Guy Adams (instructed by Capital Law LLP ) for the claimant; Neil Levy (instructed by Foot Anstey LLP ) for the defendant.
The claimant was a business account customer of the defendant bank. In January 2012, the claimant was indebted to one of its supplier companies. It owed them a sum of £217,781.57 under an invoice. On Tuesday 31 January 2012, the claimant gave an instruction to the defendant to pay the debt via a clearing house automated payment system (“CHAPS”) transfer form. The claimant stated that, unbeknown to it at the time the instruction was sent, the information it had been given about the receiving account was false and the designated receiving account belonged to a different entity. The claimant stated that it had been the victim of a fraudulent misrepresentation by an unnamed third party and informed the defendant, who instructed the receiving bank not to accept the payment. The receiving bank declined to put a stop on the funds unless required to do so by court order. The claimant sought summary judgment for an order and declaration that it was entitled to have its account re-credited by the defendant with the sum paid out. The defendant sought to have the action struck out as disclosing no reasonable ground for bringing the claim, alternatively summary judgment. The issue arose whether an instruction to make a payment via CHAPS was satisfied by funds being sent to, and accepted by, the bank which maintained the account with the number and sort code identified in the instruction as the destination of the payment, albeit that the holder of that account was not the beneficiary named in the instruction.
JUDGE HAVELOCK-ALLAN QC, granting the defendant’s application for summary judgment and dismissing the claimant’s application for summary judgment, said that the first logical step was to ask what the defendant bank was authorised to do and then to examine whether the defendant, as agent of the claimant, complied with that instruction. The instruction was to pay a sum of money to the beneficiary by CHAPS transfer to the account number and sort code specified. Although the identity of the beneficiary was important to the claimant, the evidence was that CHAPS did not operate in such a way that the beneficiary's name formed part of the identifier which determined the destination of the payment. The reason was a practical one. The volume of transactions conducted through CHAPS each business day meant that a process of manual checking would prevent payments being accomplished within the short timescale that was the hallmark of CHAPS. A receiving bank which was able to match the account number and sort code to one of its accounts would be expected to credit that account with the money and send a “logical acknowledgment”, or its modern equivalent, back to the paying bank to indicate acceptance of the payment. The payment was then complete and what happened in the instant case. On the facts, the defendant was not liable to return the funds to the claimant or to re-credit the claimant’s account. His Lordship expressed no view as to whether the claimant might be able to recover the payment from the receiving bank (paras 47–52).