The lawsuit filed by Triumph Global against Bond & Credit Company (BCC) centers around claims for unpaid debts from collapsed trades with Rhodium Resources and Longview Resources. The case delves into complex issues of trade credit insurance and the legal interpretations of "physical control" over traded goods.
Key Points:
- Background: Triumph Global, through its Hong Kong subsidiary, conducted commodity trades with Rhodium and Longview worth nearly €21.5 million. The trades involved purchasing goods from Supernova Enterprises and selling them to Rhodium and Longview, with payment due in 180 days.
- Defaults and Claims: Both Rhodium and Longview defaulted on their payments in 2020. Rhodium's collapse left over $620 million in debt. Triumph sought to recover the losses from BCC under its trade credit insurance policy.
- Insurance Dispute:
- BCC's Defense: BCC claims the insurance policy is invalid because Triumph did not take physical possession of the goods. BCC argues the trades were merely back-to-back transactions without actual physical control, which they assert is required by the policy.
- Triumph's Argument: Triumph counters that in commodities trading, passing title via documentation (such as bills of lading) is standard practice and should constitute "physical control." They argue that the policy should cover the trades as conducted and that BCC knew, or should have known, the nature of these transactions.
- Legal Precedents and Ongoing Cases: Similar lawsuits against BCC have arisen, with disputes often revolving around whether the claimant had physical control of goods. Previous cases include a settlement with Marketlend and a decision against BCC involving Thera Agri Capital Management.
- Role of Broker Marsh: Triumph has implicated their insurance broker, Marsh, in the lawsuit. Triumph claims Marsh should have advised them about the suitability of the policy. Marsh defends itself by stating Triumph should have disclosed its business practices, and has filed a cross-claim against BCC to recover funds if Marsh is found liable.
- Ongoing Litigation: The litigation is complex and involves multiple parties, with each side filing cross-claims to shift responsibility. The outcome will hinge on the interpretation of "physical control" in trade credit insurance and the customary practices in commodities trading.
Broader Implications:
- Trade Credit Insurance: This case could set a precedent for how trade credit insurance policies are interpreted, especially regarding the requirement of physical possession versus title transfer through documentation.
- Commodity Trading Practices: It highlights the importance of clearly defined terms in insurance policies that match the actual practices in commodities trading.
- Broker Responsibilities: The involvement of Marsh underscores the critical role of brokers in ensuring that clients receive appropriate advice and policies tailored to their specific business models.
The ongoing litigation will provide further clarity on these issues and potentially reshape aspects of trade credit insurance and commodities trading practices.
Source: GTR
02/08/2024