A court in Australia has heard claims that documents underpinning a financing arrangement for collapsed trader Phoenix Commodities may have been fabricated.

Australian agribusiness financier Thera Agri Capital is suing insurer the Bond and Credit Company (BCC) over its refusal to pay A$7.3mn (US$5.4mn) under a trade credit policy, after Phoenix defaulted on the payment. Dubai-headquartered Phoenix collapsed in April 2020, reportedly owing US$1.2bn to creditors.

During three days of hearings at the New South Wales Supreme Court this week, BCC’s lawyers argued that the way Thera and Phoenix structured the transaction meant that the insurance policy cannot be invoked.

Thera advanced A$7.3mn to Phoenix in February 2020 to purchase soft commodities from two companies, ACME General Summit Trading LLC and Avon International Pte Ltd, both of which have since been liquidated. Under the deal, Phoenix would buy the commodities on behalf of Thera and then buy them back by deferred payment.

ACME’s former managing director told the court on Tuesday that he could not locate any documents relating to the deal with Phoenix among his company’s records, and the documents presented to him purporting to be from ACME appear to have been falsified.

“I checked my internal system, I myself checked [the] Excel system, I checked files myself, I didn’t find anything,” Muhammad Sufyan Nagaria told the court by video link from Dubai.

When one of the parties in the case presented him with the documents purporting to show invoices and contracts between his company and Phoenix, he said he “knew there was something wrong” because the letterheads were not the same as that used by the company, an older logo had been used and he did not recognise the signatures used.

“I don’t know who put the signature on it, I assume somebody from Phoenix,” Nagaria told the court, adding that he was the only person at the company authorised to sign such documents.

BCC is not suggesting that Thera was involved in the creation of documents for the trades between Phoenix, ACME and Avon, BCC’s barrister Richard Scruby confirmed to the court.

BCC’s defence focuses on the wording on the contracts between Thera and Phoenix, but the suggestion by Scruby that the transactions between Phoenix, ACME and Avon may never have occurred also forms part of the insurer’s defence.

Under cross-examination by Thera’s barrister, Nagaria said that ACME had stopped engaging in trades in the first three months of 2020 while he was confined to his bed with a medical condition, but that he received daily reports, phone calls and emails from staff.

Thera’s barrister Jeremy Giles put it to Nagaria that one of his staff could have created the documents and authorised the sale while he was ill.

“No-one was going to you to get your signature, were they?” he said. “The five to six employees of the company in the first three months of 2020 were engaging in trades of … commodities, weren’t they?”

Nagaria responded: “They were not doing sales, they were not doing purchases. I was the only one.”

In closing submissions on Wednesday, Giles argued that the existence of “tracked” bills of lading for the sales between Phoenix, ACME and Avon made it unlikely that the other documents in the trade would have been fabricated.

A liquidator for Singapore-incorporated Avon, Kelvin Thio, told the court on Monday that he searched Avon’s records but was unable to locate any documents relating to the transaction with Phoenix.

Cross-examined by Giles, Thio said an audit of the company’s documents had not been carried out as it is not a legal requirement in Singapore. Asked by Giles if he was sure that Avon did not have additional bank accounts to those identified by the liquidators, Thio said he had not seen any evidence that additional bank accounts exist.

The hearings concluded on Wednesday and Justice Rees reserved judgement.

Liquidators were appointed for Phoenix – which spanned entities in the UAE, Singapore and British Virgin Islands – on April 20, 2020 after it reportedly racked up currency hedging losses of around US$400mn.

Lenders to the conglomerate included Emirates NBD, First Abu Dhabi Bank and Wyelands Bank.

In February a Dubai court ordered Phoenix’s former executive chairman and another defendant to pay Malta’s Fimbank just over US$19mn for failing to honour a personal guarantee when the company failed to repay a trade finance facility extended by the bank.