Bank Not Liable For Sending Chaps Payment to the Wrong Payee

Case: Tidal Energy Ltd v Bank of Scotland plc [2013] EWHC 2780 (QB) (13 September 2013)


Banks use a fast payment system known as CHAPS when making same day money transfers in sterling.  The Clearing House Automated Payment System or CHAPS, as it is better known, is run by CHAPS Clearing Company Ltd (CHAPSCo).

CHAPSCo uses a secure messaging system allowing the Banks to send payment instructions to each other and from and to the real time gross settlement system operated by the Bank of England (BoE).  CHAPSCo also provides rules as to how messages should be sent and received by the Banks, though the content of the messages is defined by the Society for Worldwide Interbank Financial Telecommunication (SWIFT).  The standard format message stipulates the fields that are to be completed as “mandatory” – such fields include the amount, sort code or bank identifier code and the account number.  The “beneficiary name” is not a mandatory field.

For a CHAPS payment to be executed on the same day the CHAPS instruction must be received before 3pm otherwise it will be deemed to be received the next business day.


The Claimant, Tidal, a customer of the Bank of Scotland (BoS), instructed BoS to pay an outstanding debt of £217,781.57 to Designcraft by CHAPS using BoS’ standard printed CHAPS transfer forms, which had been signed by two of the Claimant’s authorised signatories.  The following details were set out in the form:-

  • Account Number 13027309 at Barclays Bank;
  • Sort code 20-16-12 (Barclay’s Bury St Edmunds branch);
  • The receiving customer name was “Designcraft Ltd”;
  • Payment details given were “Invoice 2638”; and
  • The date for the payment to be processed was 31 January 2012.

Section 2 of the CHAPS payment form headed “Your CONFIRMATION (terms and conditions set out overleaf”).  The following wording was provided above the boxes where the Claimant had entered its name and where the two authorised signatories had both signed their names:-

“You are hereby authorised to effect these instructions either by transmission through the Clearing House Automated Payment System or by such other method as you may in your sole discretion decide.

I/We agree that no responsibility is to attach to you for any loss caused by delays, interruptions or errors in transmission of payment, which are not directly due to the negligence or default of your own officers or servants.

Please debit the payment from my/our account number detailed in Section 1.

Neither this instruction for a CHAPS transfer nor your acceptance of it shall be enforceable by the payee or any other third party…”

Whilst the terms and conditions mainly concerned the timings of the payment, cancellation and amendments, it also made it clear that BoS could only undertake to comply with an amendment or cancellation of the instruction if it was received by 3pm on the business day before the agreed date for payment.  The Claimant, however, had sent the form early on the 31 January 2012 so that the payment was processed through CHAPS on the same day.

On 6 February 2012 the Claimant told BoS that unbeknown to them at the time of sending the instruction, the account details they had been given were in fact false and the receiving account at Barclays did not belong to Designcraft but a different company called Childfreedom Ltd and that they had been the victim of a fraudulent misrepresentation and for BoS to get the money back.  BoS rang Barclays to request that the customer holding the incorrect account should not be allowed to draw on the funds until further notice.  BoS made two further calls to Barclays on the same date repeating the request but Barclays declined to put a stop to the funds unless by a court order.

During the course of 6 February 2012 the account holder withdrew £217,000.


The court found no evidence that BoS were responsible for any error in transmission of the payment as the way in which CHAPS is set up it does not use the beneficiary’s name as a form of identifier that determines the destination of the payment but merely the account number and sort code.  BoS were instructed the carry out the instruction in accordance with the terms set out on the CHAPS form, which included an express acknowledgement by the Claimant that they agreed that no responsibility would be attached to the Bank.  The payment ended up with the wrong payee because the Claimant gave the wrong account number and sort code.  As a result, the court dismissed the Claimant’s action for summary judgment.