The Federal Republic of Nigeria v JP Morgan Chase Bank, N.A.

Hearing dates: 4–5 February 2019

Andrew Burrows QC

Andrew BurrowsQC:

INTRODUCTION

(1) General

This judgment deals with an application by the defendant, JP Morgan Chase Bank NA, for reverse summary judgment against the claimant, the Federal Republic of Nigeria, under CPR 24.2; and/or for the claimant's statement of case to be struck out under CPR 3.4(2). The defendant submits that, under CPR 24.2, the claimant has no real prospect of succeeding and that there is no other compelling reason for a trial; and that, under CPR 3.4(2), the Re-amended Particulars of Claim disclose no reasonable grounds for bringing the claim. The claim is one by a sovereign state against an international bank. Even by the standards of this court, it is a very large claim amounting to some US$875,740,000. The claimant alleges that the defendant bank made three transfers ($401,540,000, $400,000,000, and $74,200,000.03) from an account that the claimant held with it, which the defendant bank would not have made had it been exercising reasonable care. More specifically, it is alleged that the defendant bank was in breach of what is commonly referred to as the ‘ Quincecare duty of care’, named after the case of Barclays Bank plc v Quincecare Ltd [1992] 4 All ER 363 in which Steyn J first set out this duty of care. What is being alleged, therefore, is that, although the bank had reasonable grounds for believing that the payments out of its customer's account were defrauding the customer, the bank went ahead, in breach of its duty of care to its customer, and made those payments.

The claim was commenced on 29 November 2017. Amended Particulars of Claim were served on 4 July 2018 and an Amended Defence was served on 24 July 2018. This application for summary judgment/striking out was commenced on 31 July 2018. Since then, the claimant has put forward (draft) Re-amended Particulars of Claim. They significantly differ from the Amended Particulars of Claim. In particular, a number of claims have been abandoned (such as breach of fiduciary duty, breach of the Nigerian constitution, breach of anti-money laundering legislation, knowing receipt and breach of mandate). Instead it has been made clear that the claim in contract and tort rests solely on the breach of the Quincecare duty of care; and brief particulars of the alleged fraud are also pleaded. Rosalind Phelps QC, for the defendant bank, indicated at the start of the hearing (see transcript day 1, p 9, lines 13–20) that there would be no objection to those re-amendments if this application fails. The important point – and there is no dispute about this between the parties – is that the court is required to deal with this application on the basis of the Re-amended Particulars of Claim.

(2) The relevant facts

It is alleged by the claimant that the full background to this case is a complex web of facts that reveal a fraudulent and corrupt scheme whereby the claimant (and hence ultimately the people of Nigeria) has been defrauded of large sums of money. Plainly the court on a summary judgment application cannot possibly attempt to get to the bottom of such allegations and no-one is suggesting that it should. What this application is therefore concerned with is narrow and, as is explained in paragraph 6(iii) below, the court must assume that the claimant will be able to prove the facts it is alleging unless it is clear that those allegations have no real substance.

For the purposes of this application, the relevant and undisputed facts can be stated in a few sentences. In this respect, I was assisted by Ms Phelps, who guided me through the first parts of a helpful agreed chronology of events. The claim centres on a depository account that was opened pursuant to a depository agreement dated May 20, 2011 between the Federal Government of Nigeria and the defendant bank. Under that agreement, the defendant bank was the ‘depository’ and the Federal Government of Nigeria was the ‘depositor’. The background to that depository agreement was a long-running dispute about an offshore Nigerian oilfield known as OPL 245. In 1998, the rights to exploit OPL 245 had been originally awarded by the Federal Government of Nigeria to Malabu Oil and Gas Nigeria Ltd (‘Malabu’), owned by the then Minister of Petroleum, Chief Daniel Etete (who in 2007 was convicted in France of money-laundering arising out of bribery offences committed in Nigeria). That dispute was settled and, as part of its obligations under the resolution/settlement agreements (dated 29 April 2011), the Federal Government of Nigeria was required to set up an escrow account and, subsequently, set up the depository account with the defendant bank for the purpose of money being paid to those entitled under the settlement. On 23 August 2011, the defendant bank, on instructions by authorised signatories of the Federal Government of Nigeria, made two transfers, of $401,540,000 and $400,000,000 respectively, 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, the defendant bank, on instructions by authorised signatories of the Federal Government of Nigeria, 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.

Under the Re-amended Particulars of Claim, it is alleged (see paras 20–21D of the Re-amended Particulars of Claim) that, in breach of its contractual and tortious Quincecare duty of care, the defendant, having been put on inquiry that the claimant was being defrauded, paid out irrevocably (to the accounts in the name of Malabu) sums of $801,540,000 and $74,200,000.03 from the depository account. It is alleged that that money was used to pay off corrupt former and contemporary Nigerian government officials and/or their proxies. It is alleged that some of the money was also intended to be used (and some was used) to make payments to senior executives at Royal Dutch Shell and Eni Corporation (those companies having formed an alliance for the purposes of acquiring the rights to develop the OPL 245 oilfield from Malabu).

(3) The law on summary judgment and the grounds for this application

The correct approach for a court to take on an application for summary judgment under CPR 24.2 has been clarified in several cases. These include 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]. As regards applications by defendants for reverse summary judgment, the central points to be derived from those cases are as follows:

i. The burden of proof is on the defendant.

ii. The court must consider whether the claimant has a ‘realistic’, as opposed to a ‘fanciful’, prospect of success.

iii. The court should not conduct a mini-trial. Where there is a dispute on the facts, the court should assume that the claimant will be able to prove the facts it is alleging unless it is clear that there is no real substance to those allegations, as where they are contradicted by the documentary evidence.

iv. If there is a short point of law, or construction, and the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, the court should grasp the nettle and decide it.

The defendant bank's application rests on three grounds. The first is that there was no Quincecare duty of care applicable on these facts because such a duty was inconsistent with, or was excluded by, the express terms of the depository agreement. We can refer to this as the ‘no Quincecare duty of care’ issue. The second ground is that, even if such a duty was owed, there is no realistic prospect of the claimant establishing causation of loss: the same outcome would have eventuated even if the defendant had not been in breach of its duty. This is the ‘causation of loss’ issue. The third ground is that, even if the claimant could establish the breach of a Quincecare duty of care causing the alleged loss, the defendant bank would have a complete defence to the claim because of an indemnity clause in the depository agreement: as the defendant bank would be entitled under that clause to be indemnified by the claimant, the claim would fail for circularity. This is the ‘circularity’ issue.

It is important to clarify that an ‘incorrect party’ ground is not now being put forward by the defendant bank. The claim is being brought by the Federal Republic of Nigeria although the depository agreement was made by the Federal Government of Nigeria. The defendant bank previously contended that that was a reason why summary judgment should be given and/or the claim should be struck out. But in the light of expert evidence put forward on behalf of the claimant – to the effect that, as a matter of Nigerian law, the Federal Government of Nigeria and the Federal Republic of Nigeria are not different legal entities — that line of argument has been abandoned by the defendant bank for the purposes of this...