Larsson v Revolut Ltd

Factual and Procedural Background

This case concerns an application by the Defendant, Company A, to strike out the claim brought by the Plaintiff or for summary judgment. The Plaintiff is a customer of Company A, holding an account identified as the "7703 Account". The Plaintiff was the victim of an authorised push payment fraud perpetrated by unknown persons (the "Perpetrators"). The Perpetrators induced the Plaintiff to transfer CHF 466,617.73, purportedly for the purchase of shares in a non-existent entity called "Starlink". The Plaintiff was told that five separate accounts at Company A had been set up in his name (the "Destination Accounts") and that he should transfer funds to those accounts. The Plaintiff made five transfers from his UBS account in Switzerland to the Destination Accounts, which were in fact held by different individuals. The payments were made via the SWIFT system, with the beneficiary named as the Plaintiff, though the accounts were held by others.

After the funds entered the Destination Accounts, the Perpetrators quickly transferred them out, interacting with Company A via live chat and providing suspicious reasons for urgent payments. A sixth payment attempted by the Plaintiff to another Company A account was rejected by Company A for unknown reasons. The Plaintiff claims that Company A breached contract and tort duties by failing to detect or prevent the fraud, is liable in restitution for unjust enrichment, and is liable as an accessory for dishonest assistance in a breach of trust. Company A seeks to strike out or obtain summary judgment on all claims except the unjust enrichment claim, which the parties agreed to defer pending another case.

Legal Issues Presented

1. Whether Company A owed contractual or tortious duties of care to the Plaintiff in relation to the payments made to the Destination Accounts.
2. Whether Company A breached any such duties by failing to detect or prevent the fraud.
3. Whether Company A is liable as an accessory for dishonest assistance in a breach of trust.
4. Whether the Plaintiff's claim in unjust enrichment should proceed (deferred in this application).
5. The appropriateness of striking out or summary judgment on the claims in contract, tort, and dishonest assistance.

Arguments of the Parties

Appellant's Arguments (Plaintiff)

• Company A owed an implied contractual duty to exercise reasonable care and skill in executing the Plaintiff's orders, including refraining from executing payments suspected to be fraudulent.
• Company A was obliged to have internal systems to detect and prevent errors and fraud, including identifying and blocking unlawful multiple account openings.
• A tortious duty of care existed, analogous to contractual duties, given the banker-customer relationship.
• Company A assumed responsibility by blocking the sixth payment, evidencing a duty to protect the Plaintiff.
• Company A is liable for dishonest assistance by turning a blind eye to red flags indicating breaches of trust.

Appellee's Arguments (Defendant)

• Company A denies owing any contractual or tortious duties to the Plaintiff in relation to payments made to accounts held by others.
• Company A acted only as a recipient payment service provider for the Destination Account holders and was obliged to act on their instructions, not the Plaintiff's.
• There is no duty on recipient banks to verify that the named beneficiary matches the account holder, especially in international payments governed by the Payment Services Regulations 2017.
• Imposing such duties would impose onerous burdens on banks and is a matter for legislators and regulators, not courts.
• The claim in dishonest assistance is insufficiently pleaded, lacking clear identification of the trust, breach, assistance, and dishonesty.
• There is no basis to find that Company A assumed responsibility towards the Plaintiff merely because it blocked the sixth payment.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch)	Principles governing summary judgment, including assessing whether the claimant has a realistic prospect of success without a mini-trial.	Used to frame the standard for summary judgment and strike out applications in this case.
Swain v Hillman [2001] 2 All ER 91	Distinguishing realistic claims from fanciful ones in summary judgment.	Referenced as part of the test for summary judgment.
ED & F Man Liquid Products v Patel [2003] EWCA Civ 472	Clarification that a realistic claim carries some degree of conviction and courts may disregard assertions contradicted by documents.	Applied to assess the credibility of factual assertions.
Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550	Consideration of evidence available at trial in summary judgment decisions.	Guided the court to consider evidence reasonably expected at trial.
Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63	Caution against deciding cases without a trial where fuller investigation might alter the outcome.	Supported hesitation to grant summary judgment on novel issues without full trial.
ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725	Summary judgment should not be refused merely because something might turn up at trial affecting construction.	Informed the court’s approach to legal questions on summary judgment.
JP SPC 4 v Royal Bank of Scotland [2022] HKPC 18	Duty of care of banks regarding payment instructions and third-party beneficial owners; courts may decide legal questions on assumed facts.	Relied on to justify deciding novel legal issues at this stage rather than deferring to trial.
Philipp v Barclays Bank UK plc [2023] UKSC 25; [2024] AC 346	Clarified bank duties: paying banks must act on customer instructions promptly; Quincecare duty applies only when instructions are not unequivocal; no duty to third parties.	Key authority rejecting duties to third parties and limiting Quincecare duty.
Barclays Bank plc v Quincecare [1992] 4 All ER 363	Bank’s duty not to execute payment instructions if there are reasonable grounds to suspect fraud by the customer’s agent.	Referenced to explain the scope of bank duties in payment instructions.
Abou-Rahmah v Abacha [2005] EWHC 2662 (QB)	Recipient bank does not owe duty to payer to pay monies only to beneficiary identified by payer’s instructions.	Supported the position that recipient banks owe no duty to payers in such circumstances.
Benyatov v Credit Suisse Securities (Europe) Ltd [2023] EWCA Civ 140	Adoption of incremental approach to novel duty of care claims, considering Caparo factors.	Guided the court’s analysis of whether a novel tortious duty of care should be recognised.
Westdeutsche Landesbank Girozentrale v London Borough of Islington [1996] AC 668	Constructive trust arises where property is obtained by fraud, making it recoverable and traceable in equity.	Supported the Plaintiff’s contention that fraudulently transferred funds may be subject to constructive trust.
Tecnimont Arabia Limited v National Westminster Bank plc [2022] EWHC 1172 (Comm)	Rejected claim that funds transferred under fraud were trust property at time of receipt by bank.	Relied on by Defendant to challenge the constructive trust claim.
Shalson v Russo [2003] EWHC 1637 (Ch)	Money lent fraudulently did not immediately subject to constructive trust but revested in lender on contract rescission.	Referenced in academic debate on constructive trust arising from fraud.
Re D&D Wines International Ltd [2016] UKSC 47	Constructive trust requires intention vitiated by mistake or fraud; property in wrong hands is a necessary condition.	Recognised the complexity of constructive trust in fraud cases.
Singularis Holdings Ltd v Daiwa Capital Markets Europe Ltd [2017] EWCA 257 (Ch)	Dishonesty for dishonest assistance includes wilful blindness; dishonesty must be established against an identified individual.	Informed the court’s view on pleading dishonesty and the need to identify dishonest employees.
Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378	Liability for dishonest assistance requires dishonesty, not mere negligence.	Supported the court’s rejection of negligence as sufficient for dishonest assistance.

Court's Reasoning and Analysis

The court analysed the claims on the basis of the pleaded facts, assuming them true for this application. It rejected the Plaintiff’s contention that Company A owed implied contractual duties to manage account openings or incoming transfers in the manner alleged. The contractual term restricting multiple personal accounts was not construed as imposing positive obligations to police compliance or monitor third-party payments.

Regarding tortious duties, the court applied the incremental approach considering the Caparo factors: foreseeability, proximity, and whether it is fair, just, and reasonable to impose a duty. It found no principled basis to impose a duty of care on Company A towards the Plaintiff for payments made from the Plaintiff’s account at another bank to accounts held by different customers at Company A. The fact that the Plaintiff was also a customer did not alter this conclusion. The court emphasised the regulatory context, including the Payment Services Regulations 2017, which deem payment orders executed correctly if made in accordance with unique identifiers (account numbers), without mandatory name checks for international payments.

The court noted ongoing legislative and regulatory initiatives addressing authorised push payment fraud and declined to extend common law duties in this complex and evolving area, deferring such policy decisions to legislators and regulators.

On the claim of dishonest assistance, the court acknowledged that a constructive trust might arguably arise on the funds transferred by fraud or mistake but found the pleadings insufficiently clear on the trust’s nature, breach, and Company A’s assistance. The court allowed the Plaintiff the opportunity to amend the pleadings to clarify these elements.

The court further held that allegations of dishonesty were pleaded, including wilful blindness, which suffices under established authority, but noted the high burden of proof and the necessity to identify dishonest individuals within Company A, which is not presently possible before disclosure.

Holding and Implications

The court's final decision was to STRIKE OUT the claims in contract and tortious duty of care against Company A. However, the claim for dishonest assistance in breach of trust was not struck out at this stage, and the Plaintiff was granted leave to amend the pleadings to address identified deficiencies.

The direct effect is that the Plaintiff’s claims based on breach of contract and tortious duty of care will not proceed. The dishonest assistance claim remains alive, subject to amendment and further proceedings. No new legal precedents were established, and the court emphasised the importance of legislative and regulatory frameworks in addressing the issues raised by authorised push payment fraud in the context of international payments.