JP Morgan Chase Bank, N.A. v The Federal Republic of Nigeria
| Jurisdiction | England & Wales |
| Judge | Lady Justice Rose,Sir Bernard Rix,Lord Justice Baker |
| Judgment Date | 08 October 2019 |
| Neutral Citation | [2019] EWCA Civ 1641 |
| Docket Number | Case No: A4/2019/0718 |
| Court | Court of Appeal (Civil Division) |
| Date | 08 October 2019 |
[2019] EWCA Civ 1641
Lord Justice Baker
Lady Justice Rose
and
Sir Bernard Rix
Case No: A4/2019/0718
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
Professor Andrew Burrows QC (sitting as a Deputy Judge of the High Court)
Royal Courts of Justice
Strand, London, WC2A 2LL
Rosalind Phelps QC and David Murray (instructed by Freshfields Bruckhaus Deringer LLP) for the Appellant
Roger Masefield QC and Richard Blakeley (instructed by Reynolds Porter Chamberlain LLP) for the Respondent
Hearing dates: 24 and 25 July 2019
Approved Judgment
The Respondent to this appeal, the Federal Republic of Nigeria (‘the FRN’), has brought a claim against the Appellant bank (‘Morgan Chase’ or ‘the Bank’) to recover the sum of US$875,740,000 which was held in a depository account in the FRN's name with Morgan Chase. Morgan Chase paid out the money in the account in three transfers which together comprised the whole of the deposited sum. It is common ground that those transfers were made on the instruction of the persons authorised to give those instructions under the terms governing the operation of the depository account. The FRN claims, however, that the payments were made in breach of the Quincecare duty of care which they say Morgan Chase owed to the FRN as its client. That duty is named after the case of Barclays Bank plc v Quincecare Ltd [1992] 4 All ER 363 in which this duty of care was first described (‘ Quincecare’).
The FRN's claim was commenced on 29 November 2017. After the service of Amended Particulars of Claim and an Amended Defence in July 2018, Morgan Chase applied for summary judgment on its Defence and/or to strike out the claim as having no prospect of success. Prof Andrew Burrows QC (sitting as a Deputy High Court Judge) dismissed that application for reasons set out in his judgment handed down on 21 February 2019 and reported at [2019] EWHC 347 (Comm). At paragraph 6 of his judgment, the judge summarised the test that the court should apply on an application for summary judgment under CPR 24.2, citing the well-known cases of Swain v Hillman [2001] 2 All ER 91, ED & F Man Liquid Products Ltd v Patel [2003] EWCA Civ 472, at [10], Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) at [15], and Daniels v Lloyds Bank plc [2018] EWHC 660 (Comm), [2018] IRLR 813, at [48]. Morgan Chase does not take issue with the judge's conclusion that the central points to be derived from those cases are that the burden of proof rests on Morgan Chase; the court must consider whether the FRN's claim has a ‘realistic’ as opposed to a ‘fanciful’ prospect of success; the court should not conduct a mini trial; and that if there is a short point of law or contractual construction and the court is satisfied that it has before it all the evidence necessary to determine that issue, the court should grasp the nettle and decide the point.
The background
The opening of the depository account with Morgan Chase was one step in a long-running dispute about an offshore Nigerian oilfield known as OPL 245. In April 1998, the rights to exploit OPL 245 had been awarded by the FRN to Malabu Oil and Gas Nigeria Ltd (‘Malabu’), which was beneficially owned by the then Minister of Petroleum, Chief Daniel Etete. Two years later in 2001 the Government of Nigeria rescinded that award and a year later the right to exploit OPL 245 was granted to a subsidiary of the oil company Shell in exchange for a payment from Shell to the FRN of US$210 million. A dispute over the ownership of the rights then arose and in 2003 the FRN opened an escrow account with Morgan Chase into which Shell paid US$210 million. The money sat there for several years. In 2006 there was a settlement agreement pursuant to which the licence to exploit OPL 245 was purportedly awarded again to Malabu. That award was challenged by Shell and there were various judicial and arbitral proceedings in the following years. By 2010 therefore Malabu was claiming to be the owner of the licence either pursuant to the original award in 1998 or under the 2006 settlement agreement but the Shell parties were also claiming that they were entitled to the rights because of the grant or purported grant of rights to them in 2003.
The litigation was supposed to be brought to an end by three agreements entered into on 29 April 2011. The following is a simplified account but is all that is needed for our purposes. The first agreement, called the Block 245 Malabu Resolution Agreement, was between the FRN and Malabu under which Malabu agreed to waive all its claims to OPL 245 in return for a payment from the Nigerian Government of just over US$1 billion. The second agreement, called the Block 245 Resolution Agreement, was between the Nigerian Government, the Nigerian National Petroleum Corporation and three companies who had been part of the consortium led by Shell hoping to exploit the rights. Under the second agreement the Government agreed to allocate the rights to exploit OPL 245 to those Shell and other subsidiaries in exchange for payment by Shell and others to the Government of the same sum, that is just over US$1 billion, which would then be paid to Malabu under the first agreement. The third agreement, called the Block 245 SNUD Resolution Agreement, was a settlement of the litigation between the Nigerian Government and the Shell parties over the ownership of the disputed rights. It was the second agreement, the Block 245 Resolution Agreement between the Nigerian Government and the potential Shell consortium, which gave rise to the need for a depository account with Morgan Chase.
The terms for the operation of the depository account were set out in an agreement dated 20 May 2011 between the FRN as Depositor and the London branch of Morgan Chase as Depository. The terms were, Morgan Chase submits, deliberately tailored to the specific function for which the account was opened namely to receive the US$1 billion from Shell and then pay it out on the instruction of the Government of Nigeria to those entitled to receive it under the agreements settling the overall dispute.
The recitals to the depository agreement referred to the resolution agreement dated 29 April 2011 in respect of OPL 245 (that is the Block 245 Malabu Resolution Agreement) under which the Depositor had certain obligations. It provided that the Depository would open an account entitled Federal Republic of Nigeria Depository Account and accept a deposit of the cash into that account. The depository agreement set out various release conditions which had to be satisfied before Morgan Chase could pay out from the account. These took the form of written instructions using a template contained in a schedule to the agreement to be used by the Depositor to instruct the Depository to release part of the cash to such beneficiary as was specified in the release notice. This would be followed by a telephone call back to the persons designated by the FRN so that they could confirm the written instructions. On 24 May 2011 the sum of US$1,092,040,000 was transferred into the Depository Account.
On 16 August 2011, Morgan Chase received instructions from the Minister of Finance and the Accountant General of the FRN, who were authorised signatories on the depository account. On 23 August 2011 Morgan Chase made two transfers in compliance with those instructions. The transfers were of $401,540,000 and $400,000,000 from the depository account to two separate accounts in the name of Malabu at First Bank of Nigeria plc and Keystone Bank Ltd. On 29 August 2013, Morgan Chase acting again on instructions by authorised signatories of the FRN made a further transfer of the remaining funds in the depository account, $74,200,000.03, to an account in the name of Malabu at Keystone Bank Ltd.
According to the FRN's pleaded case in these proceedings, as it stood for the purposes of the strike out application, it is alleged that these payments were made in breach of Morgan Chase's contractual and tortious Quincecare duty of care. It is alleged that Morgan Chase had been put on inquiry that these requested transfers were part of a corrupt scheme by which the FRN was being defrauded when it paid out those three amounts irrevocably to the accounts in the name of Malabu. It is alleged further that the fraudulent and corrupt scheme of which these payments were part reached the very highest levels in the Nigerian state. There is no allegation that Morgan Chase knew about or was in any way involved in the alleged fraud, but it is said that the Bank should have realised that it could not trust the senior Nigerian officials from whom it took instructions. The FRN claims that Morgan Chase should not have made the payments it was instructed to make and it is therefore liable to pay damages to the FRN in the same sum as the payments that were made.
Since the judge was disposing of a summary judgment application, he had to assume that the FRN would be able to prove the facts alleged in its Particulars of Claim. He said at paragraph 16 of the judgment that he therefore proceeded on the basis that:
i) the FRN has been defrauded of the money paid out by Morgan Chase from the depository account by way of a fraudulent and corrupt scheme;
ii) before the payments were made, Morgan Chase had been put on inquiry about the circumstances of the instructions to pay out the money, that is to say Morgan Chase had reasonable grounds for believing that the payment instructions it received were part of an attempt to defraud the FRN; and
iii) despite being on inquiry, Morgan Chase had gone ahead and made the payments.
The application turned, as does this appeal, largely on the issue of...
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