Refusal of Restitution: Trafigura Continues to Retain Incorrect Payments Post-Farlin Fraud Scandal
Updated Article:
Pubished on June 24, 2025
Multinational Commodities Trader Scores Victory Against Fund in Unjust Enrichment Case, as Court Endorses Change of Position Defense
In a notable judgment issued on June 23, 2025, the High Court in London ruled in favor of the Singapore-based multinational commodities trader Trafigura, rejecting a USD 21.6 million unjust enrichment claim brought by Rasmala Trade Finance Fund. The judgment, penned by Mr. Justice Rajah, upheld the change of position defense, determining that Trafigura had indeed changed its position in good faith, making it unfair to compel restitution.
The principle of "changing position" was introduced in the 1991 case Lipkin Gorman v Karpnale, where the House of Lords established that a party who has received a mistaken payment and, as a result, has undertaken actions they wouldn't have (such as spending the money, entering into contractual obligations, or trading with a counterparty), may argue that they are no longer able to return the funds if doing so would cause significant and irreversible detriment.
THE SITUATION AT HAND
The present dispute stemmed from an intricate trade finance arrangement in which Rasmala, a Cayman Islands fund managed by Rasmala Investment Bank, had provided funds to Farlin Energy & Commodities, an UAE-based coal trader, for Trafigura coal purchases. Between August 2017 and March 2018, Rasmala disbursed a total of USD 21.6 million to Trafigura across five transactions, which were later revealed to be based on forged contracts by Farlin. These deals also featured fabricated tripartite agreements (TPAs) to authorize Trafigura to help settle Farlin's existing debts. Rasmala, unaware of the fraud, sought restitution from Trafigura on the grounds of mistake.
IN COURT
Rasmala initially accused Trafigura of being complicious in the fraud, primarily targeting Harsh Jasani, the trader responsible for managing the Farlin relationship. However, in the run-up to the trial, the fund withdrew most of these deceit allegations and narrowed its argument to suggest that Mr. Jasani had knowingly turned a blind eye. The judge found this argument "boosted on hope" and concluded that "there is no credible evidence of Mr. Jasani's dishonesty," critiquing Rasmala's "cynical approach" to pleading fraud without genuinely believing in its validity.
An extensive collection of over 2,000 contemporaneous documents was presented, demonstrating that Farlin created forged contracts and TPAs to mimic legitimate financing requests under an Islamic financing arrangement known as Murabaha. Although Rasmala necessitated TPAs to verify how funds would be allocated, in each case, the supposed Rasmala signatures were forgeries. Trafigura received the payments based on these forged TPAs and allocated them to clear Farlin's past debts.
Rasmala argued that Trafigura had been unjustly enriched at its expense, that the payments were made under a factual error, and that it was entitled to restitution. In response, Trafigura admitted the enrichment but denied that the payments were at Rasmala's expense, contending instead that Rasmala served as Farlin's agent. The court rejected that characterization, asserting that Rasmala made the payments on its own behalf based on a mistaken belief that it was engaging in genuine coal transactions.
THE VERDICT
Mr. Justice Rajah confirmed that Rasmala did establish the components of unjust enrichment, that Trafigura was unjustly enriched at Rasmala's expense, and that the enrichment was unjust "due to a factual error." He dismissed Trafigura's submission that Rasmala's "lackadaisical approach" to documentation called into question the mistake argument, clarifying that "the payments were made by Rasmala due to its mistaken belief that it was making advance payments on genuine contracts." Nevertheless, the court held that Trafigura demonstrated a legitimate defense of change of position, accepting that, absent the payments, Trafigura would have ceased trading with Farlin.
"I am convinced that Trafigura's acceptance of the payments and continued trade with Farlin occurred without knowledge or suspicion... and was in good faith," the judge ruled, refusing to draw an unfavorable inference from Trafigura's choice not to call Mr. Jasani as a witness. Twisting Rasmala's criticism regarding Trafigura's conduct, which accused the defendant of relying on inconsistencies and supposed "red flags" (such as anomalies in SWIFT messages and inconsistencies in regular payment practices), Mr. Justice Rajah found that "these matters fall far short of establishing that anyone at Trafigura had knowledge of facts that gave them, or should have given a reasonable person, reason to believe that the TPAs had not been signed by Rasmala."
Consequently, the entirety of the fund's claim was dismissed, with the court recognizing that Rasmala genuinely believed it was financing legitimate coal purchases, that Farlin fabricated documents, that rather than using the money to buy coal, Farlin instructed Trafigura to apply the payments to its outstanding debts, and, most crucially for this judgment, that Trafigura applied the funds in good faith.
THE PARTIES
In this case, the claimant Rasmala was represented by Richard Power and Laurentia de Bruyn of Fountain Court Chambers, instructed by Hill Dickinson. The defendant Trafigura was represented by Neil Kitchener KC and James Nadin of One Essex Court, instructed by Reed Smith.
KEY TAKEAWAYS
- The case reaffirmed the evidentiary threshold required to recover mistaken payments in complex trade finance frauds.
- Although restitution is available for unjust enrichment, the change of position defense impedes recovery when the recipient acting honestly and reasonably relied on the payment.
- The ruling confirmed the legal impact of structured payment arrangements, even when the underlying transactions were false, provided they appeared regular and were accepted in good faith.
- For trade finance funds and lenders, the judgment highlighted the risk that payments made under seemingly verified structures may not be recoverable if recipients rely on them in good faith.
- On the other hand, it offered legal certainty for recipients whose conduct was honest and commercially reasonable.
In summary, the court dismissed Rasmala's claim since the law does not require repayment when the recipient has changed their position in good faith by applying the funds to settle outstanding debts, thereby preventing restitution despite the unjust enrichment caused by the mistaken payments.[1][2][3]
- The forged coal purchases from Farlin Energy & Commodities involved funds from Rasmala, a finance entity, which were used by Trafigura, an energy company, to settle Farlin's existing debts, signifying a transactions within the energy and finance industries.
- In the high court judgment, the change of position defense was upheld, determining that Trafigura, a participant in the energy sector, had indeed changed its position in good faith by applying the funds to settle outstanding debts, a decision that has implications in the finance industry, as it impedes recovery when recipients acting honestly and reasonably rely on the payment.
