Plane parts, phoney emails and a payment to fraudsters; but who caused the loss?

In Logix Aero Ireland Limited v Siam Aero Repair Company Limited [2026] EWCA Civ 510 the Court of Appeal upheld a first instance decision that fraudsters' intervention in an email exchange that diverted payment for plane parts to their own account was sufficient to break the chain of causation.

The claimant intended to purchase two aircraft engines from the defendant pursuant to a Letter of Intent. When the defendant emailed the claimant pressing to close the deal, fraudsters intervened in the email exchange and sent emails between the parties from fake accounts. The defendant sent purchase agreements to the fraudsters believing they were sending them to the claimant. The fraudsters inserted details of their bank account in Vietnam and sent the agreements on to the claimant, returning a signed version of the agreements with the defendant's bank details reinstated to the defendant. The claimant transferred funds to the fraudsters' account but by the time the fraud was detected, the funds had disappeared.

The Court of Appeal proceeded on the basis that when the defendant sent the purchase agreements to the fraudsters it had breached its obligation in the Letter of Intent to keep the information contained in those agreements confidential. It was clear that "but for" the defendant's breach of contract, the claimant would not have suffered loss because the fraudsters would never have received the agreements to manipulate.

However, the court noted that the intervention of a third party (such as the fraudsters) can mean that a breach of contract is not the effective or dominant cause of a party's loss. The third party breaks the chain of causation. It noted that the defendant had only sent the agreements to the fraudsters and breached its confidentiality obligation after the fraudsters had intervened in the email chain. The fraudsters had in fact caused the defendant to breach its contract. The defendant's breach was also only one of a number of stages in the fraud, which involved the manipulation of information received from both parties and depended on the claimant being deceived by the fraudsters and making payment to the wrong account. Accordingly, the fraudsters' conduct destroyed the "causative potency" of the defendant's breach and was the effective cause of the claimant's loss.

The claimant relied on a House of Lords authority London Joint Stock Bank Limited v Macmillan and Arthur [1918] AC 777 as authority for a proposition that an intervening fraudulent act does not prevent a loss being attributable to a party that created the opportunity for the fraud. In that case, the claimant signed a cheque which was partially blank. The clerk at the bank increased the amount shown on the cheque from £2 to £120. The House of Lords rejected the claimant's claim for a declaration that the forged cheque should not be cashed. It decided that the claimant owed a contractual duty to the bank to take care to ensure that the cheque could not be forged, by completing it correctly. Accordingly, the clerk's forgery did not break the chain of causation as this was the very thing the claimant was obliged to prevent.

The Court of Appeal decided that the present case could be distinguished from Macmillan. The confidentiality obligation in the Letter of Intent was designed to prevent commercial damage arising from sensitive information falling into the hands of competitors. It did not impose a duty on one party to protect the other from being deceived by fraudsters who were looking to manipulate anodyne information for their own gain. The court also noted that "it is far from clear that [the defendant] was in breach of the confidentiality clause by “disclosing” its own information".

The decision represents a common-sense application of causation principles. It also confirms that claimants wishing to rely on Macmillan will need to prove a duty exists to prevent the event which caused the loss. As Lord Justice Phillips commented at the outset of the Court of Appeal's judgment in Logix, the proceedings "arose from an email interception fraud of a type now all too common" and so this clarity from the appellate courts is welcome.