THE FEDERAL REPUBLIC OF NIGERIA v JPMORGAN CHASE BANK, N.A.

The Quincecare duty requires a bank to refrain from executing a payment instruction while it has reasonable grounds to believe that the instruction is an attempt to defraud its customer. The inquiry must focus on the fraud said to vitiate the particular instruction, rather than on general money-laundering, corruption or financial-crime concerns. The duty remains narrow and carefully calibrated against the bank’s primary duty to execute valid instructions.

Gross negligence requires more than a serious mistake. It involves conduct of a very serious, shocking or startling quality, often approaching recklessness, assessed by reference to the obviousness of the risk, the ease of mitigation and the seriousness of the consequences. A state may seek adjudication in England on its own executive acts without engaging the foreign act of state doctrine where refusal would itself undermine comity.

The Federal Republic of Nigeria claimed damages from JPMorgan Chase Bank, N.A. for payments made in 2011 and 2013 from a depository account held for the Nigerian government. Nigeria alleged that the payments formed part of a fraudulent and corrupt scheme involving the allocation and subsequent sale of an offshore oil licence, and that the bank breached its Quincecare duty by making the payments despite multiple warning signs.

The bank denied fraud, breach of duty, gross negligence, causation and loss. It also argued that the foreign act of state doctrine prevented the court from examining the validity of relevant Nigerian executive acts, that the wrong Nigerian governmental entity had sued, and that the claimant had suffered no loss. The central issues were whether there was a relevant fraud, whether the bank was put on inquiry about that fraud, and whether its conduct was grossly negligent.

1. Claim dismissed. The court held that the foreign act of state doctrine did not prevent Nigeria from asking the English court to adjudicate upon its own executive acts. The doctrine is founded principally on comity, and that rationale did not apply where the foreign state itself sought adjudication. The court also considered, tentatively, that the public policy exception would have applied on the facts.
2. The Quincecare duty exists and may extend beyond the traditional internal-fraud paradigm. The Court of Appeal decision in Philipp established that the duty is not legally dependent upon the instruction being given by an agent, but it did not establish that the duty necessarily arises in every authorised push-payment case.
3. The relevant question is whether the bank was on notice that the particular instruction might be vitiated by fraud, namely that it was an attempt to misappropriate the customer’s funds. General concerns about corruption, money laundering or financial-crime risk do not, without more, engage the duty.
4. The court found that the original 1998 grant of the oil licence was corrupt, but that the 2006 settlement and the 2011 Resolution Agreements had not been proved fraudulent. The alleged fraud involving the Attorney-General’s role and the payment instructions was not established on the balance of probabilities.
5. Even assuming a fraud, the bank was not put on notice of an obvious risk of the specific fraud in 2011. In 2013 it was on notice of a possible relevant fraud, but the evidential foundation remained insufficient to establish an obvious risk or serious disregard of that risk.
6. Gross negligence is more than ordinary negligence. It requires conduct of a very serious, shocking or startling quality, often approaching recklessness. The assessment is fact-sensitive and includes the likelihood of the risk, the ease of mitigation and the seriousness of the potential consequences. The bank’s conduct did not meet that threshold.
7. The court rejected the bank’s loss and standing arguments. The Federal Republic of Nigeria was the proper claimant, and the payments would have represented loss if the relevant fraud and breach had been established. Any contributory-negligence reduction was considered only contingently and would have been 15 per cent.