Velstra Pte Ltd v Mercator & Noordstar NV: Avoidance of Transactions at Undervalue under Insolvency Law
In the case of Velstra Pte Ltd v Mercator & Noordstar NV, the Singapore High Court heard an originating summons by the liquidators of Velstra Pte Ltd seeking to declare a payment of US$5.08 million to Mercator & Noordstar NV void as a transaction at an undervalue under s 98 of the Bankruptcy Act read with s 329 of the Companies Act. The court found that the payment was indeed a transaction at an undervalue and granted the liquidators' application, ordering the recovery of the funds from Mercator & Noordstar NV.
1. Case Overview
1.1 Court
High Court1.2 Outcome
Judgment for Plaintiff
1.3 Case Type
Insolvency
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
The High Court considered whether a payment made by Velstra Pte Ltd to Mercator & Noordstar NV was a transaction at an undervalue under insolvency law. The court ruled in favor of the liquidators, ordering the recovery of the funds.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Velstra Pte Ltd | Plaintiff | Corporation | Judgment for Plaintiff | Won | |
| Mercator & Noordstar NV | Defendant | Corporation | Claim Dismissed | Lost |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Choo Han Teck | Judge | Yes |
4. Counsels
4. Facts
- Velstra Pte Ltd made a payment of US$5.08 million to Mercator & Noordstar NV on 4 January 2000.
- The payment was recorded as being made on behalf of N.V. Language Development Fund (LDF).
- LDF was indebted to Mercator & Noordstar NV in the sum of US$10 million.
- Mercator & Noordstar NV owned 97% of LDF.
- Velstra Pte Ltd was in liquidation.
- The liquidators of Velstra Pte Ltd sought to declare the payment void as a transaction at an undervalue.
- Khatchadourian transferred US$36m to Velstra Pte Ltd's account with the Development Bank of Singapore.
5. Formal Citations
- Velstra Pte Ltd v Mercator & Noordstar NV, OS 1179/2002; NAOS 567/2002; RA 9 & 16/2003, [2003] SGHC 35
6. Timeline
| Date | Event |
|---|---|
| N.V. Language Development Fund incorporated | |
| N.V. Language Development Fund received a loan of US$10m from the defendants | |
| Velstra Pte Ltd incorporated | |
| Loan agreement signed between Khatchadourian and Velstra Pte Ltd | |
| Khatchadourian transferred US$36m to Velstra Pte Ltd's account | |
| Velstra Pte Ltd paid US$5.08m to Mercator & Noordstar NV | |
| Lernout, Hauspie and Willaert resigned from L&H | |
| Lernout, Hauspie and Willaert were arrested in Belgium | |
| Gaston Bastiens arrested in Boston, USA | |
| K petitioned to wind up the plaintiffs | |
| Winding up order made | |
| Liquidators of the plaintiffs wrote to the defendants asking for details of the US$5.08m payment | |
| Defendants’ solicitors in Belgium replied to say that it was made in part payment of the US$10m loan | |
| Appeal in RA 9 of 2003 and RA 16 of 2003 heard before the judge | |
| Decision Date |
7. Legal Issues
- Transaction at an Undervalue
- Outcome: The court held that the payment constituted a transaction at an undervalue.
- Category: Substantive
- Good Faith Defence
- Outcome: The court rejected the defendant's argument that they acted in good faith and without notice of the relevant circumstances.
- Category: Substantive
8. Remedies Sought
- Declaration that the payment of US$5.08 million is null and void
- Order to recover US$5.08 million from the defendants
9. Cause of Actions
- Avoidance of Transactions at an Undervalue
10. Practice Areas
- Insolvency Litigation
- Commercial Litigation
11. Industries
- Finance
- Insurance
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Cashflow Finance v WestpacCOD Factors | Supreme Court of New South Wales | Yes | [1999] NSW SC 671 | Australia | Cited to support the interpretation of 'transaction' to include payment, even without active participation. |
| Pegulan Floor Coverings Pty Ltd v Carter | N/A | Yes | (1997) 15 ACLR 1293 | N/A | Cited for the principle that the court should ensure that a creditor does not receive a benefit over and above that received by other creditors. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Bankruptcy Act, Ch 20, s 98 | Singapore |
| Bankruptcy Act, Ch 20, s 101 | Singapore |
| Bankruptcy Act, Ch 20, s 102 | Singapore |
| Companies Act, s 329 | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Transaction at an undervalue
- Liquidation
- Insolvency
- Good faith
- Associate
- LDF
- L&H
- Liquidators
15.2 Keywords
- Insolvency
- Transaction at undervalue
- Bankruptcy
- Liquidation
- Companies Act
- Good faith
- Directors' duties
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Avoidance of transactions | 95 |
| Insolvency Law | 90 |
| Transactions at an undervalue | 90 |
| Bankruptcy | 75 |
| Company Law | 60 |
16. Subjects
- Insolvency
- Corporate Law
- Financial Transactions