Velstra Pte Ltd v Dexia Bank: Avoidance of Transactions at Undervalue under Bankruptcy Act

In the High Court of Singapore, Velstra Pte Ltd (in liquidation) sued Dexia Bank NV seeking to void a US$20.92 million payment as a transaction at an undervalue under Section 98 of the Bankruptcy Act. The liquidators of Velstra claimed the payment was made while Velstra was insolvent or became insolvent as a result. Justice Kan Ting Chiu dismissed the claim, finding that Velstra did not intend to enter into a transaction with Dexia Bank.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Claim dismissed with costs.

1.3 Case Type

Insolvency

1.4 Judgment Type

Judgment reserved.

1.5 Jurisdiction

Singapore

1.6 Description

Liquidators of Velstra Pte Ltd sought to void a US$20.92m payment to Dexia Bank as a transaction at an undervalue. The court dismissed the claim, finding Velstra did not intend to transact with Dexia.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Velstra Pte Ltd (in liquidation)PlaintiffCorporationClaim dismissedLost
Dexia Bank NV (formerly known as Artesia Banking Corp NV)DefendantCorporationClaim DismissedWon

3. Judges

Judge NameTitleDelivered Judgment
Kan Ting ChiuJudgeYes

4. Counsels

Counsel NameOrganization
David ChanShook Lin and Bok
Vinodh CoomaraswamyShook Lin and Bok
Tan Chuan ThyeAllen and Gledhill
Eugene ThuraisingamAllen and Gledhill
Ivan ChiaAllen and Gledhill

4. Facts

  1. Velstra is a Singapore company in insolvent liquidation.
  2. Dexia Bank NV is a Belgian bank.
  3. LH&W opened a joint account with Dexia Bank and were granted a US$20m rollover credit facility.
  4. US$20m was drawn from the account but not repaid.
  5. DBS Bank sent a SWIFT message to Dexia Bank indicating a US$36m payment in favor of Velstra.
  6. Velstra's bank, DBS Bank, paid US$20.92m to Dexia Bank, with instructions naming Artesia Bank Brussels as the beneficiary but providing the LH&W account number.
  7. The defendant treated the payment as its own when it used the payment to discharge the debt of LH&W.

5. Formal Citations

  1. Velstra Pte Ltd (in liquidation) v Dexia Bank NV (formerly known as Artesia Banking Corp NV), OS 1181/2002/K, [2004] SGHC 23

6. Timeline

DateEvent
Jo Lernout, Pol Hauspie and Nico Willaert opened a joint account with the defendant.
US$20m was drawn from the account under the facility.
The loan was not repaid when the facility expired.
DBS Bank sent a SWIFT message to the defendant that DBS Bank will be receiving USD36m value 4 Jan 2000 in favour of Velstra Pte Ltd.
The defendant debited its own internal account with US$31m, and credited US$21m to the LH&W account.
Velstra paid $27,384,280 to LH&W on behalf of five related companies.
DBS Bank, on the instructions of Velstra, paid US$20.92m to the defendant.
Harout Khatchadourian made a loan to Velstra of $61,199,961.
The difference between the US$21m credited on 30 December 1999 and the amount received on 5 January 2000 arising from bank charges was debited against the LH&W account.
Khatchadourian obtained judgment in default against Velstra.
Velstra was wound up and placed in compulsory liquidation.
Judgment reserved.

7. Legal Issues

  1. Whether the payment received by the defendant was a transaction at an undervalue
    • Outcome: The court held that the plaintiff did not prove that the payment was a transaction with the defendant.
    • Category: Substantive
  2. Whether the plaintiff was insolvent at the time of the payment or became insolvent as a result of the payment
    • Outcome: The court found that Velstra was insolvent on 5 January 2000 by the balance sheet test but did not prove insolvency by the cash flow test.
    • Category: Substantive

8. Remedies Sought

  1. Declaration that the transaction is a transaction at an undervalue
  2. Declaration that the transaction is null and void
  3. Repayment of US$20,920,000

9. Cause of Actions

  • Avoidance of transaction at an undervalue

10. Practice Areas

  • Insolvency Litigation
  • Commercial Litigation

11. Industries

  • Banking
  • Finance

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Mercator & Noordstar NV v Velstra Pte Ltd (in liquidation)Court of AppealYes[2003] 4 SLR 667SingaporeCited for the interpretation of 'transaction' under the Bankruptcy Act.
Re Taylor Sinclair (Capital) Ltd (in liquidation)N/ANo[2001] 2 BCLC 176N/AConsidered for its interpretation of 'transaction' and the requirement of some element of dealing between the parties.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Bankruptcy Act (Cap 20, 2000 Rev Ed) s 98Singapore
Companies Act (Cap 50, 1994 Rev Ed) s 329(1)Singapore
Bankruptcy Act s 100(1)(a)Singapore
Bankruptcy Act s 100(4)Singapore
Bankruptcy Act s 2(1)Singapore
Moneylenders Act (Cap 188, 1985 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Transaction at an undervalue
  • Insolvency
  • Liquidation
  • SWIFT message
  • Balance sheet test
  • Cash flow test
  • LH&W account
  • Khatchadourian loan

15.2 Keywords

  • Insolvency
  • Bankruptcy
  • Transaction at undervalue
  • Liquidation
  • Singapore
  • Dexia Bank
  • Velstra

17. Areas of Law

Area NameRelevance Score
Insolvency Law95
Avoidance of transfer90
Undervalue Transaction90
Bankruptcy75
Liquidation60
Company Law50
Contract Law30

16. Subjects

  • Insolvency
  • Bankruptcy
  • Corporate Law