Background
Rasmala paid Trafigura more than $22.6 million in five instalments between August 2017 and March 2018, believing that it was financing genuine coal purchases by Farlin Energy & Commodities FZE under a Sharia-compliant facility. Farlin had supplied Rasmala with forged or manipulated contracts. It separately led Trafigura to believe that Rasmala was financing Farlin and had authorised the payments to be applied against Farlin’s existing debts, including through third-party agreements bearing forged Rasmala signatures.
Trafigura applied the payments to Farlin’s outstanding indebtedness and continued supplying it with coal because the payments brought its exposure within Farlin’s credit limit. Farlin later failed owing Trafigura about $15 million. The High Court found that Trafigura had been enriched at Rasmala’s expense through payments made under a mistake, but dismissed the restitution claim because Trafigura had changed its position in good faith by continuing to trade and forgoing the opportunity to stop trading and pursue Farlin earlier.
By the appeal, Rasmala accepted that Farlin’s repayments had discharged Payments 1 and 2, leaving only Payments 3 to 5, worth about $11 million, in issue. It challenged the findings on causation, risk, good faith, Payment 5—where no third-party agreement was obtained—and detriment.
The Court’s Holding
The Court of Appeal unanimously dismissed the appeal. It held that Trafigura’s receipt of payments it honestly believed it was entitled to retain caused it to continue trading with Farlin. The third-party agreements were part of Trafigura’s internal process for handling third-party payments, not an independent cause that broke the connection between the payments and its subsequent trading.
Trafigura acted in good faith because no one there knew or suspected that the agreements were forged or that the payments were recoverable. The change-of-position inquiry did not require an assessment of the parties’ relative fault, and alleged negligence or a failure to contact Rasmala directly did not by itself defeat the defence. The absence of an agreement for Payment 5 also did not change the result: Trafigura still believed the payment was valid and continued trading in reliance on it.
The court permitted Rasmala to advance its late additional ground concerning detriment but rejected it. Trafigura had incurred substantial and irreversible detriment by increasing its exposure and losing a real opportunity to stop trading, seek repayment from Farlin, and claim under its credit insurance earlier. That opportunity did not need to be valued precisely. Requiring repayment would leave Trafigura worse off than if it had never received the payments, so it was inequitable to order any restitution.
Key Takeaways
- A recipient may establish change of position where a payment believed to be valid causes it to continue trading and assume further exposure it otherwise would have avoided.
- Good faith does not require a comparison of the claimant’s and recipient’s relative negligence; the defence may fail for knowledge, suspicion, dishonesty, or commercially unacceptable conduct, but not for mere carelessness.
- A substantial, irreversible lost commercial opportunity can constitute detriment even when its precise financial value cannot be quantified.
Why It Matters
The decision confirms that change of position remains a flexible, equitable defence in mistaken-payment cases involving two innocent victims of a third party’s fraud. Courts focus on whether the recipient acted in good faith and would be materially worse off if ordered to repay, rather than conducting a fault-balancing exercise or demanding damages-style quantification.
For trade financiers and commodity businesses, the case also highlights the practical risk created when payments and authorisations are routed exclusively through a shared customer. Although Trafigura prevailed, direct verification between payer and recipient could have exposed Farlin’s fraud before either party’s losses increased.