Moorwand: The 'Novel Approach' To Quincecare Claims That Could Let APP Fraud Victims Succeed Where Others Have Failed
In a significant ruling on the Quincecare duty in the context of APP fraud, the Court of Appeal has overturned the High Court’s decision and reinstated the trial judge’s dismissal of a derivative claim brought on behalf of the corporate vehicle used in the fraud.
In Moorwand Ltd v Hamblin & Ors [2026] EWCA Civ 942, the Court of Appeal allowed an appeal against a High Court decision finding that an electronic money institution breached its Quincecare duty in processing APP fraud payments. The Quincecare duty requires a bank to refrain from executing a payment instruction if it has reasonable grounds to believe (i.e. it is put on enquiry) that the instruction is an attempt to misappropriate the customer's funds.
The decision raises important questions about the use of derivative claims by fraud victims to circumvent the limits on the Quincecare duty.
Background
A shell company, RND Global Ltd ("RND"), was fraudulently incorporated using the stolen identity of Mr Stanfield as director. It then opened electronic money accounts with Moorwand (an e-money institution) by submitting falsified documents.
The fraudsters then perpetrated an APP fraud on Mr and Mrs Hamblin, inducing them to pay £160,000 into RND's account, and subsequently dissipating the funds through Bitcoin purchases and other transfers.
Since the bank's Quincecare duty is owed only to its customer, not to a third-party fraud victim,1 the Hamblins instead brought a derivative action on RND's behalf, alleging Moorwand had breached its Quincecare duty to RND.
The decisions below
The trial judge dismissed the claim, finding Moorwand was not put on enquiry that the transfers lacked RND's authority. On appeal, the High Court reversed this and ordered Moorwand to reimburse RND's account. Moorwand brought a second appeal to the Court of Appeal.
The Court of Appeal's decision
Three issues were before the Court: (1) whether the case as pleaded actually raised the "put on enquiry" question at all; (2) whether the trial judge had wrongly conflated the fraudster with RND itself; and (3) whether the trial judge had wrongly written off the onboarding failures as irrelevant once he turned to consider the transfers.
The Court of Appeal's key findings were as follows:
- Moorwand argued the claim was pleaded too narrowly to raise the general enquiry question; the Court disagreed.
- The trial judge had not treated the fraudster's conduct as RND's own. He was assessing matters as they would reasonably have appeared to Moorwand, which was the correct test for enquiry.
- While treating regulatory-breach facts as automatically irrelevant to the Quincecare duty would be an error of law, the trial judge's actual conclusion was that "despite" the onboarding failures, the circumstances didn't put Moorwand on enquiry.
With no error of principle found, the high threshold for disturbing the trial judge's evaluative conclusion wasn't met. Accordingly, the appeal was allowed.
Unresolved issues
The Court of Appeal left open three further questions:
- whether a bank could defend a Quincecare claim by pointing to the customer's own breach of warranty about the legitimacy of its business, and, if so, whether a fraudulent director's knowledge that those promises were false should count as the company's own knowledge for that purpose;
- whether the directors of a company set up purely as a fraud vehicle lack actual authority to disburse its funds; leaving unresolved whether the fraudster, whose identity was never established, held that authority; and
- whether the Quincecare duty extends to instructions that are actioned automatically rather than reviewed by a person.
Key takeaways and wider implications
- Regulatory failings and the Quincecare duty: AML or onboarding failures are not irrelevant to the Quincecare duty, but neither do they automatically establish that a bank was put on enquiry regarding misappropriation.
- Derivative claims remain a theoretically viable route for APP fraud victims: The decision leaves open the viability of derivative actions by APP fraud victims who can establish that the recipient company held their funds on constructive trust. The trial judge considered this a "novel approach," which might let victims "succeed where others have failed." However, a claimant would still need to prove the bank was put on enquiry.
- Impact for financial institutions: Although the Hamblins' claim failed in this instance, the indication that derivative claims in APP fraud cases remain possible may be unwelcome news for financial institutions, who may have concluded that APP fraud was outside the scope of the Quincecare duty following the Supreme Court's 2023 ruling in Philipp v Barclays.2
- Automated payment processing and monitoring duties: An argument that payments were processed automatically was raised on appeal but left undecided, along with the broader question of what, if any, monitoring duty might apply in such circumstances.
Quincecare duty: where this leaves the law
Moorwand shows the Quincecare duty is still being tested, even after Philipp v Barclays narrowed its scope for APP fraud victims. The Court of Appeal's openness to a derivative claim, brought via the defrauded company rather than the victims directly, keeps that route alive. However, the Court's reasoning also confirms the "put on enquiry" threshold remains fact-sensitive: onboarding or AML failures (here, a suspicious utility bill that compliance identified but never followed up on) are relevant context, but not automatic proof of enquiry.
With three key questions remaining open, the boundaries of the Quincecare duty in APP fraud cases may see further clarification in future litigation.
Other authors and key contacts: Sophie Law, Counsel; Fraser Collingham, Senior Associate; Lucy Miles, Trainee Solicitor
