Gareth Anthony Hamblin & Anor v Moorwand Ltd & Anor

A payment service provider must comply with its customer’s mandate, but must not execute an instruction where circumstances reasonably put it on inquiry that an authorised agent is acting fraudulently against the customer. The provider must then investigate the instruction. Facts relevant to regulatory failings may also be relevant to the common-law duty of inquiry. An exclusion clause directed to liability for damages does not remove the primary obligation to comply with the mandate or to restore an account debited without authority. The mechanical requirements of the Payment Services Regulations 2009 do not duplicate or replace the Quincecare duty.

The appellants were victims of a push-payment fraud. They sought recovery from Moorwand, a payment service provider, through a derivative claim brought on behalf of RND Global Ltd, the holder of the relevant electronic-wallet account. The first-instance judge permitted the derivative claim but dismissed it, holding that Moorwand was not put on inquiry and that the payments were authorised for the purposes of the Payment Services Regulations 2009.

The appeal concerned whether the derivative claim was properly pleaded, whether the first-instance factual and evaluative findings could stand, whether an exclusion clause defeated the claim, and whether the withdrawals were unauthorised under regulations 55 and 61. The appeal was heard on a rolled-up basis.

1. Appeal allowed in part. Permission to appeal was granted on the principal derivative-claim ground. Moorwand was required to restore just under £160,000 to RND’s account.

2. An appellate court should be slow to interfere with findings of fact or evaluative decisions. Intervention is justified where the decision is unsupported by the evidence, no reasonable judge could have reached it, or an identifiable flaw such as a gap in logic, inconsistency or failure to consider a material factor undermines the conclusion. The judge’s treatment of the Derivative Claim contained such errors.

3. The first-instance judge wrongly attributed the fraudster’s knowledge to RND. The knowledge of an agent acting fraudulently against the corporate principal is not ordinarily attributed to the company. The agent’s conduct had to be assessed from the perspective of RND as an innocent principal.

4. The circumstances relevant to whether Moorwand was put on inquiry included the inconsistency between RND’s stated business and the transactions conducted, and the evidence that the person purporting to act for RND might not have been the authorised individual. Facts may be relevant both to regulatory failings and to the common-law duty of inquiry. The court must consider the relevant history as a whole.

5. Where a payment service provider is put on inquiry that an agent’s instruction may be fraudulent, it must satisfy itself that the instruction is proper before debiting the customer’s account. The resulting claim is one for restoration or correction of the account balance, not a claim sounding in damages.

6. The exclusion clause applied to damages. It did not exclude Moorwand’s primary obligation to comply with its mandate or its obligation to restore an account debited without authority. The challenge to the reasonableness assessment under the Unfair Contract Terms Act 1977 failed because no manifest error was shown.

7. The Payment Services Claim failed. Regulations 55 and 61 impose mechanical requirements concerning consent and execution of payment transactions. Moorwand had complied with those procedures. That compliance did not remove the separate Quincecare duty, but it meant that the statutory claim itself was not made out. Permission to appeal on this ground was refused.

• High Court (Chancery Division): HHJ Mark Raeside KC dismissed the Derivative Claim and the Payment Services Claim, while granting permission to pursue the derivative action. On appeal, the Derivative Claim succeeded to the extent of restoration of the account balance; the Payment Services Claim remained dismissed.