren’t [sic] approved and all questions regarding the merchants aren’t [sic] clarified. Tatiana, please not [sic] my comments; Owner’s UB is expired (Aug 16), please ask him to provide a recent one (UB/BS). I’m not sure about the company UB. It looks fake. Can they provide another proof of company address?”
So far as the contemporaneous documents are concerned, there was no reply to this serious concern, and [Moorland] did not complete their regulatory checks on RND. [64] Despite those concerns, the UPay Card account was set up almost immediately on 22 March 2017 which allowed RND to successfully set up a trading account to trade from then onwards. [Moorwand] rightly admits that it called into question the veracity of the Unicom invoice but say that this is part of the regulatory process and not relevant to any duties [Moorwand] owed once the account was operated… iv) Moorwand set up three different accounts for RND, all commencing operation on 22 March 2017. These three accounts (the account numbers do not matter) were denominated in bitcoin, £ sterling and € Euro: at [97]. The Judge noted (at [97]): Accordingly, within a day of taking on their new client RND as their customer, it was agreed between them that they were allowed to trade a Bitcoin account and I have no doubt whatsoever of the inference that can be drawn is that the attraction of organisations such as [Moorwand] was that they performed this online trading in Bitcoin. This all took place some five months after the accounts were set up. This is not a case where the Regulatory checks and Bitcoin purchases all factually took place at the same time but were quite separate factual events. v) The monies fraudulently extracted from the Appellants by the “push” fraud reached RND’s account as described in [98] to [100]. The Judge found nothing in this transfer to put Moorwand on inquiry. The Judgment then deals with the payment out of the RND account with Moorwand, noting (at [101]): Within 10 days or not more than about two weeks, the lion’s share of Mr and Mrs Hamblin’s £160,000 was paid out by RND from the account number 2241593 which is the Bitcoin account and also the other account in GBP. The details of the transactions are set out below which in terms of the paperwork seems entirely in order. There is no reason why [Moorwand] would be concerned not to carry out the instructions given by RND or be put on enquiry. The Bitcoin account is considered first as it has the most transactions and traded over a short period constantly. vi) At [102] to [108], the Judge sets out the transactions that resulted in the paying away of the Appellants’ £160,000 out of the RND account. The Judge reached relatively few factual conclusions from the granular payments away that he described. However, it can be said that there was a great deal of transacting in Bitcoin (at [111]), with significant payments to “Global Self Drive Ltd” (£40,000) and “Authentic Luxury Watches Trading” (£34,500) (at [111]). The Judge concluded (at [111]) that: …These three amounts account for £74,650 withdrawn by RND and, therefore, taken with the other Bitcoin purchases, explains the total payment out of £160,000 of Mr and Mrs Hamblin’s money. Thus, the greater part of the £160,000 went to the Bitcoin account and a single watch purchase was relatively small at £34,500 and does not stand out when reviewing the three accounts. As far as these three transactions were concerned, they were with RND and therefore they used the line of communication agreed when the GBP account was set up and there was no reason for [Moorwand] to doubt who they were dealing with or that these three transactions were not authorised by RND. To the contrary, [Moorwand] was duty bound to carry out RND’s instructions… vii) The Judge found nothing suspicious (at [113]): The purchase of the watch was a one-off transaction. It has to be set in the context of all the transactions taking place, including those permitted on the Bitcoin account though I generally accept the comments made by [the single joint expert] that watches, and Bitcoin trading are typically associated with fraudsters. That may be so, but the facts of this case have to be considered with the above transactional background which in my judgment would not give rise to any reasonable concerns by [Moorwand] who provided a quite separate Bitcoin account for the purpose of trading from the outset, and that is where RND generally traded. viii) The Judge considered the evidence of the single joint expert (who was not cross-examined) later on in his Judgment. As recorded by the Judge (at [128]), the single joint expert concluded: …With regard to whether a reasonable payment services provider would have had grounds for believing the Transfers were an attempt to misappropriate RND’s funds, my view is that, while the transactions themselves were not indicative of an attempt to misappropriate RND’s funds, their nature and size were out of the expected character of transaction that RND had previously advised. Therefore, while it was legitimate for [ML] to accept that the instructions were properly given under their terms and conditions, notwithstanding the shortcomings in initial due diligence and there was no reason for them to suspect an attempt at misappropriation of the funds, the nature of transfers should have triggered suspicions of money laundering and been subject to a Suspicious Activity Report, which may have prevented their completion. ix) The Judge did not consider this material to the Derivative Claim, for reasons given at [128]: There is no complaint made of ML in accordance with Phillip (supra), only regulatory concerns that “may” have had an impact and this is a counterfactual question not based on any probability for a civil trial and must be put in the context of the very few days in which all the funds were dissipated as set out above and the quite long period of time since the account was set up. So I put this last comment made by Mr Burns to one side as it is of no assistance. x) The Judge stated his reading of the single joint expert’s report as follows (at [129]): The conclusion in the report maybe leaves something to be desired in terms of understanding, but my reading of it is as follows: (1) The opening of the account by RND was suspicious and therefore greater scrutiny was required with the transactions; however, he could be wrong as a matter of law in accordance with Philipp, (2) Despite these initial shortcomings, there was no reason to suspect any attempt of misappropriation of funds, but (3) the transfers “may” have given rise to a Suspicious Activity Report due to the suspicion of money laundering, which “could” have prevented the transactions from being completed, but that takes this civil case no further. xi) The Judge concluded (at [130]) that the report only supported “regulatory failings, but this is not of any relevance to a common law and contract case”.

Philipp v. Barclays Bank plc

[16]The important decision of the Supreme Court in Philipp v. Barclays Bank plc, [2023] UKSC 25 was handed down before the trial, but after the pleadings had closed. It may be that the Amended Particulars of Claim might have been slightly differently framed in light of that decision, but no amendment was required to enable the Derivative Claims to proceed. The decision in Philipp was fully considered by the Judge in the Judgment.[17]The decision in Philipp clarifies the nature of a bank’s so-called “Quincecare duty”, so called because of the decision in Barclays Bank plc v. Quincecare, [1992] 4 All ER 363. As in this case, Philipp concerned a “push” payment (also referred to as “Authorised Push Payment” or “APP” fraud), whereby the victim is induced by fraudulent means to authorise their bank to send a payment to a bank account controlled by the fraudster. What is interesting about this appeal, is that the APP elements of the Appellant’s claim are not before this court. The Appellants’ claim in this regard failed before the Judge, and the Appellants do not appeal that part of the Judge’s decision. In this case, the claim begins with the recipient of the monies fraudulently extracted from the Appellants, RND. The principles laid down in Philipp will have to be applied in the context where the driving motive behind the Appellants’ claim is APP fraud, but where the facts concerning the APP fraud are altogether irrelevant for the purposes of this appeal.[18]The legal principles that can be extracted from Philipp – in the main, they constitute restatements of long- and well-understood points of banking law – are as follow: i) The relationship between a bank and the customer of a bank holding a current account with that bank is that of debtor/creditor: Philipp at [29]. For the remainder of this paragraph, all references are to Philipp. I use the term “bank” to embrace payment service providers like Moorwand. As stated, this was a convenient shorthand used both before the Judge and in this appeal, and in no way implies a lack of appreciation of the differences between payment service providers like Moorwand and banks. ii) Absent contrary agreement, the bank must comply strictly with its mandate. Where the bank acts outside the mandate by making a payment which the customer has not authorised, it cannot debit the customer’s account. Conversely, where the bank receives an instruction to make a payment given in accordance with the mandate, the ordinary duty of the bank is to carry out the instruction: at [30]. iii) However, the bank cannot be obliged to act unlawfully when carrying out its customer’s authorised payment instructions: at [31]. A genuine, reasonable and (above all) valid concern on the part of the bank that it might incur a legal liability by carrying out the instruction entitles the bank not to act: at [32]. There are many reasons why such a justification for not acting may arise, two of which are(i) incurring liability for dishonestly assisting in a breach of trust and(ii) money laundering: at [32] and [33]. iv) Further, in providing its services, the bank must carry out its services with reasonable skill and care: at [34]. This duty only arises where the bank has some latitude in acting. Where the bank has no choice in terms of its duty, questions of reasonable skill and care do not arise: at [35]. Questions of reasonable skill and care tend to involve judgement, and the exercise of judgement implies choice. v) Difficult questions arise where a payment instruction is given to the bank by an agent who was an authorised signatory of the customer’s account but was acting in fraud of the customer. This – deriving from the Quincecare case – is often referred to as the “Quincecare duty”: at [53]. In this case, the Quincecare duty involved consideration of payment instructions given by a Mr “Stanfield” (I will explain why I put the name in quotes in due course) on behalf of RND to Moorwand. In such a case: a) The bank’s duty to exercise reasonable skill and care arises only where there is range of options available to the bank. If the bank has only one course open to it, it must follow that course: at [35] and [63]. b) A bank will be obliged to exercise reasonable skill and care when interpreting, ascertaining and acting in accordance with the instructions of the customer. Where the instruction is clear, leaving no room for interpretation or choice, the bank has no option but to execute the[19]The Judgment most impressively sets out the facts and the Judge’s reasons for his conclusion. The Judgment is all the more impressive given that it was ex tempore. The clarity of the Judgment enables the identification of errors which render the Judge’s rejection of the Derivative Claim incorrect, such that (subject to the biting of the exclusion clause, to which I will come) permission to appeal must be given on this point and the appeal on this point allowed.[20]The errors were as follow: i) The Judge incorrectly equated RND’s agent (Mr “Stanfield”) with RND itself, such that he regarded the knowledge of the agent as that of the company RND: see [69], [109] and [187] of the Judgment. Instead of seeing the issues from the perspective of an innocent principal (RND) that was the victim of a fraud of its agent (Mr “Stanfeld”), the Judge treated the fraudster’s knowledge as that of RND. ii) This was an error of law. It has been clear, since the decision in Re Hampshire Land Co, [1896] 2 Ch 743 that the knowledge of a director acting in fraud of their corporate principal is not to be attributed to the company. For more recent authority – cited both to the Judge and to me – reference may be had to Bilta (UK) Ltd v. Nazir, [2015] UKSC 23 and Singularis Holdings Ltd v. Daiwa Capital Markets Europe Ltd, [2019] UKSC 50. iii) Although Ms Knight sought to suggest that this was a principle that ought to be attenuated or not applied in the present case, I disagree. Not only am I bound by high authority, but also the rule is a highly principled one. A sound claim brought by a company against a third party should not be destroyed or fatally undermined by attributing to the company the dishonest conduct of the company’s agent. iv) By equating Mr “Stanfield” with RND, the Judge failed to appreciate the significance of a number of factors: a) RND’s business was stated to be that of a marketing consultancy: see paragraph 15(i) above. It was also described as doing on-line marketing and lead generation: see paragraph 15(ii) above. There was thus an obvious tension between the description of RND’s business, and the actual conduct of that business by Mr “Stanfield” which the Judge failed to take into consideration: see, in particular, the passages in the Judgment set out at paragraphs 15(vi) to (xi) above. The fact is that the actions of RND’s agent were inconsistent with the stated business of RND. That inconsistency could only be disposed of by aligning the agent’s state of mind with that of RND which (as I have stated) was an error of law. b) This elision between agent and principal also meant that the Judge failed to take account of the fact that the person acting as soi disant agent of RND was no such thing. The person authorised to act for RND was a Mr Stanfield, a real person who was himself the victim of identity fraud: see paragraphs 15(i) to (iii) above. There was a good deal of material to suggest that the person in fact purporting to act for RND was not Mr Stanfield, hence my use of quotation marks around “Stanfield”. The Judge failed to attach weight to these factors by treating the agent acting or purporting to act for RND as indivisible from RND. Thus, the Judge treated all acts by the (unknown) fraudster masquerading as Mr Stanfield as those of RND. Again, for the reasons I have given, this was an error of law. v) As a result, the Judge wrongly discounted a number of factors which went to the question of whether Moorwand had been put on inquiry. The issues(i) of whether RND’s trading was consistent with that described on the opening of the account and(ii) whether an authorised agent was acting for RND at all were central to the essential Quincecare question of whether Moorwand had been put on inquiry. vi) The Judge also erred in drawing a line between facts that went to “regulatory failures” and facts going to Moorwand’s duty of inquiry: see [66], [97], [130], [161], [164], [167], [187], [191] and [192] of the Judgment. Whilst it is entirely right to say that regulatory failures (for instance: failure to monitor for money laundering) are not relevant to the Quincecare duty, it is an error to assert (as the Judge appears to have done) that where facts are relevant to one duty they are, ipso facto, irrelevant to another. That does not follow and is obviously wrong. Whether a bank is put on inquiry is obviously a question of fact, but one that must be considered in light of the relevant history. That history cannot be redacted because some facts which would otherwise serve to put a bank on inquiry go to other, different, regulatory breaches on the part of the bank. Facts may be pertinent and to be taken into account for more than one purpose. vii) Thus, the Judge dismissed the tensions between RND’s business purpose and the manner in which RND’s account was conducted and the clear concerns arising on the opening of RND’s account for an altogether bad reason. He also dismissed the concerns identified by the single joint expert for the same erroneous reason.[21]The evidence I have described demonstrates that Moorwand was on inquiry. Considering matters in the way that the Judge should have seen them, this outcome is inevitable on the facts of this case. Indeed, in this case, it is clear that Moorwand was subjectively aware that further inquiries needed to be made at the very outset: see [63] of the Judgment, quoted at paragraph 15(iii) above.

Disposal

[22]For these reasons, permission to appeal on this ground must be given, and the appeal must succeed. Moorwand should never have debited the account of RND without satisfying itself (Moorwand being on inquiry) that the payment instruction it was receiving from Mr “Stanfield” were proper and not in fraud of RND. The Derivative Claim is not a claim that sounds in damages, but is one that obliges Moorwand to restore or correct the balance between RND and itself: see Philipp itself and Sagicor Bank Jamaica Ltd v. Seaton, [2022] UKPC 48 at, in particular, [17].[23]This question of remedy is a matter of some relevance to the exclusion clause, to which I turn next. The question is whether this otherwise successful claim fails because of the exclusion clause in the terms and conditions between RND and Moorwand.

THE EXCLUSION CLAUSE

[24]The agreement between RND and Moorwand contained (in clause 16) the following exclusion clause, which is set out in [68] of the Judgment: IN NO EVENT SHALL COMPANY OR ANY PERSONS OR ENTITIES ASSOCIATED THEREWITH BE LIABLE FOR ANY DIRECT, INDIRECT, PUNITIVE, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT OR THE SUBJECT MATTERS HEREOF (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF BUSINESS PROFITS, BUSINESS INTERRUPTION, OR LOSS OF BUSINESS INFORMATION) EVEN IF COMPANY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES

The Judge found that this exclusion clause bound RND:

[25]see [185] of the Judgment. On appeal, this was challenged on three grounds: i) First, it was contended that the exclusion clause applied to claims for damages only and could not affect Moorwand’s obligation to abide by its mandate and (where a payment was made in breach of mandate) to reinstate the account (ground 8 of the Amended Grounds of Appeal). This contention is, in my judgement, plainly right. Not only does the exclusion clause apply to claims in damages only – and this claim is not a claim in damages – but also if the exclusion clause were to be read as extending to the obligation to reinstate, this would have the effect of rendering Moorwand’s mandate meaningless. Moorwand would be able to disregard the limits to its mandate and would be under no obligation to reinstate the account, whatever the nature of its conduct (unless fraudulent). Essentially, the exclusion clause would be serving to re-write Moorwand’s primary contractual obligations: and it is clear from the wording of the clause that this is not intended nor (if intended) achieved. ii) Secondly, it was suggested that the exclusion clause should be construed narrowly, so as to be limited to certain types of claim (eg innocent breaches, and not negligent breaches). So far as I can see, this point was not run before the Judge and does not appear clearly in the Amended Grounds of Appeal. It seems to me that there are difficulties with this argument in any event, both because of the wording of the clause itself and because there is no innocent breach of duty capable of being excluded: it seems to me that the argument that this clause extends to negligent breach of duty is a difficult one to resist. Since it appears to be an unpleaded and new point, and since it is unnecessary to consider it given my conclusion at paragraph 25(i), I say no more on this point. iii) Thirdly, it was suggested that the Judge wrongly applied the test of reasonableness laid down in the Unfair Contract Terms Act 1977. The contention (see paragraph 9 of the Amended Grounds of Appeal) was that the Judge had failed specifically to address the various factors going to reasonableness as set out in Schedule 2 to the Act, had disregarded the inequality of bargaining power between the parties and the proper allocation of risk, and had failed to attach any weight to the fact that Moorwand had failed to adduce any evidence specifically on this point. This last point is bad: although parties may adduce evidence going to (un)reasonableness, (un)reasonableness is usually assessed by reference to the general facts of the case, which is what the Judge did here. The Judgment is a careful – and ex tempore – judgment, and I consider that the Judge made an evaluation of reasonableness which I should only interfere with if there is manifest error. There is no such manifest error here, and I dismiss this ground of appeal.[26]However, for the reason given in paragraph 25(i) above, the exclusion clause does not bite on RND’s claim for reinstatement of the account. The claim for reinstatement therefore succeeds and the appeal should be allowed. For the avoidance of any doubt, permission to appeal is granted in respect of paragraph 8, and the appeal succeeds on that ground. Although it is much more marginal, I also give permission to appeal in respect of paragraph 9 but the appeal fails on that ground for the reasons I have given.

THE CLAIM BASED ON THE PAYMENT SERVICES REGULATIONS 2009

[27]The Payment Services Regulations 2009, SI 2009 No 209, provide at regulation 61 that where an executed payment transaction was not authorised in accordance with regulation 55, the payment service provider (here: Moorwand) must immediately: i) Refund the amount of the unauthorised payment transaction to the payer; and ii) Where applicable, restore the debited payment account to the state it would have been in had the unauthorised payment transaction not taken place.[28]The Appellants contended (on RND’s behalf) that the payments out of the account RND held with Moorwand were unauthorised within the meaning of regulation 55. Regulation 55 provides as follows: (1) A payment transaction is to be regarded as having been authorised by the payer for the purposes of this Part only if the payer has given its consent to - (a) the execution of the payment transaction; or (b) the execution of a series of payment transactions of which that payment transaction forms a part.[29]Clearly, this is a case of a series of payment transactions within regulation 55(1)(b). The critical question is what constitutes “consent”, which is given a very specific meaning by regulation 55: (2) Such consent –(a) may be given before or, if agreed between the payer and its payment service provider, after the execution of the payment transaction; and(b) must be given in the form, and in accordance with the procedure, agreed between the payer and its payment service provider.[30]Regulation 55(2)(b) imposes a purely mechanical requirement on the payment service provider to observe the procedures agreed between it and its customer. The Payment Services Regulations are concerned with transactional speed and efficiency. Payment service providers should execute payment instructions swiftly and in accordance with clear criteria. Where those criteria are not met, the transaction should speedily be reversed if executed in error. The Regulations are nothing to with the Quincecare duty articulated in Philipps. Indeed, it would be odd if there were duplication in this regard.[31]As the Judgments make clear, it cannot be said that the mechanical provisions regarding payment instructions were disregarded by Moorwand. To the contrary, they were (as the Judgment records) punctiliously observed. The claim under the Payment Services Regulations fails for this reason. The point is that a punctilious observance of the mechanics of a mandate does not absolve a payment service provider from observing the Quincecare duty where it arises, as it does here.[32]This ground of appeal fails. There was never, in my judgement, any real prospect of it succeeding given the terms of the Regulation, and for that reason I also refuse permission to appeal.

DISPOSITION

[33]For the reasons I have given, the Derivative Claim as I have defined it succeeds and the appeal is allowed to this extent. Moorwand must restore the monies (just under £160,000) improperly paid away from the RND account to that account for the use of RND.[34]I very much hope that this does not prove to be a pyrrhic victory for the Appellants. RND, as I understand it, is in administration, and its assets must be distributed properly in accordance with the rules. To whom those monies go is not a matter for this appeal.

order

at [63] and [64]. c) An agent has no actual (ostensible authority raises different questions) authority to act fraudulently in their own interests and not bona fide in the interests of their principal: at [71], [72] and [78]. Ostensible authority – where a third party relies on the apparent authority of an agent who has no actual authority – exists to protect a third party who relies on the appearance of authority with which an agent is cloaked: at [72]-[85]. Apparent authority confers no protection on a third party with notice that the agent is acting without actual authority: at [86]. d) Where – in a case potentially giving rise to the Quincecare duty – an agent is acting in fraud of their principal, there will (self-evidently) be no actual authority in the agent (at [90]). The bank receiving a payment instruction from such an agent will, nevertheless, be protected by that agent’s ostensible authority (at [90]). e) If there are circumstances suggestive of dishonesty apparent to the bank which would cause a reasonable banker before executing an instruction to make inquiries to verify the agent’s authority, the bank’s duty to exercise reasonable skill and care in and about executing the customer’s instructions requires the bank to make inquiries to ascertain whether the instruction given is one actually authorised by the customer. If the bank executes the payment instruction without making such inquiries, the bank will be acting in breach of duty. Furthermore, the instruction will not bind the customer, as the dishonest agent will lack apparent as well as actual authority to give it on behalf of the customer: at [90]. The duty of care requires the bank, if put on inquiry, not to act without checking that the order is a valid order of the customer to transfer money promptly. The duty of care requires the bank, if put on inquiry, not to act without checking that the order is indeed a valid order of the customer to transfer money. If the bank, without taking steps to clarify the customer’s intention, executes the order, the bank will be acting in breach of its duty of care and will also be acting outside the scope of its mandate: at [91]. f) Such cases actually involve interaction between two agents of the principal (here: RND): the agent authorised to give payment instructions (here: Mr Stanfield) and the agent authorised to execute those payment instructions (here: Moorwand). The consequence of the Quincecare duty is that the bank may not follow the instructions of the principal’s (other) agent where that agent has neither actual or apparent authority to give those instructions: at [93]. Analysis

Cited in 1 later judgment