Trafigura Pte Ltd & Anor v Prateek Gupta & Ors

A seller negotiating a contract for the supply of identified goods may impliedly represent that it honestly intends to perform and will not substitute worthless or materially different goods. Fraudulent misrepresentation induced each sale. Where a contract for delivery by instalments is severable, the innocent buyer may rescind only the affected instalments. Contractual quality notices and waivers do not ordinarily exclude liability for fraudulent inducement, total non-delivery of the contracted goods, or deceit, absent sufficiently clear language. Knowledge of employees who participated in a fraud against their company is not attributed to the company when it seeks redress from the fraudsters. A person who knowingly procures or materially assists a company’s deceit pursuant to a common design may be jointly liable in tort.

Trafigura purchased purported LME Grade Nickel from companies associated with Prateek Gupta under master contracts and related trades. The cargoes were represented in contracts and shipping documents as Nickel, but inspections showed that most contained stainless steel, aluminium or iron briquettes. Trafigura alleged fraudulent misrepresentation, deceit, conspiracy and related claims. The defendants alleged that Trafigura employees had agreed to an arrangement under which non-Nickel material could be supplied while documents described it as Nickel.

The court determined whether that arrangement existed, whether knowledge could be attributed to Trafigura, whether the contracts and trades could be rescinded, whether contractual terms barred relief, and whether Mr Gupta and the corporate defendants were jointly liable.

1. Issue 1: The alleged arrangement did not exist. The contemporaneous documents, private communications, commercial improbability of the alleged scheme and conduct surrounding the inspections demonstrated that Trafigura and its employees believed they were financing genuine Nickel. Mr Gupta had instead devised and implemented a fraud through the corporate defendants.
2. Attribution: On the assumed facts that Trafigura employees had participated in the arrangement, they would have acted dishonestly and contrary to Trafigura’s interests. They lacked actual or apparent authority to bind Trafigura. Their knowledge could not be attributed to Trafigura in claims seeking redress for their own fraud or the fraud of those acting with them. Morris v Bank of India concerned a special statutory attribution rule and did not alter that conclusion.
3. Misrepresentation: In the circumstances of contracts for the sale of Nickel, the sellers impliedly represented that they honestly intended to deliver Nickel. Those representations were false, fraudulent and induced the contracts. The elements of fraudulent misrepresentation and deceit were established.
4. Rescission: Rescission is ordinarily all-or-nothing, but a severable contract may be rescinded in part. The master contracts provided for discrete instalments, separate shipping documents and invoices, separate pricing and payment, and delivery over different periods. Each Main Trade was therefore a separate severable bargain. Trafigura could rescind the 91 Main Trades without rescinding the remaining trades.
5. Trafigura had not affirmed the trades. It lacked full knowledge of the fraud and of its legal right to rescind, and had not communicated an unequivocal election to affirm. Counter-restitution was practically possible through return of the goods or accounting for their sale proceeds.
6. The contractual quality and notice provisions did not bar relief. They did not exclude liability for fraudulent inducement, did not apply to a deliberate failure to deliver Nickel at all, and the relevant deficiencies were not apparent from the shipping documents.
7. Mr Gupta procured the corporate defendants’ deceit and was jointly liable. He was also liable for the deceit of D6–D8 because he materially assisted them pursuant to a common design and knowingly procured their participation. The defendants were liable for unlawful means conspiracy, with damages assessed on the same basis as deceit damages.
8. D3 and Mr Gupta were liable in relation to the duplicate bills of lading. The wider corporate group was not shown to have participated in that particular conspiracy. Trafigura succeeded on the principal claims, obtained rescission and proprietary relief, and was entitled to substantial damages, with tracing issues reserved for Phase II.

The claim was issued on 8 February 2023. Foxton J made a Worldwide Freezing Order on that date. Bright J dismissed the defendants’ application to discharge the order: [2023] EWHC 3184 (Comm). The present judgment determined the substantive claims at first instance.