Singapore’s Supreme Court has sided with QBE in a case brought by trade finance platform Marketlend, ruling the insurer is not liable to pay US$9mn due to the “fictitious” nature of the transactions covered under the disputed policy.

Sydney-headquartered Marketlend and fellow claimant Australian Executor Trustees Limited (AETL) had been seeking to force payment under a credit insurance policy initially taken out by the now-liquidated Novita Trading.

Novita allegedly sold commodities such as soybeans, wheat and tin ingots to various buyers in 2020, in eight separate transactions worth between US$0.9mn and US$1.8mn, reveals a Singapore court judgment.

As a creditor to Novita, Marketlend argued it had the “power of attorney” to trigger a QBE credit insurance policy on the trades as the buyers allegedly defaulted on their payments months later, the judgment shows.

But in the decision, issued on January 8, Judge Sir Henry Bernard Eder rejected the firm’s attempt to force coverage.

Judge Eder upheld several arguments presented by QBE’s legal team, including the assertion that Novita had likely colluded with its “alleged buyers” to fabricate the trade transactions.

“The [Singapore International Commercial Court] dismisses eight claims made pursuant to a trade credit insurance policy because, among other reasons, the transactions sought to be indemnified by the policy were fictitious,” a summary of the decision reads.

Judge Eder also concluded that Novita had breached its trade credit insurance policy with QBE by assigning the rights and benefits to Marketlend without the insurer’s “written consent”, according to the judgment.

“That conclusion is fatal to the claims brought by both claimants in this suit,” he added.

The ruling comes amidst a series of legal tussles involving commodity traders, lenders and insurance companies since 2020, when a liquidity crunch sparked the collapse of numerous trading houses.

Marketlend itself has initiated multiple court actions against insurers in Australia, Malaysia and Singapore. It discontinued proceedings against another insurer, BCC, after reaching a settlement in early 2023.

The Australian company is a provider of supply chain finance, lines of credit and debtor financing, helping match investor funds with SMEs in need of liquidity. In August 2019, it signed a debtor financing agreement with Novita, the judgment shows.

Baldev Bhinder, managing director of QBE’s representing law firm Blackstone & Gold, says the outcome is a “landmark decision” for insurers globally.

“It cannot be enough to cobble together a contract for a trade of commodities that have been shipped.” he tells GTR. “For a trade credit insurance policy requiring a sale and shipment of goods from an insured to its buyers, the insured needs to demonstrate not just a sale but an actual physical shipment of goods from it to its insured buyer.”

“It is clear that paper trades or trades where the actual shipment of goods was done to the exclusion of the insured and its buyer would not be covered by a trade credit insurance policy like that in the present case. Just because an invoice financier might have been duped, does not mean that a trade credit insurer must be left to pay out on fictitious or paper trades,” he says.

Novita was placed into liquidation on March 27, 2024.

 

Fictitious trades

The legitimacy of the transactions covered by the policy was a key thrust of QBE’s defence.

Marketlend had sought to prove the underlying trades were genuine, pointing in part to bills of lading (BLs) and reports from Lloyds Intelligence Report and the International Maritime Bureau to show a “physical” trade had taken place. The actual transfer of goods between Novita and the various parties was a proviso of QBE’s policy which did not cover financial instruments.

But QBE argued such documents did not prove Novita and the buyers were directly involved in the trades, the judgment shows.

The insurer said it possessed “credible positive evidence” that at least two of the deals were faked: a US$1.35mn purchase of tin ingot by Sealoud Asia, as well as a shipment of milling wheat worth US$0.9mn to NJS General.

According to QBE, the tin ingot shipment involved different parties entirely – Indometal, Viant and Ningbo Zhichen Trading – while the wheat transaction was conducted by Grainexport, Ameropa, ETG Commodities and ETC Agro. The insurer supported its claims with statements obtained from the shipping companies and other parties involved in the transactions.

QBE also relied on oral evidence from Samantha Lim, a director at Viant, and Maria Gomez, head of trade operation in Africa for ETG, as detailed in the judgment.

“Not a single shipper, notify party or intermediary who responded to those inquiries and/or has provided witness statements was aware of any involvement of Novita or the Alleged Buyers in the trade flows for the respective bills of lading,” the judgment reads.

The judge agreed these deals appeared to be fake, writing in his decision: “I am… satisfied on a balance of probabilities that the Alleged Sealoud Trade and the Alleged NSJ Trade were both fictitious.”

“It follows that the claimants’ claims in respect of at least these two trades must be dismissed.”

While QBE had no “direct evidence” for the other six trades, Judge Eder indicated they were likely also fictitious: “It seems to me that having regard to the totality of the evidence, the irresistible inference is, at least on a balance of probabilities, that that is indeed the case.”

QBE highlighted the “curious features” of the eight sales contracts presented by Novita.

It also noted the contracts were in “precisely the same form” despite being for commodities as disparate as tin ingots and wheat, which QBE’s expert witnesses deemed suspicious, according to the judgment.

 

Novita, nowhere

In his decision, the Singapore court judge underscored Novita’s absence from the proceedings and its lack of co-operation with Marketlend as indications that the transactions were likely fictitious.

Novita had been requested to appear yet, as shown in the documents, failed to provide an affidavit or witness statement.

Marketlend’s CEO and founder Leo Tyndall repeatedly asked Novita’s then-director Jitendrakumar Trivedi for proof it bought the commodities in question, the judgment shows.

“It noteworthy that between May and August 2023, Mr Tyndall followed up a number of times with Mr Trivedi for ‘evidence and do[c]s’ to show that Novita’s alleged trades were not ‘fictitious and a fraud’, requesting in particular for ‘bank statements and payments to suppliers…[and] [e]mails’, emphasising that the evidence of Novita’s purchase of the goods is ‘very important’,” Judge Eder said.

“Even now, there is no evidence at all of Novita’s purchase of the goods that it allegedly sold,” he added.

Judge Eder said that if the alleged trades were genuine, he sees “no reason why Mr Trivedi would not be prepared to assist and to give evidence… given that he has apparently provided a personal guarantee”.

By mid-2023, relations between Marketlend and Novita had broken down. In a WhatsApp exchange that year, Tyndall messaged in “exasperation” and said he was “sick and tired” of Trivedi’s lack of cooperation, the judgment shows.

Tyndall warned that if Novita’s unco-operative stance persisted, he would have “no other choice but to actually advise the liquidator to make it complaint [sic] to the police and order a warrant against you in Singapore”, with similar actions considered in other jurisdictions.

The judgment also notes that Tyndall himself admitted he did not trust Trivedi, stating, “he just lied so many times”.

While Trivedi’s actions do not necessarily prove the alleged trades were fake, they undermine their credibility, the judge said. “As submitted by QBE, such conduct and his refusal to give evidence or otherwise assist does, in my view, provide justification for an adverse inference that the alleged trades were not genuine.”

Marketlend has faced difficulties in its efforts to recoup debt from the buyers since 2020, according to the judgment.

The firm initiated court proceedings in Dubai, Singapore and Hong Kong, winning judgments against Crown Beec, Green Trees, Max Arabian and NSJ in 2021. It also secured winding-up orders against UIG and Yeskey in Hong Kong.

But Marketlend is yet to recover “any” of the money despite these court wins, the judgemnt shows. CEO Tyndall referred to these buyers as “ghosts” in evidence because they have “all apparently disappeared”.

Marketlend had not provided a response by press time when contacted by GTR. Novita could not be reached for comment.