Rasmala Trade Finance Fund v Trafigura Pte Ltd [2026] EWCA Civ 1259 concerned the familiar scenario where both parties to the dispute are victims of a fraud committed by a third party, and the question for the court is which of the parties ought to bear the loss. Rasmala sought to recover from Trafigura payments which it had been induced to make by the fraud of a third party. At trial, Rajah J dismissed the claim on the basis that Trafigura had a defence of change of position. The Court of Appeal rejected Rasmala’s appeal, and gave important guidance on the necessary elements of the defence.
The dispute arose out of a fraud committed by a company named Farlin. Farlin was a customer of Trafigura, the international commodities trader. Trafigura had granted Farlin an open credit limit of around $10 million, for the purpose of coal trading. At the relevant time, Farlin had nearly exhausted its credit limit, and Trafigura would not permit any further trading until the exposure was reduced. Via a series of fraudulent representations, Farlin persuaded Rasmala to make five payments to Trafigura, totalling around US$20 million. Farlin told Rasmala that Rasmala was financing future contracts for coal, in relation to which Rasmala would have security. Farlin told Trafigura that Rasmala was content for the monies to be applied to Farlin’s historic debts. On the advice of its in-house lawyers, Trafigura insisted on receiving “tri-partite agreements” (“TPAs”), confirming both Farlin and Rasmala’s agreement to the funds being used in this way. Farlin provided executed versions, ostensibly signed by both Farlin and Rasmala. On the basis of these agreements, Trafigura treated the payments as reducing Farlin’s debts and bringing Farlin back within its credit limit. On that basis, Trafigura extended further credit to, and continued trading with, Farlin. When Farlin eventually stopped trading, Trafigura suffered a substantial loss. In fact, Farlin had forged both the TPAs and the coal contracts that Rasmala thought it was financing.
Rasmala sought restitution from Trafigura on the basis that the payments had been made by mistake. Trafigura defended the claim on the basis that it had changed its position in good faith. At trial, Rajah J upheld Trafigura’s defence, and dismissed the claim [2025] EWHC 1569 (Ch). On appeal, Rasmala argued that the Judge had made a number of errors of law. The Court of Appeal rejected each of these arguments and dismissed the appeal. In doing so, the Court gave authoritative guidance on the ingredients which are necessary to establish the defence. In summary:
- Causation: Rasmala argued that Trafigura could not satisfy the relevant causation test because it had changed its position in reliance on the TPAs, rather than on the payments themselves. In rejecting this argument, the Court drew a distinction between (a) cases where the change of position is the result of a voluntary act of the recipient (such as the present case) and (b) cases where it is not (e.g. where money paid by mistake is later stolen). The Court held that, in the former category, it is sufficient that the recipient changed its position “on the faith of” the payment. Trafigura satisfied this test. In the latter category, “but for” causation is sufficient.
- Good faith: Rasmala argued that it was commercially unacceptable for Trafigura not to contact Rasmala directly to check that it consented to the payments being used to satisfy Farlin’s historic debts. The Court of Appeal doubted whether conduct which was “commercially unacceptable” but did not amount to “sharp practice” would be sufficient to disqualify a party from the defence. But in any event, it was not commercially unacceptable for Trafigura to communicate via Farlin as (a) this was the structure that Rasmala had set up, for its own commercial reasons and (b) Trafigura went well beyond what was typical in the market to ascertain the purpose of the payment.
- Risk allocation: Rasmala argued that Trafigura had taken the risk that the TPAs might be invalid. The Court held that “risk allocation” is not a separate part of the legal test for change of position. In any event, Trafigura had not consciously taken the risk that it could not retain the payments.
- Detriment: Rasmala argued that, on the Judge’s findings of fact, Trafigura had not suffered any detriment. The Court rejected this argument. As a result of the payments, Trafigura lost the opportunity to stop trading with Farlin and seek to recover its then outstanding debts (either from Farlin or under its credit insurance). Although it was not possible to quantify the recoveries Trafigura might have made in that counterfactual world, the loss of the opportunity was a substantial and irreversible detriment. That is sufficient to establish the defence.
Neil Kitchener KC and James Nadin acted for Trafigura, instructed by Reed Smith LLP.
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