Background
Fraudsters incorporated RND Global Ltd using the stolen identity of John Stanfield and opened electronic-money accounts with Moorwand Ltd. Gareth and Marilyn Hamblin were then induced by an authorised push-payment fraud to transfer £160,000 into RND’s sterling account. Most of the money was rapidly spent on Bitcoin, luxury watches and other payments.
After RND was restored to the register, the Hamblins brought a derivative claim asserting RND’s rights against Moorwand. The trial judge found that RND held the money on constructive trust for the Hamblins and permitted the derivative claim, but dismissed it because Moorwand had not been put on enquiry that the transfer instructions lacked RND’s authority. Marcus Smith J reversed that decision and ordered Moorwand to restore £160,000 to RND’s account, with interest.
The Court’s Holding
The Court of Appeal unanimously allowed Moorwand’s second appeal. The trial judge had addressed the correct question—whether Moorwand was put on enquiry that the fraudster’s instructions were unauthorised—and was entitled to conclude from the evidence, including the single joint expert’s report, that it was not. The High Court therefore had no proper basis for disturbing that evaluative finding.
The Court rejected the view that the trial judge had improperly equated the fraudster with RND or automatically disregarded facts underlying Moorwand’s regulatory shortcomings. Although the trial judge’s assessment was favourable to Moorwand and another judge could reasonably have reached the opposite conclusion, it was open on the evidence and did not meet the high threshold for appellate intervention. The order requiring restoration of the account was consequently set aside, making the interest ruling academic.
Key Takeaways
- Whether a payment provider was put on enquiry that an agent lacked authority is an evaluative, fact-sensitive question with which an appellate court may interfere only on established appellate-review grounds.
- Facts revealing anti-money-laundering or onboarding shortcomings may also be relevant to a Quincecare analysis, but regulatory failures do not by themselves establish that a provider suspected misappropriation from its customer.
- A payment provider’s compliance with agreed payment procedures and the apparent authority of the person giving instructions remain important unless circumstances put the provider on enquiry that the instructions are unauthorised.
Why It Matters
The decision limits an attempt to use a derivative claim by APP-fraud victims to compel the recipient company’s payment provider to restore funds paid away by fraudsters. It does not rule out that form of claim in principle; instead, it emphasizes that liability depends on proving the provider was put on enquiry about the agent’s lack of authority.
The judgment also reinforces appellate restraint where a trial judge has evaluated mixed evidence and reached a conclusion reasonably open to them. Peter Jackson LJ separately criticized the disproportionate litigation costs, reported at about £1 million—roughly seven times the original sum in dispute.