On appeal, the High Court in Hamblin & Anor v Moorwand Ltd & Anor [2025]  upheld a novel derivative action brought by victims of Authorised Push Payment (“APP”) fraud against an Electronic Money Institution (“EMI”). The court found that the EMI had breached its Quincecare duty by failing to make adequate inquiries before executing fraudulent payment instructions.

Background

• Mr and Mrs Hamblin were victims of APP Fraud. They were persuaded to make a payment of £160,000 to a shell company, RND Global Ltd (“RND”), which held an account with Moorwand Ltd (“Moorwand”), an FCA-regulated EMI.
• Through Moorwand, RND operated an e-wallet, which was able to hold money in Sterling, Euro, and Bitcoin.
• Unbeknownst to the Hamblins, RND’s director had himself fallen victim to identity fraud.
• The actual fraudster induced the Hamblins into sending funds to RND’s account, which was subsequently drained.
• Although the Hamblins were not customers of Moorwand and had no contractual relationship with the company, they sought legal recourse to recover their losses from both Moorwand and RND. 
• The High Court granted the Hamblins permission to bring a derivative action on behalf of RND. This was not appealed by Moorwand.

The Quincecare duty

The crux of this High Court case was whether Moorwand had breached the Quincecare duty.

Let’s recap what this duty entails.

In Barclays Bank plc v Quincecare Ltd [1992], the court held that banks owe a duty not to execute payment instructions given by a customer’s agent where they have reasonable grounds to believe that the agent is attempting to defraud the customer – commonly known as the Quincecare duty.

This principle was later extended to include EMIs in Hamblin v World First Limited and Moorwand NL Limited [2020].

The scope of the Quincecare duty was definitively narrowed by the UK Supreme Court in Philipp v Barclays Bank (please see our article: Five key points from Philipp v Barclays Bank UK Plc), which confirmed that the duty arises only in cases involving payment instructions issued by an agent of the customer – not the customer themselves.

Mr Justice Marcus Smith’s Judgement

Overturning the first instance decision, Mr Justice Marcus Smith held that while a Payment Service Provider (“PSP”) is generally entitled to rely on an agent’s actual or ostensible authority when receiving and executing a payment instruction on behalf of a company even if the agent is acting fraudulently (as established in Philipps) this protection does not apply where there are:

“circumstances of dishonesty apparent to the [PSP] which would cause a reasonable banker before executing the instruction to make inquiries to verify the agent’s authority” [18].

The PSP should act upon those inquiries prior to authorising the payment. If a PSP does not make such inquiries, the PSP will be acting in breach of duty, outside the scope of its mandate and the instructions sent by the agent will not bind the customer.

Red Flags Triggering Inquiry

Mr Justice Marcus Smith explained that the EMI had been “subjectively aware” of the need for further inquiries from the outset.

The court identified two key findings that put Moorwand Ltd on inquiry:

1. Onboarding Irregularities: The documents required for onboarding the alleged director of RND were inconsistent and RND’s UBO appeared “fake”; and
2. Business Discrepancies: There were inconsistencies between RND’s declared business activities and the nature of the transactions initiated by the purported agent.

Despite these warning signs, Moorwand failed to undertake appropriate inquiries. As a result, the court found that the Quincecare duty had been triggered and breached.

Outcome

Mr Justice Marcus Smith ordered the EMI to return the misappropriated funds to RND which is currently in administration.

Three Lessons

1. Derivative Actions as a Recovery Tool
   The High Court granted the Hamblins permission to bring a derivative action on behalf of RND. However, because Moorwand did not appeal the decision, the legal basis for granting that permission has not yet been examined by the courts. It remains unclear how future courts might respond to similar claims – particularly where the defrauded company does not consent or where the defendant actively challenges the action. Nevertheless, the case highlights a potential avenue for recovery that fraud victims should consider, especially in situations where shell companies have been used to facilitate fraud or where the value of the fraud exceeds the reimbursement threshold set by the Payment Systems Regulator.
2. Increased Due Diligence Obligations
   This caselaw also serves as a reminder to PSPs that when put on inquiry of potential wrongdoing, proper investigations must be undertaken to confirm the accuracy of payment instructions provided on behalf of companies
3. Broader Quincecare Liability
   This case reaffirms that the Quincecare duty extends to EMIs.