Key Facts
- •Trafigura, a commodities trader, initiated legal action against Prateek Gupta and several related companies (MDR Defendants) for alleged fraud involving nickel trades.
- •The fraud involved the sale of materials falsely represented as LME-grade nickel in 'buyback' contracts, resulting in over US$500 million in losses for Trafigura.
- •Trafigura obtained a Worldwide Freezing Order (WFO) but the MDR Defendants applied for its discharge, alleging Trafigura failed to make full and frank disclosure when obtaining the WFO.
- •The core dispute centered on whether Trafigura had knowledge, through its employees (particularly Mr. Bhatia and Mr. Oikonomou), of the fraudulent nature of the nickel cargoes.
- •The MDR Defendants presented evidence suggesting Trafigura employees were aware of inconsistencies in documentation (HS codes, certificates of analysis) and the non-delivery of nickel.
Legal Principles
Duty of full and frank disclosure when applying for injunctive relief, such as a WFO.
Brink’s Mat Ltd v Elcombe [1988] 1 WLR 1350
Attributability of knowledge of fraud by employees to the company. The knowledge of an employee acting in breach of their duty to the company is not necessarily attributable to the company.
Bowstead & Reynolds on Agency (22nd ed.) Article 95 and Bilta (UK) Ltd v Nazir (No. 2) [2016] AC 1
Outcomes
The MDR Defendants' application to discharge the WFO was dismissed.
The court found that Trafigura had not failed in its duty of full and frank disclosure. While some evidence suggested possible knowledge of the fraud by individual employees (primarily Mr. Bhatia), it was not sufficient to establish that Trafigura itself knew or should have known about the fraud before obtaining the WFO. The court found that Trafigura had adequately addressed the possibility of Mr Bhatia's knowledge in the initial application.