Yesterday, the Commercial Court rejected a bank's application to strike out its customer's $1bn claim based on a "Quincecare" duty of care owed to the customer.

This is a much anticipated ruling in the case of The Federal Republic of Nigeria v JP Morgan Chase Bank, N.A. [2019] EWHC 347 (Comm), in which the bank had agreed to act as depository in respect of settlement monies put up by The Federal Republic of Nigeria (FRN) in relation to a long-running dispute about an offshore Nigerian oilfield.

The deposit account was opened pursuant to a Depository Agreement between the bank and the FRN in May 2011. Between August 2011 and August 2013, on instructions by authorised signatories of the FRN, the bank made three transfers totalling $875m from the deposit account. It was alleged that the money was then used to pay off corrupt former and contemporary Nigerian government officials and/or their proxies, rather than being paid to parties properly entitled to the settlement monies.

In court, the FRN relied upon the Quincecare duty which requires a bank to refrain from executing a customer's order if, and for so long as, the bank has reasonable grounds for believing that the order is an attempt to defraud the customer (so-called after the case of Barclays Bank plc v Quincecare Ltd [1992] 4 All ER 36).

Based upon certain express provisions in the Depository Agreement, the bank argued that the Quincecare duty had been excluded so that it did not owe a duty of care to the FRN. However, the judge considered that the Depository Agreement was neither inconsistent with, nor excluded the Quincecare duty of care.

At the strike-out hearing, it had to be assumed that the FRN had a realistic prospect of successfully establishing at a trial that the bank had reasonable grounds for believing that the transfers were part of an attempt to defraud the FRN: i.e. that the bank was "put on inquiry". If so, the Quincecare duty would mean that the bank could not simply follow the instructions given by the FRN; the duty at its core required the bank to protect the FRN against being defrauded, by not paying out unless and until the bank was "off inquiry."

In conclusion, the bank had failed to establish that the FRN's claim had no realistic prospect of success, and the matter will proceed towards trial.