QBE says it believes commodity trades at the heart of an ongoing legal dispute with Marketlend were fictitious or fraudulent, allegations rejected by the Australian trade finance platform.
On January 19, QBE’s Malaysian arm was ordered to pay out insurance claims totalling US$9.38mn brought by Marketlend, which stem from the default of several commodity traders in 2020 and 2021.
The default judgement was issued after QBE failed to appear as a defendant, which the insurer later said was due to an administrative error on its part. That development prompted Marketlend to issue a statutory demand to wind up QBE’s Malaysia business.
Both parties have since agreed to set aside the default judgement, and QBE has obtained a temporary injunction against the winding-up order.
However, QBE and Marketlend continue to dispute the validity of the initial insurance claims, according to court documents seen by GTR.
The claims relate to transactions involving 50 bills of lading (BLs), covering shipments of soybean oil from Argentina to India in mid-2020.
The seller in each transaction is Fidelity Trading, a Malaysia-based trader whose book was taken over by Marketlend after a winding-up order in July 2020.
Nine commodity traders named as Fidelity’s buyers then defaulted on their debts between December 2020 and January 2021. That prompted Marketlend to seek reimbursement from QBE under a trade credit insurance policy Fidelity had taken out to cover potential losses arising from those commodity trades.
But following attempts to verify the physical flow of those goods, QBE says it does not believe Fidelity nor its buyers actually took part in the trade transaction.
For 34 of the BLs, the insurer says it has contacted the named seller, AGD SA, which confirmed it sold the goods directly to another company in the wider AGD group. That company then sold them directly to the end buyer, Mera International India, QBE says.
The insurer says no other intermediaries were involved, and says those two sales account for “the complete transaction chain”. Mera says it has not “heard of or ever traded with” Fidelity, QBE adds.
According to QBE, this indicates Fidelity “could not have conducted a genuine physical trade of the goods with its alleged insured buyers in respect of these BLs”.
“Fidelity’s alleged trades were accordingly fictitious,” the insurer adds.
For the 16 other BLs, Glencore Agriculture – now Viterra – confirmed it sold goods directly to Mera’s parent company, and “has no trace of any dealing with Fidelity or its alleged counterparts in the trade”, QBE says.
“While the goods did exist and were shipped, the actual sale chain involved completely different parties to the exclusion of Fidelity and the insured buyers,” the insurer alleges, adding that as a result it is entitled to refuse to pay Marketlend’s claims.
Marketlend’s founder and chief executive, Leo Tyndall, rejects QBE’s claims and says the company will file a defence in the coming weeks.
“These are unproven, unfounded allegations,” he tells GTR. “We don’t yet know the full details of the allegations, but it is in the interest of both parties for this matter to be heard in court, when the full evidence and related facts are discovered.”
QBE also says Fidelity failed to disclose that it had been facing a winding-up petition since November 2019. Fidelity was ultimately wound up by a Malaysia court on June 15 the following year, just one day after entering into the policy with QBE.
The insurer argues this is a breach of Fidelity’s duty to disclose “all material facts under the policy”.
Marketlend’s Tyndall says: “The fact the insured went insolvent does not preclude the policy from responding, as it is the indemnity for payment on the debtors, not the insured.”
The case is one of several involving the Sydney-headquartered financier, which has also filed claims against Australia’s Bond & Credit Company (BCC).
It takes place against a backdrop of numerous disputes involving lenders, traders and insurers, spanning Australia, Singapore, Malaysia and Dubai, which have their roots in defaults among commodity traders in 2020 and 2021.
Insurance-related rulings so far have been few and far between, but in May last year, an Australian court ordered BCC to pay a claim of A$7.2mn filed by trade financier Thera Agri Capital Management, rejecting the insurer’s argument that the relevant transactions were not compliant with the terms of the policy in place. BCC’s appeal was this week rejected by an Australian court.
In November, a Malaysian court ruled in favour of Westford Limited against its insurer, Archipelago Insurance Limited, but written reasons for the judgement have not been issued as of press time.