Victim of (Mandate?) Fraud sued for Breach of Contract + Complaint upheld by Financial Ombudsman

[Wilderbird]

Hi Everyone,

I'm going to tell you my experience to date so that others may learn from it.

It's not quite over yet but I think it will be by next week.

Feel free to ask me any questions.

 

 

I live in SW Scotland and in Feb 2014 I approached a local family run company to quote for double glazed replacement windows.

The sales director sent me the quote from his email address.

I responded with a query and then accepted the quote by email.

His email address was then automatically added to my Outlook email address book.

 

 

The work was carried out in May 2014.

The fitters did a really good job and I love the windows so there's no problem there.

The problem started on 2nd June 2014.

I received an invoice from the company asking me for immediate payment

but that invoice didn't give me one jot of information on how to pay them.

In fact it was very poor, it had no company reg number and no T & Cs either.

 

 

I sent a quick email to the sales director (using the address already stored in Outlook) asking for payment details.

I got a response which mentioned 'New bank account' signed by the director from the sales director's email address.

 

 

I logged onto my bank account (Cahoot) and setup the payment online.

This all happened early afternoon.

 

 

Then around 4:30pm I received a second email from the sales director's email address but signed by the girl in the office.

It gave me different bank details.

 

 

I presumed that the company were in the process of changing bank accounts and that maybe the directors hadn't communicated it yet to the staff.

It was too late in the day to check with them when I picked up the email.

 

At about 7:30 that night Cahoot performed a security call.

In it they asked me if the payment was going to the windows company to which I said yes.

 

The next day I received an email from the sales director asking me where the money was because they hadn't received it.

I was given the run around until the 11th June when I had become very suspicious and stopped communicating with him.

 

 

In the meantime the bank were trying to trace where the money had gone.

They sent me the necessary proof on the 20th June.

I then got in touch with the company and sent the document to them on a different email address.

 

 

I told them they could now put pressure on Barclays bank because they had definitely received the money.

They instantly replied asking why Barclays when they were with Bank of Scotland.

I sent them all the previous emails and the girl in the office phoned me and said they had never sent the emails to me.

 

 

She asked me what I intended to do and I said I was going to phone the police, which I did.

The police investigation is ongoing and there are now 8 other victims none of them to do with the windows company.

 

Not once did this company try to talk to me or investigate the circumstances.

Their first response was when I was on the phone to the office girl and the sales director was asking in the background if I was insured.

The next thing they did was get a solicitor involved and sent me a demand to pay up.

 

 

I went to my own solicitor and showed her the email.

She told me I have paid.

The company did a few things that made me very suspicious about them.

They never chased me for the payment when I had told them they should received my payment by 3rd June at the latest

and they deleted all their emails which were police evidence.

 

 

I had my computer checked to ensure I hadn't been hacked which I hadn't.

I then had the email headers looked at by a computer expert

and they have shown that the so called fraudulent email was sent to me via the window company's server.

 

 

It looks as if someone within the company logged onto a google email account (which is largely anonymous)

and somehow intercepted my email but not quickly enough to stop another person in the company from also seeing my email.

 

My next step was to complain to my bank.

There had been no warnings on their screens to tell me that I wasn't protected by the Faster Payments System

or that they don't check the account name.

 

 

The bank's response was to tell me they didn't want the criminals to know this!

I said if that was the case they could have told me during the security call.

They dismissed my complaint.

 

 

I went to the Financial Ombudsman.

The adjudicator also dismissed my complaint twice but I appealed and it finally reached the Financial Ombudsman.

The bank had very conveniently lost the recording of the security call but somehow the FO managed to get them to find it.

 

 

It was because of that security call that she upheld my complaint.

She says that the bank led me to believe that they checked the account name.

She also said that the bank had authorised the payment and not me.

 

 

She ruled that the bank should re-imburse me for all my legal costs,

the debt owed to the window company and any other costs so that I am not out of pocket.

This decision was made in May 2015 from my initial complaint in Aug 2014.

 

 

My solicitor was amazed at what I had achieved.

I would say that the Faster Payments System is not secure enough.

The customer has no way of checking that the bank details provided by a company actually belong to that company.

Criminals are now putting people into companies to spot loopholes in their security/admin procedures

in order to send out fraudulent bank details to unsuspecting victims like me.

 

 

You could ring a company to ask them for their bank details and the person you were speaking to could give you their personal information

and you would be none the wiser.

There is nowhere to verify that an account belongs to a company.

Once you have paid the money it is impossible to get it back unless the bank made the error.

 

 

I believe that in other countries they use a third check like the company reg number or an NI number.

 

When the bank finally got in touch with me in August this year

I asked them who makes the decisions on the court case if they are now paying.

They said that I do no matter what the cost!

 

 

They also said that they didn't want me to settle out of court and they wanted the hearing to go ahead.

I have put in endless hourss of work on this and accumulated some very good evidence to defend my case.

A legal debate is scheduled for 22nd October but my solicitor wants to use Counsel for the debate.

They are saying they have struggled to find anything in law to help them and have had to go right back to Victorian law.

They say the contract was formed via email and the company should have ensured that their email system was secure because I had relied on it.

 

At the mention of Counsel the bank have started squirming.

They rang me on the 22nd and said they were refusing to indemnify me after that date.

 

 

I went back to the Financial Ombudsman with this information and she told me that wasn't quite what had been discussed.

So everything is currently up in the air with the case.

It looks very much like I will have to settle out of court because I cannot afford to fund this on my own.

If the criminals are part of the company they will receive the money twice.

 

 

I had hoped that the bank would help me see this case through to its conclusion

so that I could have possibly had an outcome good enough to help others that follow in my footsteps.

I may never know who was responsible for sending me that email because the police are just following the money.

 

I now have a lovely set of windows with no guarantee.

[steampowered]

Hello, I hope this goes well for you.

 

This is not the first time this sort of thing has happened. This recently happened to a firm of solicitors. The client was selling his house. A crook hacked the client's email account and sent an email to the solicitor stating that his account details have changed, and the solicitor sent the money to that account. See http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/11605010/Fraudsters-hacked-emails-to-my-solicitor-and-stole-340000-from-my-property-sale.html.

 

There are two parts of your story which I find very confusing:

 

- Why are you litigating against the bank rather than the window company? Did you make a second payment to that company? As it was the window company's servers which were compromised, and since you are entitled to rely on an email coming from a company email address, I think it is the window company that should be liable. I would be saying to the window company that payment to the bank account they stated in an email settled your debt to them.

 

- Why have you found yourself in contested litigation against the bank when it sounds like you have a FOS ruling in your favour? FOS rulings are legally binding if they are accepted by the consumer.

[Wilderbird]

Thank you steampowered. I don't think the outcome will be what I want it to be. Thank you for the link, that's really interesting. The main difference in my case is that it was the windows company who sent me their bank details via email not the other way around.

 

To answer your questions. I am litigating against the window company. I also made a complaint to the bank because they led me to believe (in their security call) that they were sending my money to the window company when in fact they sent it to a fraudulent account. And they didn't give me any warnings whatsoever, anywhere on any of the payment screens to tell me I wasn't protected at all by using the Faster Payments System or that they only check the sort code and account number. I use the FPS a lot and don't have a credit card. After many appeals the FOS upheld my complaint. So the bank are now having to pay for all my litigation with the window company. The problem now is that the bank have got cold feet. They are trying to force me to settle out of court because of the uncertainty of the costs involved to them. My solicitor has reminded them that I have a legally binding fos. I don't like the way the bank are treating me, it's a little scary. They didn't tell me the truth the other day when they told me they were pulling the plug. They said the Ombudsman had agreed to them doing that and they were removing the indemnity that day (22nd). What she actually said was this -

 

'I spoke to Santander earlier this week as they were concerned they were obliged to pay a never-ending commitment when they weren’t sure what your (and the other party) court costs would end up at. They wondered what I thought if they were to suggest paying the money the company is claiming and bringing this all to an end and paying costs up to that stage. I said, in principle, I felt this was fair. What I don’t know is whether there is any other aspect of the court case that would still exist after that but if there was, that’s not been mentioned before so I don’t think there is.

 

If Santander had thought about this logically when I first completed the provisional decision (and when you raised this with them in August), they’d have come back and said they’d pay and bring everything to an end then. Actually that’s what I expected them to do and I mentioned this to them when I spoke earlier this week. They’re now realising that would be the best thing to do.

 

I’ve said, however, the final decision exists and I can’t change what it says. However if you agree with their proposal, then I’d see no reason why we’d disagree with that because we’ve no interest in doing so. But I did stress they need to agree this with you. I did tell them I felt this was a fair solution and would be happy to tell you that as long as you’re not out of pocket.'

 

What I don't know now is whether or not I can choose to continue with the case if I want to. I am very upset that I mayl not have my day in court.

 

As for the window company, their argument is that they don't have a 'duty of care' towards me. I would love to name and shame them but I know that they would probably sue me for damages if I did. Hell hath no fury like a woman scorned.

[steampowered]

Hello,

 

If you have accepted the FOS decision, it is now legally binding on both parties. It is no longer possible to open a court claim against the bank. You can however agree to deal with decision in a way which suits both sides.

 

It sounds like the FOS has ordered the bank to indemnify you against the costs of litigation with the window company. The bank's proposal is that they would basically pay you off in exchange for you agreeing not to rely on that indemnity.

 

Personally, I would be inclined to say no to the bank's proposal, and to say that you will be sticking to the terms of the FOS decision. This is because you do not know how the litigation would turn out. I would say that the window company are very unlikely to be win in court if you can prove that the email came from the window company's email address, but this cannot be guaranteed. There is always a possibility that the window company will win and in that scenario you would need the bank to pay up.

 

A nice strategy would be to go back to the bank with a high number. You would offer to drop the indemnity if they will pay you for the full loss and damage which you may have suffered. As you do not know what the outcome of the litigation will be, assume that you will be ordered to pay the full amount claimed by the window company plus their costs, and give that number to the bank. That way you would get a windfall if you win or settle the litigation with the window company. If the bank agree to that and want to pay you now, fine. If they want to pay a lower number, they can wait and you claim under the indemnity later.

[honeybee13]

Hello there.

 

SP is the legal expert, not me. You haven't said how much money is involved, but I was just thinking it might have been cheaper for the bank to just pay the company again, or to get the police on the case themselves. SP's strategy sounds interesting.

 

HB

[Wilderbird]

Hi steampowered, both sides have accepted the fos and it is now legally binding. It is worded thus -

 

1) that the bank are to indemnify me against paying £6,087 to window company if asked to by court

2) indemnify me in case I am asked to pay window company costs

3) reimburse my own legal costs, based on appropriate invoices, and

4) pay me £200 for the inconvenience caused.

 

I will therefore not be able to profit from the situation. The bank are aware that if I pull out now they will have to pay my legal costs to date, the debt of £6,087 and the window company costs to date. They are all for this. There is also the danger that if I win the window company may deliberately fold in order to avoid paying costs. The bank would then lose out. Whichever way it goes it will not cost me a penny.

 

The only thing I will lose out on if I pull out or if I lose the case is being able to sue the windows company for damages. This is a very small community and people have seen my name on the court rolls.

[Wilderbird]

Hi honeybee13, the debt amount involved is £6,087. The bank have to pay this plus my costs and the window company costs so we could be talking anything up to £18k at this stage if I am forced to pull out now. The police are still investigating. I sent them a copy of the report showing that the fraudulent email came through the company's email server. They told me they have put it on file but will not be investigating it at this stage.

[Wilderbird]

The last time I was in court (for an options hearing) the sheriff said to my solicitor 'but she sent the email' which seemed to say that he was siding with the window company. My solicitor explained to him that when there are 2 innocent parties the courts have the difficult job of deciding who facilitated the fraud. She had hoped that he would choose to opt for 'Proof with answer' which is a mixture of actual evidence and a debate. The sheriff decided to go for a legal debate only, scheduled for the 22nd October. So is the law on my side? Am I protected because this company sent me an invoice asking me to pay immediately but not telling me how? Aren't the company supposed to put bank details on the invoice if they accept electronic payments? Was the invoice sent deliberately to make me contact them and lead me into a trap? If they had given me the fraudulent information over the phone I would have no proof. And what of data protection? Who now knows my email address?