When a bank’s mistake leads to the wrong person receiving a transfer of money, a ‘Norwich Pharmacal’ order can be used to identify them. However, a recent case has highlighted limitations on these applications, and suggested that their use be restricted in the future.

Mistakes in transfers of funds have been reduced, but still represent a routine problem for banks. If a bank makes a mistake and a transfer of funds is sent to the wrong person, or the wrong amount is sent, then the bank will have to compensate their customer. In some cases banks may elect to write off any recovery, but with larger amounts the preference is likely to be to try to recover their losses.

Of course, where a mistake has been made and funds sent to the wrong person it is often difficult to identify who received the money, and so they cannot be contacted to issue a claim. An application to the Court is required to gain access to this information.

A 2014 case (Santander UK plc v National Westminster Bank plc [2014] EWHC 2626) established that the High Court will allow banks’ applications for ‘Norwich Pharmacal’ orders in these situations. These orders allow a claimant who is aware that a claim exists against a defendant, but does not have any means of identifying that defendant to require a third party party (in this case, the bank of the recipient) to provide the identity of the defendant.  

However, in the recent case of Santander UK plc v The Royal Bank of Scotland plc and others [2015] EWHC 2560 a district judge put himself directly at odds with the case law and expressed doubts about whether Norwich Pharmacal orders should be granted in these circumstances.

The Courts have always emphasised that Norwich Pharmacal orders should be only used in certain situations, and at their discretion. Disclosure of the details of the intended defendant must be necessary for the claimants to gain redress, and the order must be proportionate, taking the privacy and data protection rights of the intended defendant into account.

The district judge in Santander UK plc v The Royal Bank of Scotland plcexpressed an opinion that the use of the orders by banks in cases like these should not be allowed.  A Norwich Pharmacal order, he argued, is an “exceptional jurisdiction”, which “involves a serious invasion of privacy and a burden on persons (banks) who have in some way become involved in the affairs of others”.

The district judge was of the view that receiving the mistakenly transferred money itself involved no wrongdoing, and that any potential wrong only arose in refusing to return the money.  Given that the claim did not arise out of “fraudulent, dangerous or even deliberate” acts by the defendant the district judge was sceptical that it was sufficiently serious to permit the invasion of privacy inherent in a Norwich Pharmacal order.

The district judge also had doubts about the position of the receiving bank. The case which established the use of Norwich Pharmacal orders involved the third party “getting mixed up in the tortious acts of others so as facilitate their wrongdoing...”. While the third party is not liable themselves, they are involved in activity that gave rise to the claim against the defendant. Here the district judge suggested that the bank innocently processing an incoming payment was not sufficient to qualify as “facilitating wrongdoing”, as in his view receiving the money was not really ‘wrongdoing' at all.

The district judge in Santander UK plc v The Royal Bank of Scotland plc may have made his disagreement with the High Court clear, but the more junior court was obliged to follow the judgment in the 2014 case, and the Norwich Pharmacal order was granted to Santander.

However, his arguments may represent a shift in the views of the junior judiciary. The 2014 High Court case shows that Santander made 83 applications for Norwich Pharmacal orders in 2013 and planned to make around 250 in 2014. With increasing numbers of claims this is likely to come before the courts again, and if this district judge's arguments are adopted by higher courts these applications will be refused, making it very difficult for banks to recover these funds.

More immediately, while obliged to allow the order the district judge limited the personal information that would be disclosed. Santander had originally requested the full name of the recipient of the funds, their address, email address, telephone number and full date of birth. The district judge ruled that only the bare minimum of personal information required to serve a claim should be disclosed – the name and address of the recipient. He also ruled that this information could only be used for the purpose of enforcing legal rights in connection with the mistaken payments.

Banks applying for Norwich Pharmacal orders should make it clear why the personal information they want provided is necessary to pursue their claim, or they will also risk being refused the right to anything beyond a name and an address. There will also likely be strict restrictions on how they use the information they are allowed, and any use beyond issuing a claim for the mistaken payment should be specifically addressed in the application.