The Court of Appeal recently considered a novel derivative Quincecare claim arising from an APP fraud and provided guidance on the relationship between regulatory failings and Quincecare liability.

Background

The Court of Appeal's decision in Moorwand Ltd v Hamblin [2026] EWCA Civ 942 concerned an authorised push payment ("APP") fraud.  The appeal to the Court of Appeal was the second appeal in these proceedings.

A fraudster used the identity of a real person to incorporate RND Global Ltd ("RND") and open accounts with Moorwand Ltd, an Electronic Money Institution ("EMI").

Despite inconsistencies in RND's onboarding documents and concerns raised internally by Moorwand, the accounts were successfully opened.  Mr and Mrs Hamblin were subsequently induced by the fraudster to transfer £160,000 to RND's accounts with Moorwand, after which the funds were dissipated through transactions such as the purchase of Bitcoin and a luxury watch.  RND was later dissolved.

As the Hamblins were not customers of Moorwand, they could not bring a direct Quincecare claim (i.e., a claim alleging that a bank, EMI, or other payment services provider ("PSP") wrongly executed a payment instruction despite being "put on enquiry" that the instruction involved an authorised agent misappropriating his customers' funds).  To overcome this, the Hamblins employed a novel procedure by successfully restoring RND to the Companies Register and establishing the £160,000 was subject to a constructive trust, which gave them standing to bring a derivative claim in the shoes of RND against Moorwand asserting a breach of a Quincecare duty by Moorwand.  The trial judge noted the novelty of that procedure and accepted it as valid.  The use of the derivative procedure was not subsequently appealed and went unchallenged in the higher courts.

Outcome

The claim ultimately turned on whether Moorwand had been "put on enquiry" that the payment instructions were made without RND's authority because they involved the misappropriation of RND's funds.  The trial judge, HHJ Raeside KC, dismissed the claim at first instance, finding that Moorwand had not been "put on enquiry" despite its regulatory failings when opening the accounts. 

On first appeal, the High Court held the trial judge had made three errors of law.  It reached the contrary conclusion that Moorwand had been "put on enquiry" and ordered Moorwand to re-credit the funds to RND's account. 

The Court of Appeal restored the trial judge's decision, holding that the high threshold for revisiting the trial judge's evaluative findings had not been met as the trial judge had not, in fact, made the errors of law identified by the High Court in the first appeal. 

Key takeaways

Quincecare liability has been the subject of significant and sustained litigation in recent years, and some important cases are still to be substantively decided.  This decision involved a number of unusual features, but at least three key points arise for firms handling Quincecare type claims.

First, the decision provides guidance on the relationship between regulatory failings and Quincecare liability.  In particular, the Court drew a distinction between the existence of a regulatory breach and the underlying facts giving rise to it, confirming that the question of whether a financial institution (e.g., a bank, EMI, and/or PSP) was "put on enquiry" of a potential fraud for the purposes of assessing Quincecare liability always turns on the underlying facts of the case.  The mere fact that there has been a regulatory breach will not be sufficient to establish that an instruction is unauthorised.

Second, the decision illustrates how claimants continue to deploy creative causes of action, procedures, and recovery routes in an attempt to expand the scope of Quincecare-type claims and overcome the limitations on such claims established by the Privy Council and the Supreme Court.  In Moorwand, the claimants sought to do so through a derivative action argued on the basis of the existence of a constructive trust.  Although that procedure was not challenged on appeal, the Court of Appeal identified a number of unresolved issues relating to authority, potential contractual defences, and attribution, and sounded a note of caution that the derivative procedure and these issues would "require full argument and careful consideration in a case in which they arise".  More broadly, recent cases demonstrate mixed success for claimants.  While some claims, such as unjust enrichment claims, have survived strike out and summary judgment, others, including contract, tort, and "duty of retrieval" claims against receiving institutions, have faced greater difficulties.  The viability and scope of these alternative routes to recovery, including derivative Quincecare claims, therefore remain unsettled.

Third, the decision re-affirms the principle of appellate restraint.  Importantly, the Court of Appeal did not endorse the trial judge's factual findings that, despite the regulatory failures, Moorwand had not been "put on enquiry".  Rather, it expressly acknowledged that a contrary conclusion could also have been reached on the facts and it would not have interfered with that conclusion absent a demonstrable error of law.  Therefore, the appeal succeeded, and the claim failed, on the much narrower and more conventional basis that none of the three alleged errors of law identified by the High Court in the first appeal had, in fact, been made by the trial judge and, therefore, the high threshold for appellate intervention had not been met.