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Dubai Insurance Co is pressuring Westford Trade Services to prove that purchases of goods later sold onto collapsed trader Phoenix were genuine, saying it has identified several irregularities and due diligence red flags. 

Westford entities in the UK and Dubai are suing Dubai Insurance over unpaid claims arising from Phoenix Commodities’ insolvency in April 2020. The insurer is refusing to pay out on the grounds that it does not believe Phoenix’s purchases of goods from Westford were legitimate. 

In an amended defence filed in April and released by a Dubai court last week, the insurer also cast doubt on a US$3.49mn purchase of rice by Westford in December 2019. 

Court filings show that under an arrangement between Phoenix and Westford, Phoenix would arrange the purchase of goods from a supplier, before asking Westford to step in. Westford would then purchase those goods itself, before immediately selling them onto Phoenix on deferred payment terms. 

For one transaction, Dubai Insurance says a due diligence report requested by Westford on the supplier – UAE-based Uno Trading – found no business registration or website matching that name, and could not verify the address or phone numbers provided. 

The due diligence report adds that “no other sources were available to provide any further information about the subject matter”, the court filing shows. 

The insurer also alleges that Westford obtained a US$3.6mn loan from White Oak to finance that purchase, but rather than transfer the funds to Uno Trading, it reassigned to Uno Trading an existing receivable due to its Hong Kong parent company. 

That receivable derived from a sale by Westford Limited to Darintech Singapore, but Dubai Insurance says Darintech appears to have ceased trading in August 2017. 

The insurer says Darintech “could not therefore in December 2019 have generated a receivable that was capable of being assigned by Westford Limited to Uno Trading, or a receivable of any value”. 

It argues this “alleged convoluted payment arrangement” was not set out in the purchase contract with Uno Trading, nor seemingly communicated to White Oak. 

Dubai Insurance says Westford is “put to proof as to how it deployed the loan monies from White Oak in circumstances where it did not use those loan monies to pay Uno Trading”. 

It adds Westford should provide evidence there was a legitimate sale from Westford Limited to Darintech, and that the reassignment of that receivable to Uno Trading was properly accounted for within Westford’s intra-company accounts. 

The defence document also reiterates claims based on information from Phoenix’s liquidators that the same goods being bought and sold by Westford had already been bought and sold by Phoenix, and so could not have been the subject of a legitimate trade transaction. 

Those claims follow findings by Phoenix’s liquidators that the company constructed a sub-ledger of transactions that do not appear to correspond to real trades, but were used to raise financing from lenders. 

Dubai Insurance argues Westford knew, or ought to have known, “that the transactions were not genuine”. 

Westford did not comment when contacted by GTR. The company has previously argued that it was unaware Phoenix may have undertaken multiple transactions involving the same goods, and had no knowledge of its internal record keeping. 

Westford has also argued in its own submissions that it obtained original bills of lading from sellers and delivered them to Phoenix, and so legitimately acquired and sold title to the goods. 

Dubai Insurance and White Oak did not comment when contacted.