Hamblin v World First: remedies for victims of investment swindles

The case of Hamblin v World First 2020 EWHC 2383 (Comm) signifies a claim made by the victim to recover losses directly from the payment service provider who received monies from Mr Hamblin into an account set up by the fraudsters and, upon their instructions, had arranged for the onward payment of these monies. 

For the avoidance of doubt, the purpose of this case was not to make any allegation that the payment service provider had knowledge of the scam or acted dishonestly. 

This case is interesting because it overcame the issue that Mr Hamblin was not a direct customer of the payment service provider and the court's refusal to grant the payment service provider's application to strike out the claim. 

Factual background

At the time, Mr Hamblin thought he was investing in an organisation known as CEX Markets, who were engaged in foreign exchange dealing. The fraudsters set up a website and customer service whereby you were able to telephone and email a representative of the fraudsters. 

One year later, Mr Hamblin discovered the fraud when he could no longer log on to the website, and his emails would remain unanswered, resulting in him losing all his investment. 

No direct relationship = No duty of care 

Mr Hamblin never had any direct contractual relationship with the payment service provider. In light of Mr Hamblin not being an account holder – no duty of care (known as the Quincecare duty of care) was owed by the payment service provider to Mr Hamblin, but in fact, it was owed to the clone company as a customer.  

Derivative action approach  

The judge held that it was reasonably arguable for Mr Hamblin to bring a derivative action whereby he would stand in the shoes of the clone company in the name of which the account was opened by way of the following: 

(i)  Assert that the monies held in the account in the name of the clone company were held on trust for Mr Hamblin (which arose when Mr Hamblin was tricked into paying the money into the account).  

(ii) Claim that Mr Hamblin is entitled to bring a derivative action on the grounds that the rule that only a trust can bring a claim to recover trust monies is not absolute and therefore a beneficiary may bring such a claim where the trustee commits a breach of trust.  

The remedy: Two parts

1. Authorisation  

The payments made out of the account were never authorised by the clone company (as there was never a director appointed on Companies House), resulting in the account being restored to the position it would have been had the unauthorised payments not been made.

2. Breach of a duty of care

The payment service provider was in breach of the well-known Quincecare duty of care – i.e. duty not to give effect to a payment instruction without further investigation in circumstances in which the payment service provider has been put on inquiry as to the propriety of the payment instruction.

Summary

The Hamblin case has opened the gateway for victims of a scam to potentially make a claim directly against the payment service provider on the grounds that the payments made out of the relevant account by the payment service provider were either made without authorisation and/or in breach of the Quincecare duty of care. 

We anticipate that financial institutions will have to review their contractual terms and seek to limit their exposure for breach of the Quincecare duty of care. The recent case indicates that claims may be anticipated to increase. In other words, financial institutions can expect to see an increase in these types of claims when transactions go wrong. 

Contact our Chancery Lane solicitors 

If you have questions about the Quincecare duty in banking claims, we can help you navigate the legal complexities. 

Our London solicitors are based at 5 Chancery Lane in the legal quarter, next to the Law Society and a short distance from the Royal Courts of Justice. 

We also have specialist solicitors in Brighton, Eastbourne, Hastings, Uckfield, and Ulverston, and we work with clients across the UK.