Kenneth Larsson v Revolut Limited

A recipient payment service provider does not generally owe a third-party payer a contractual or tortious duty to detect fraud by checking whether the payer’s name matches the account identified by an international payment’s unique identifier. A customer relationship with the recipient provider does not create such a duty where the payment concerns another customer’s account and is unrelated to the payer’s account contract. Imposing a system-wide checking obligation for international payments would be a radical development with substantial operational consequences and is principally a matter for legislation or regulation. A dishonest-assistance claim may proceed where the existence of a constructive trust remains sufficiently arguable, but its constituent elements must be expressly pleaded.

Revolut applied to strike out, or obtain summary judgment on, claims arising from an authorised push payment fraud. The claimant, a Revolut customer, transferred funds from his UBS account to five Revolut accounts which he had been told were held in his name. The accounts were in fact held by other persons, and the funds were rapidly transferred away.

The claimant alleged contractual and tortious duties requiring Revolut to maintain systems preventing fraudulent use of accounts and to investigate discrepancies between payment names and account numbers. He also alleged dishonest assistance in a breach of trust. The court considered whether those claims disclosed a reasonable cause of action or had a real prospect of success.

1. Contract and tort. The claims based on contractual and tortious duties were struck out. Revolut was acting as recipient payment service provider. The claimant had instructed UBS to pay the destination accounts, not his own Revolut account. Any contractual duty concerning receipt and crediting of payments was owed in relation to the holders of those destination accounts, not to him. The contractual restriction against opening more than one personal account defined no service and imposed no positive obligation on Revolut to police compliance with it.
2. A recipient bank does not owe a third-party payer a free-standing duty to check international payment messages for a mismatch between the payer’s name, beneficiary details and account number merely because the payer is also a customer of that bank. The alleged duty failed the incremental analysis, including foreseeability, proximity, and fairness, justice and reasonableness. The customer relationship arose from a separate account contract and was unconnected with the payments to accounts held by other customers.
3. The burden of reviewing all international payment messages and comparing names with potentially millions of customer accounts would be substantial. Under Payment Services Regulations 2017, regulation 90(1), payment orders executed using the unique identifier are treated as correctly executed as regards the payee. The court would not impose a new international-payment name-checking duty where no comparable system existed and recent policy initiatives were matters for legislators and regulators.
4. The fact that Revolut rejected a later payment did not establish an assumption of responsibility. Whether Revolut’s systems should have detected discrepancies went to breach, not to the anterior question whether the alleged duty existed.
5. Dishonest assistance. The court declined at this stage to strike out the claim because it was sufficiently arguable that a constructive trust arose over funds transferred under fraud or mistake. The issue required fuller argument and could have wider implications. However, the pleading had to identify expressly the trust, the breach of trust and the assistance said to have been provided. The claimant was given an opportunity to amend.
6. Dishonesty was adequately alleged in principle. Wilful blindness could satisfy the dishonesty requirement, but incompetence, even gross incompetence, would not. The pleading also had to identify the individual within Revolut who possessed the relevant dishonest knowledge. The court declined to strike out for that omission because the identity might only become known through disclosure.

The contract and tort claims were struck out. The dishonest-assistance claim was allowed to continue subject to amendment.