Bankers’ duties and suspicious payments - excluding the Quincecare duty of care

United Kingdom

The recent case of Federal Republic of Nigeria v JP Morgan Chase Bank, NA [2019] EWHC 347 (Comm) provides a valuable reminder to banks of their Quincecare duty and, moreover, a helpful discussion of some circumstances in which it may be possible for banks to exclude that duty.

The Quincecare duty arises when bankers are asked to make payments in circumstances in which there are reasonable grounds to suspect a possible fraud. Banks then owe a duty of care to their customers to refrain from making payments. When “on inquiry” in this way, banks have a positive duty to investigate the potential fraud. They have to be satisfied, by enquiring as far a reasonable banker could be expected to do so, that the payment is not fraudulent before they can be “off inquiry” and go on to comply with their contractual obligations and make the payment.

In this case, the Commercial Court rejected JP Morgan’s application for reverse summary judgment of a $875M claim against it by its customer, the Federal Republic of Nigeria, based on the “Quincecare” duty of care. JP Morgan attempted to argue that it had managed to exclude its obligation to act in accordance with the Quincecare duty by using certain express terms in the contract with Nigeria. Significantly, the judge agreed that it would be possible in theory for banks to expressly exclude the Quincecare duty by using express terms in their contracts with customers. However, he concluded that, on the facts, JP Morgan had not managed to exclude the duty in this instance.

In this article, we explore the origins of the Quincecare duty of care and the findings in this recent case. We then go on to comment on the statement by the judge that the Quincecare duty can be excluded and suggest how banks may wish (or not) to adapt their practices.

Quincecare Duty of Care:

The Quincecare duty of care takes its name from the decision of Steyn J in Barclays Bank plc v Quincecare Ltd. [1992] 4 All ER 363. In that case, a loan made available to a newly incorporated company, Quincecare Ltd, was misappropriated by the company’s director who absconded to the United States. Barclays sought to recover the loan against Quincecare and various companies who had provided ‘all-monies’ guarantees in respect of the loan. Quincecare counterclaimed that Barclays had acted negligently in making the payment which led to the director misappropriating the monies, as the circumstances surrounding that payment should have raised questions in the mind of a reasonable banker as to whether Quincecare had authorised it.

Steyn J set out the following propositions:

  • The relationship of customer and banker is primarily that of debtor and creditor. However, in addition to that, the banker acts as the customer’s agent in paying the customer’s cheques against the customer’s money in the banker’s hands.
  • The same relationship applies where the banker acts on the customer’s order to make an immediate money transfer.
  • An agent owes a principal a duty to exercise reasonable skill and care in carrying out the principal’s instructions;
  • Therefore, a banker owes a customer a duty of care in tort to take reasonable care when making such a payment. This duty is implied in the contact between the banker and the customer.

As such, a bank will be under a duty to refrain from making a payment if, and for so long as, it had reasonable grounds (although not necessarily proof) for believing that the order for payment was an attempt to misappropriate funds. Where the bank is thus put “on inquiry”, there is a positive duty to “investigate” the fraud, but only so far as a reasonable banker would be expected to do. In failing to makes such inquiries and making a payment, suspecting the order to make payment to have been dishonestly given, the bank would plainly be liable.

In the original Quincecare case, however, Barclays was held not liable of breaching this duty of care. This was because there was nothing in the history of the relationship between Barclays, Quincecare and the director, which would have put Barclays on inquiry as to the director’s dishonesty. Furthermore, making further inquiries to the company’s firm of solicitors would also not have revealed the fraud.

The Court of Appeal affirmed the Quincecare duty of care in Lipkin Gorman v Karpnale Ltd [1989] 1 WLR 1340, holding that the test was met, “if a reasonable an honest banker knew of the relevant facts, he would have considered that there was a real or serious possibility, albeit not amounting to a probability, that its customer might be defrauded”. Nonetheless, the court also pointed out that, due to the sheer amount of cheques and payments made by a bank every day, it would only be “in rare circumstances” that a banker would breach its duty. In fact, a bank has only ever once been held to be in breach of the Quincecare duty. This was in the case of Singularis Holdings Ltd (In Official Liquidation) v Daiwa Capital Markets Europe Ltd [2017] EWHC 257 (Ch), where the judge held that any reasonable banker would have realised that there were “many obvious, even glaring, signs” that the director of Singularis Holdings Ltd was perpetrating a fraud on the company when he instructed that the money to be paid to other parts of his own business operations. In making the disputed payments without proper or any inquiry, Daiwa were negligent and were held liable to repay the money to Singularis.

Difficulties associated with the Quincecare duty of care:

The Quincecare duty of care raises a number of difficulties for banks and organisations where an agent/principal relationship arises in respect to the movement of money. The duty can conflict with the other contractual duties of a bank, namely its prima facie duty to execute a valid and proper order to execute a money transfer. In failing to execute such an order promptly, a bank will be liable for any consequential loss to its customer. The Quincecare duty also puts an increased obligation on a bank to look out for potential fraud (although the courts have stressed that the Quincecare duty only arises when the possibility of fraud is obvious to the reasonable banker).

Federal Republic of Nigeria v JP Morgan Chase Bank, NA – [2019] EWHC 347 (Comm):

In this case, the claimant alleged that JP Morgan (the “Bank”) made transfers from the claimant’s deposit account, totalling US$875,740,000, which it would not have done had it been exercising reasonable skill and care. The claimant alleged, “that the money was used fraudulently to pay off corrupt former and contemporary Nigerian government officials and/or their proxies”.

The Bank argued that:

  1. The Quincecare duty did not necessarily apply to deposit accounts, which provided a different type of service to current accounts;
  2. The Quincecare duty was inconsistent with, or was excluded by, express terms of the deposit agreement which stated, for example, that the duties of the Bank should be determined “solely by the express terms of this Agreement” and that the Bank “shall be under no duty to enquire into or investigate the validity, accuracy or content of any instruction or other communication”; and
  3. Even if the Quincecare duty did apply and even if a breach of duty was established, the Bank would have a defence to the claim due to an indemnity clause in the deposit agreement which stated that the depositor (Nigeria) "irrevocably and unconditionally agrees on demand to indemnify ... the depository ... against all costs, claims, losses, liabilities, damages, expenses, fines, penalties, tax and other matters (losses) which may be imposed".

The case was heard before Judge Andrew Burrows QC, who began his judgment by giving some general, useful, guidance on the law relating to the Quincecare duty. He stated that:

  • The Quincecare duty was part of a bank's overall duty of reasonable skill and care in executing customers' orders and that it arose by reason of an implied term of the contract, either at common law or under the Supply of Goods and Services Act 1982 s.13, or under a coextensive duty of care in negligence, as set out by Steyn J in the original Quincecare case.
  • He strongly inclined to the view that, when a bank had reasonable grounds for believing that a payment request was part of a scheme to defraud the customer, the bank was duty-bound to enquire whether those reasonable grounds had substance.
  • A bank's duty was to protect customers from fraud by declining to pay out unless and until its reasonable grounds for suspecting fraud no longer existed.
  • However, there was no duty to make enquiries prior to having reasonable grounds for believing that fraud was at play.

Moving on to the issues in question in this case:

  1. The judge stated that there was no reason of principle or authority why the Quincecare duty should be confined to current accounts; the relationship between a bank and customer was comparable in cases of deposit accounts. Prima facie, in this case, the Bank, therefore, owed a Quincecare duty to Nigeria.
  2. The judge agreed that it was possible that the Quincecare duty, as an implied term, could in principle be excluded by an express contractual term. He stated:
  3. “It is of course possible that the Quincecare duty may not arise because it is inconsistent with the express terms of the contract or it may be excluded by an exemption clause. It is trite common law that an implied term cannot be inconsistent with an express term; and that idea is spelt out, as regards the s 13 implied term, in s 16 of the Supply of Goods and Services Act 1982. Similarly, the duty of care in tort may be shaped by, and can be excluded by, contractual terms. But given that the Quincecare duty of care is imposed for good policy reasons and is a valuable right for the customer, clear wording, including clear inconsistency, will be needed before a court concludes that that duty of care does not arise.”

    However, the judge went on to say that in this case the implied Quincecare duty was not clearly excluded. There was no clear inconsistency between the express terms of the contract and the implied term which gives rise to the Quincecare duty.

  4. The judge found that the indemnity clause which the Bank referenced did not entitle the Bank to indemnification against the claim by Nigeria. In the context of the agreement as a whole, the clause was best interpreted as dealing with the Bank's liabilities to third parties, as a clause elsewhere in the agreement dealt with the Bank's exclusion of liability to the customer.


It is significant that the judge in this case expressly recognised the possibility that a bank could use express contractual terms to exclude the Quincecare duty and/or indemnify itself against claims in relation to it. This option may appear attractive to banks. However, there may be difficulties in attempting to completely exclude the duty in practice. For instance, it is clear from the judgment that such wording would need to be definitively clear in order to be effective. Therefore, any attempt at excluding the Quincecare duty would in all likelihood need to make absolute, direct reference to the Quincecare duty itself.

In this case, the judge focused solely on the legal principle as to whether the express wording used in the contract was of sufficient clarity to exclude an implied term. Ultimately, the judge held that the JP Morgan had not been successful in excluding the Quincecare duty. However, there may also be other factors that banks should consider should they wish to try to exclude the Quincecare duty, beyond ensuring that the wording in a contract is clear. For example, in view of the FCA’s Principles for Business and, in particular, PRIN6, by which a firm must pay due regard to the interests of its customers and treat them fairly, we can imagine that the Financial Ombudsman Service may not like arguments around exclusion in the context of “fair treatment” of eligible complainants. There is also the impact of legislation such as the Unfair Contract Terms Act 1977 and the Consumer Rights Act 2015, which contain provisions aimed at ensuring that customers, especially consumers, are treated fairly. For example, the Unfair Contract Terms Act 1977 provides that any exclusion of negligence liability must satisfy requirements of reasonableness[1] and the Consumer Rights Act 2015 sets out that a term of a contract to supply services will not be binding on a consumer to the extent that it would exclude the duty for the provider to perform the required service with reasonable care and skill.[2] These points were not raised in this case, the claimant being anything but a consumer. Ultimately, the Quincecare duty was found not to be excluded on the basis of the wording of the contract. It is, therefore, an untested area. It may, therefore, be that attempts to exclude the Quincecare duty have better prospects of success in contracts where the customer is not a consumer, is sophisticated and is clearly able to understand the implications of the exclusion.

However, banks could still make use of the reminder in this judgment that it is possible to use express terms to govern the operation of terms implied by common law, tort or statute. Banks could insert express provisions into contracts to clarify each party’s responsibilities in the event that a situation arises where the bank is put on inquiry as to possible fraud. For example, a bank could set out in the contract how it expects the customer to cooperate in these situations: that the customer might be expected to use best endeavours to respond immediately to all reasonable requests from the bank for documents and information. This would help to clarify the bank’s expected practical response in circumstances when it is put on inquiry as to the possibility of fraud.

Please contact the authors if you would like to discuss any aspect of this case.

The authors would like to acknowledge the assistance of Richard Watkins, trainee at CMS, in preparing this article.

[1] Unfair Contract Terms Act 1977 Section 2(2)

[2] Consumer Rights Act 2015 Section 57(1)