An Australian agriculture finance provider is suing insurer the Bond and Credit Company (BCC) for refusing to honour a claim for A$7.3mn owed by collapsed Dubai-based commodities trader Phoenix Commodities.

The legal wrangle highlights the ongoing fallout from the demise of Phoenix, a trading conglomerate that reportedly owed US$1.2bn to creditors when it entered liquidation in April last year. 

Thera Agri Capital, which signed an agreement with Phoenix in February last year for the export of Australian-grown food goods, filed the suit in October in the New South Wales Supreme Court.  

Thera and Phoenix signed contracts for 11 shipments of lentils, soybeans, chickpeas, wheat and canola under which the Australian company would advance funds – collectively worth A$7.3mn – to Phoenix to purchase the goods as its agent, according to court documents. 

Thera was to then sell the goods to Phoenix, which in turn was supposed to make deferred payments, plus 10%, in June and July under a murabaha contract, the documents say. Although Thera’s fund advances were made, Phoenix collapsed several weeks before the deferred payments were due, leaving Thera on the hook for the full amount. 

Thera says it then filed a claim with BCC, believing the advances it had paid to Phoenix were covered by a clause on non-payment of debt obligations in a policy it took out in February 2020. The claim is for A$6.6mn, which is the insured amount of the transaction. 

Insurer rebuffs claim 

BCC, a subsidiary of Japan’s Tokio Marine, is arguing that the transactions were not covered by the policy because the A$7.3mn advanced to Phoenix under the agreements was in fact used to buy commodities from two companies, ACME General Summit Trading LLC and Avon International Pte Ltd, in transactions separate to those covered by the policy. 

BCC claims the contracts between Phoenix, ACME and Avon were entered into in January and invoices were issued in late February. 

As a result, Thera never took title over the commodities nor paid the unidentified sellers for them, BCC alleges. “The plaintiff [Thera] was not a seller of the commodities and any losses it would incur would not be for non-payment of commercial trade debt,” its defence, dated December, says.  

“The plaintiff has not provided evidence of the payment of the purchase price of the commodities to the commodities seller by the plaintiff or Phoenix Global,” BCC alleges.   

BCC says Thera knew, or was in a position to know, the arrangement between Phoenix and the two traders and was obligated to disclose that to the insurer under the terms of the policy. 

Singapore-headquartered Avon was placed into liquidation on September 1, 2020. ACME is a Dubai-based import-export business specialising in agricultural produce. 

In most cases, BCC says in its defence, the commodities were shipped out of Australia before Thera had issued purchase instructions and other documents to Phoenix and before the insurance policy was taken out with BCC. 

The first hearing in the case is scheduled to take place on April 29.  

Thera’s CEO, Mark Allen, declined to comment. BCC’s parent company Tokio Marine and its solicitor Richard Lyne did not respond to requests for comment. 

BCC shot to prominence in March after it was revealed it had refused to renew US$4.6bn of insurance policies to disgraced supply chain finance firm Greensill, precipitating the company’s collapse. 

Phoenix, made up of a group of companies spanning five continents, collapsed after racking up some US$400mn in trading losses, Reuters reported in May 2020, citing a document prepared by liquidators. Liquidators were appointed on April 20 that year. 

Deloitte’s Paul Leggett, a joint liquidator of Phoenix’s Dubai entity, Phoenix Global DMCC, says the liquidators’ reports for the group of companies are confidential and currently only available to creditors. Phoenix companies in Singapore and the British Virgin Islands are also in the process of being liquidated, Leggett says in an email to GTR.

Media reports last year put the figure it owes to creditors at around US$1.2bn. Several banks in the United Arab Emirates, including Emirates NBD and First Abu Dhabi Bank, disclosed exposures to Phoenix shortly after the liquidation. 

Wyelands Bank, under scrutiny over lending to metal tycoon Sanjeev Gupta’s embattled GFG Alliance, was also a major financing provider for Phoenix, according to media reports.