Westford Trade Services is suing Dubai Insurance Co over losses involving disgraced commodities trader Phoenix, with the insurer arguing there is no evidence the parties involved ever had title to the goods.
The case relates to a December 2019 purchase by Phoenix of 10,000 tonnes of Myanmar white rice, court documents from the Dubai International Financial Centre show.
As part of the US$3.6mn transaction, Westford, a Hong Kong-headquartered trader and trade finance lender, purchased the rice from Singapore-based Uno Trading and immediately sold it onto Phoenix, with payment due in April 2020. Phoenix defaulted on several payments that month, and went into liquidation in June the same year.
The company has since faced accusations it fabricated documents in order to obtain financing, and collapsed without any funds in its estate to repay creditors. At the time of its downfall, Phoenix owed a reported US$1.2bn to creditors, including several international banks.
Westford had obtained cover from Dubai Insurance in the event of non-payment by Phoenix, payable to one of its funders, White Oak Trade and Specialty Finance Cayman.
But the insurer has since refused to pay, arguing that “there is no evidence on the face of the bills of lading (BLs) that Uno Trading ever had title to the goods that were purportedly sold to [Westford]”, nor that Westford actually acquired title to the goods and transferred it to Phoenix.
In its defence submission, Dubai Insurance says it does not believe the trade took place as described by Westford in its claim.
It argues that the BLs did not name Uno Trading as the seller, but rather Singapore-registered trader Gmec Pte Ltd, and that they were not consigned to the order of Westford nor endorsed in favour of Phoenix.
The insurer adds that information provided by Phoenix’s liquidator suggests the same goods involved in Westford’s claim were already involved in earlier transactions.
It says Phoenix appeared to have purchased the same goods in November 2019 and sold them to another party – referred to only as Buyer A – according to the company’s accounts.
Dubai Insurance says it has been informed that in December 2019, part of the same consignment was sold to another company, Buyer B. The same month, Phoenix also purchased the same goods from its sister company and sold them to another party, Buyer C.
None of those transactions appear in Phoenix’s accounts, the insurer says.
Westford’s claim says it received original BLs on December 17 and delivered them by hand to Phoenix on December 19.
But Dubai Insurance says it now believes the original BLs supporting that trade were “most likely to have been in the possession of one of Phoenix’s financing banks” rather than with Westford.
“In the circumstances, and based on the information and evidence currently available, the transactions between [Westford] and Uno Trading and Phoenix were ‘paper transactions’ with no actual transfer of goods (underlying stock movements) or title between the parties,” the insurer says.
As a result, Dubai Insurance argues Westford did not fulfil the terms of its sales contract and so is not entitled to file a claim for reimbursement.
No foul play
In a reply to Dubai Insurance’s defence filing, Westford rejects any suggestion it did not actually acquire and sell title to the goods.
Westford says it obtained original BLs from Uno Trading and delivered them by hand to Phoenix as outlined in its insurance claim. It says the involvement of Gmec is irrelevant, pointing out that it did not commit to buying the goods from the named parties on the BL.
It acknowledges it did not take physical possession of the goods, but says doing so was not required as part of the transaction, with the right to ownership transferred by the BLs. The company says those terms are not “in any way ‘unusual’ or contrary to ordinary practice in international trade”.
Westford adds it is “unaware of Phoenix undertaking multiple transactions in respect of the same set of goods at any material time, as alleged”, and that it has no knowledge of Phoenix’s internal record keeping or trades with other parties.
It says it was “wholly unaware of any third parties holding original bills of lading”.
The company notes that it should have retained title to the goods as a result of non-payment by Phoenix, and says it has taken “all reasonable steps to… re-sell the goods in order to mitigate its loss”.
However, the four-month payment terms and the perishability of the goods, as well as difficulties coordinating with Phoenix directors, have left Westford unable to practically enforce its right to ownership.
Westford “has been unable to locate, obtain possession of the goods and re-sell them”, it adds.
The Dubai court registrar says the case is due to go to trial in June next year, with witness statements and expert reports due in February and March respectively.
Westford chief executive Hande Elmener tells GTR the company is “confident of prevailing”. Dubai Insurance did not respond when contacted.
The case is one of several disputes to have arisen from Phoenix’s collapse.
Dubai Insurance Co also faces a claim from Commonwealth Trade Bank, a former trade finance lender owned by steel magnate Sanjeev Gupta, over the bank’s purchases of Phoenix invoices that were not repaid once it entered liquidation.
Gupta’s GFG Alliance, a network of companies that drew significant funding from collapsed lender Greensill, is currently under investigation by the UK’s Serious Fraud Office for “suspected fraud, fraudulent trading and money laundering”.
Phoenix and Westford each sold receivables to Greensill, which it securitised and sold to funds run by Credit Suisse. GTR revealed last year that Westford employees had historically concealed the involvement of Gupta-owned Liberty in its trading activity.
In June, an Australian court ordered Bond & Credit Company – a subsidiary of Tokio Marine – to pay an insurance claim of A$7.2mn to Thera Agri Capital Management, ruling that the financier had fallen victim to a fraud orchestrated by Phoenix.
And in February, a Dubai court ordered Phoenix’s former executive chairman and majority shareholder, Gaurav Dhawan, to pay US$19mn to Maltese lender Fimbank to cover unpaid debts from a trade finance facility put in place in early 2020.
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