Thera Agri Capital No 2 Pty Ltd v BCC Trade Credit Pty Ltd t/as the Bond & Credit Co

Thera Agri Capital No 2 Pty Ltd sought indemnity from BCC Trade Credit Pty Ltd t/as the Bond & Credit Co for a default by a guarantor of its customer, a commodities trader. The dispute centred on the trader’s breach of Sharia principles in the financing transactions and whether this breach triggered an exclusion in the trade credit insurance policy. The case was heard in the Supreme Court of New South Wales.

The court was required to interpret the insurance policy, particularly the definition of “material” and “material default”, and assess the relevance of the parties' conduct post-contract. The key issue was whether the trader’s breach of Sharia principles constituted a “material default” that would exclude the insurer from providing indemnity. Another issue was the applicability of New South Wales law under the policy’s choice of law clause, considering the non-exclusive jurisdiction clause in favour of the Dubai International Financial Centre.

The court held that the trader’s failure to comply with Sharia principles and the finance documents constituted a material default, thus excluding the insurer from providing indemnity. The court further held that the public policy of the UAE, based on Sharia principles, did not constitute an “applicable material law” under the policy. Consequently, the insurer was not liable for the guarantor’s default.

The court ordered that the insurer was not liable for the guarantor’s default and that the commodities trader’s breach of Sharia principles constituted a material default. The court also determined that the public policy of the UAE did not constitute an “applicable material law” under the policy, thereby upholding the insurer’s denial of indemnity.