Nicola Sharp explains how a company can defend the receipt of mistaken payments if it acts in good faith.
Rasmala Trade Finance Fund (Rasmala) sought restitution of five payments that it made to Trafigura PTE Ltd (Trafigura), on the basis that the payments of $21.6 million in total were made mistakenly. A third party, Farlin Energy & Commodities FZE (Farlin) had forged documents in order to pay off its debts to Trafigura. Rasmala was duped into providing the money to Farlin in the understanding that it was financing the purchase of coal.
Rasmala alleged that Trafigura was aware of the fraud and that they had been unjustly enriched by the payments.
However, the judge decided that it was inequitable to require Trafigura to make any repayment to Rasmala of the $21.6 million. Trafigura had a ‘change of position’ defence to escape any liability in the unjust enrichment claim.
The case in fraud was ‘hopeless’
Farlin forged or doctored the trading contracts that were used for financing and supplying coal. It also forged Rasmala’s signature on tripartite agreements to structure the transactions.
Rasmala argued that Trafigura was party to the fraud by Farlin. Specifically, it alleged dishonesty against Mr Harsh Jasani, who Rasmala said dishonestly turned a blind eye to the fraudulent documents. Mr Jasani was the trader at Trafigura who dealt with Farlin.
Mr Justice Rajah did not accept that view. He described the allegation of fraud and dishonesty against Mr Jasani as “hopeless” and found that there was no credible evidence of Mr Jasani’s dishonesty. He surmised that Mr Jasani had been used as a scapegoat because he was unable to attend the trial.
Mr Justice Rajah went further and said that he had “seen and heard no evidence that anyone on the Rasmala side genuinely believed that Mr Jasani and Trafigura were dishonestly turning a blind eye to the fraud perpetrated against Rasmala.” In other words, he did not consider that Rasmala believed their own claims in fraud were justified.
The claim in unjust enrichment
In a claim for unjust enrichment the claimant has to prove:
- that the defendant has been enriched,
- that the enrichment is at the claimant’s expense and
- the enrichment at the claimant’s expense is unjust.
In this case, Rasmala was able to prove each of those three limbs. The onus then shifts to the defendant to establish a defence. One available defence is that it had had a ‘change of position’.
A successful ‘change of position’ defence
The case of Lipkin Gorman (a Firm) v Karpnale Ltd [1991] 2 AC 548 established that a defendant can escape liability in unjust enrichment where his position has so changed that it would be inequitable in all the circumstances to require him to make restitution.
The defence is established in respect of a mistaken payment if:
- the defendant has (in good faith) changed his position in some way which, but for the payment he would not have done; and
- the defendant would now suffer substantial detriment if they were required to repay all, or alternatively part of the sum received.
Trafigura said that the payments it received from Farlin caused Trafigura to continue to trade with, and supply coal to, Farlin. If those payments had not been made, further deliveries to Farlin would have been stopped because they would have exceeded Farlin’s credit limit with Trafigura.
On the back of the payments, Trafigura entered a further 15 new contracts for the supply of coal to Farlin. The reason Trafigura continued to trade with Farlin was that it had received a payment on what it considered were satisfactory terms as to how it could use that payment. Judge Rajah described this as a “sufficient causal connection” between the enrichment and the change of position.
Interestingly, it does not matter that it was not Rasmala’s fault that its signature was forged on the agreements. The concept of relative fault is not part of the English law of restitution; Dextra v Bank of Jamaica [2001] UKPC 50.
Read the decision in full here: Rasmala Trade Finance Fund v Trafigura PTE Ltd [2025] EWHC 1569 (Ch)
Comment
One of the key reasons why Trafigura was successful in its defence is that it acted in good faith in its dealings with Rasmala. The law provides protection to companies if they receive mistaken payments, so long as they have relied on them in good faith.
Unfortunately for Rasmala, even if a fraud has been present, restitution is not guaranteed.
