Velstra Pte Ltd v Azero Investments SA: Director's Duties & Unfair Preference

The liquidators of Velstra Pte Ltd (in compulsory winding up) sued Azero Investments SA in the High Court of Singapore, alleging that Velstra's director, Snauwaert, breached his fiduciary duties by assisting Azero to recover funds to the prejudice of Velstra's other creditors, constituting an unfair preference. The court, Lai Siu Chiu J presiding, found in favor of the liquidators regarding the final garnished sum, ordering Azero to pay US$250,346.98 with interest and costs.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Judgment for Plaintiff in part.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Velstra Pte Ltd's liquidators sued Azero Investments SA, alleging unfair preference. The court found in favor of the liquidators regarding the final garnished sum.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Azero Investments SADefendantCorporationJudgment against Defendant in partLost
Velstra Pte Ltd (in compulsory winding up)PlaintiffCorporationJudgment for Plaintiff in partPartial

3. Judges

Judge NameTitleDelivered Judgment
Lai Siu ChiuJudgeYes

4. Counsels

Counsel NameOrganization
Conrad CamposRobert Wang and Woo LLC
Ramesh TiwariRobert Wang and Woo LLC
David ChanShook Lin and Bok
Vinodh CoomaraswamyShook Lin and Bok
Stanley TokShook Lin and Bok

4. Facts

  1. Velstra Pte Ltd was placed into compulsory liquidation by court order on 12 April 2002.
  2. Khatchadourian extended an unsecured loan of US$36m to Velstra on or about 24 December 1999.
  3. Azero Investments SA extended a loan of €2m to LDS, which then sub-loaned 75% to Velstra.
  4. LDS assigned its debt of €1.5m due from Velstra to Azero on 14 June 2001.
  5. Azero obtained default judgment against Velstra and commenced garnishee proceedings.
  6. Snauwaert, director of Velstra, assisted Azero in recovering US$546,152 from Velstra's accounts.
  7. The court found that the last garnished sum of US$250,346.98 constituted an unfair preference.

5. Formal Citations

  1. Velstra Pte Ltd (in compulsory winding up) v Azero Investments SA, Suit 445/2003, [2004] SGHC 251

6. Timeline

DateEvent
Velstra Pte Ltd incorporated
Azero Investments SA incorporated
Khatchadourian extended an unsecured loan of US$36m to Velstra Pte Ltd
Loan expired
LDS assigned debt to Azero Investments SA
Azero Investments SA commenced proceedings against the dot com company and Velstra Pte Ltd
Azero Investments SA obtained judgment in default of appearance against the dot com company and Velstra Pte Ltd
Garnishee orders nisi made absolute against KBC and DBS
Snauwaert tendered his resignation
Azero Investments SA applied to garnish the DBS account again
Garnishee order nisi was made absolute against DBS
DBS remitted US$250,145.08 to AGPV
Velstra Pte Ltd placed into compulsory liquidation
Liquidators filed suit
Judgment reserved

7. Legal Issues

  1. Breach of Fiduciary Duty
    • Outcome: The court found that Snauwaert breached his fiduciary duty as a director of Velstra.
    • Category: Substantive
    • Sub-Issues:
      • Director actively assisting creditor in collecting debt from company to the prejudice of other creditors
  2. Unfair Preference
    • Outcome: The court found that undue preference was given by Snauwaert on Velstra’s behalf to Azero within the meaning of s 99(1)(b) of the Bankruptcy Act in relation to the sum of US$250,346.98.
    • Category: Substantive
    • Sub-Issues:
      • Garnishment of money to the prejudice of other creditors
      • Whether unfair preference given at relevant time
  3. Constructive Trust
    • Outcome: The court found that Azero held the garnished moneys as constructive trustee for Velstra.
    • Category: Substantive

8. Remedies Sought

  1. Account of Profits
  2. Constructive Trust

9. Cause of Actions

  • Breach of Fiduciary Duty
  • Unfair Preference

10. Practice Areas

  • Corporate Litigation
  • Insolvency Litigation

11. Industries

  • Finance
  • Legal

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Federal Express Pacific Inc v Meglis Airfreight Pte LtdHigh CourtYes[1998] SGHC 417SingaporeCited regarding the duty of directors of an insolvent company to consider the interests of its creditors.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Bankruptcy Act (Cap 20, 2000 Rev Ed)Singapore
Companies Act (Cap 50, 1994 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Unfair Preference
  • Garnishee Proceedings
  • Fiduciary Duty
  • Constructive Trust
  • Assignment
  • Liquidation
  • Insolvency

15.2 Keywords

  • unfair preference
  • director duties
  • garnishee
  • liquidation
  • insolvency
  • companies act
  • bankruptcy act

17. Areas of Law

Area NameRelevance Score
Unfair preferences85
Winding Up80
Bankruptcy75
Avoidance of transactions70
Director's Duties70
Company Law70
Fiduciary Duties65
Garnishee Proceedings60
Constructive Trust50

16. Subjects

  • Insolvency
  • Company Law
  • Director's Duties
  • Banking
  • Finance