Azero Investments SA v Velstra Pte Ltd: Unfair Preference & Constructive Trust in Insolvency
In Azero Investments SA v Velstra Pte Ltd, the Court of Appeal of Singapore heard appeals regarding unfair preference and constructive trust in an insolvency case. Azero Investments SA sought to recover funds from Velstra Pte Ltd. The liquidators of Velstra claimed that the garnishment of Velstra's accounts constituted an unfair preference and that Azero held the garnishee proceeds as a constructive trustee. The Court of Appeal allowed Azero's appeal, finding that there was no unfair preference conferred by Velstra to Azero and the garnished proceeds were not transferred from Velstra to Azero in breach of trust.
1. Case Overview
1.1 Court
Court of Appeal of the Republic of Singapore1.2 Outcome
Azero’s appeal is allowed with costs, and Velstra’s appeal is dismissed with costs.
1.3 Case Type
Insolvency
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
The Court of Appeal addressed whether an assignment of debt constituted unfair preference and if garnishee payments should be reversed. The court found no unfair preference or breach of trust.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Azero Investments SA | Appellant | Corporation | Appeal allowed | Won | |
| Velstra Pte Ltd | Respondent | Corporation | Appeal dismissed | Lost |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Chao Hick Tin | Justice of Appeal | No |
| Kan Ting Chiu | Judge | Yes |
| Yong Pung How | Chief Justice | No |
4. Counsels
4. Facts
- Azero loaned €2m to BVBA Language Development Service (LDS), secured by personal guarantees.
- LDS sub-loaned €1.5m to Velstra and €500,000 to Four One-One.Com Pte Ltd without informing Azero.
- Negative reports about Lernout & Hauspie Speech Products NV (L&H) surfaced, prompting Azero to inquire about the loan.
- LDS assigned the sub-loans of Velstra and Four One-One.Com Pte Ltd to Azero.
- Azero commenced proceedings against Velstra and obtained judgment in default of appearance.
- Azero garnished Velstra’s bank accounts and received a total of US$546,152.
- Velstra was wound up on a petition filed by a creditor.
5. Formal Citations
- Azero Investments SA v Velstra Pte Ltd, CA 124/2004, 125/2004, [2005] SGCA 44
6. Timeline
| Date | Event |
|---|---|
| Azero made a loan of €2m to BVBA Language Development Service. | |
| Loan to BVBA Language Development Service was to be repaid. | |
| Azero’s lawyers wrote to BVBA Language Development Service to demand payment. | |
| BVBA Language Development Service’s lawyers replied that it was unable to repay the loan. | |
| Sub-loans of Velstra and Four One-One.Com Pte Ltd were formally assigned to Azero. | |
| Notice of assignment was given to Velstra. | |
| Azero commenced proceedings against Velstra. | |
| Azero obtained judgment in default of appearance. | |
| Azero applied to garnish Velstra’s two bank accounts. | |
| KBC Bank NV paid US$204,457.98 to Velstra. | |
| Development Bank of Singapore paid US$91,347.04 to Velstra. | |
| Amount in the Development Bank of Singapore account stood at US$250,346.98. | |
| Azero received payment of US$250,145.08 from Development Bank of Singapore. | |
| Petition filed to wind up Velstra. | |
| Velstra was wound up. | |
| Judgment reserved. |
7. Legal Issues
- Unfair Preference
- Outcome: The court held that there was no unfair preference conferred by Velstra to Azero.
- Category: Substantive
- Sub-Issues:
- Assignment of debt
- Garnishee payments
- Breach of Fiduciary Duty
- Outcome: The court found that the garnished proceeds were not transferred from Velstra to Azero in breach of trust.
- Category: Substantive
- Constructive Trust
- Outcome: The court found that the garnished proceeds were not transferred from Velstra to Azero in breach of trust.
- Category: Substantive
8. Remedies Sought
- Reversal of garnishee payments
9. Cause of Actions
- Unfair Preference
- Breach of Trust
10. Practice Areas
- Commercial Litigation
- Insolvency Litigation
11. Industries
- No industries specified
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Unknown | High Court | Yes | [2004] SGHC 251 | Singapore | Cited for the trial judge's findings regarding unfair preference and breach of fiduciary duties. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap 50, 1994 Rev Ed) | Singapore |
| Bankruptcy Act (Cap 20, 2000 Rev Ed) | Singapore |
| s 329 Companies Act (Cap 50, 1994 Rev Ed) | Singapore |
| ss 99 Bankruptcy Act (Cap 20, 2000 Rev Ed) | Singapore |
| s 100 Bankruptcy Act (Cap 20, 2000 Rev Ed) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Unfair preference
- Constructive trust
- Garnishee proceedings
- Assignment of debt
- Fiduciary duties
- Insolvency
- Winding up
15.2 Keywords
- Unfair preference
- Constructive trust
- Insolvency
- Garnishee
- Assignment
- Bankruptcy Act
- Companies Act
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Unfair preferences | 90 |
| Fiduciary Duties | 80 |
| Avoidance of transactions | 75 |
| Bankruptcy | 70 |
| Recipient liability | 65 |
| Trust Law | 60 |
| Constructive trustee | 55 |
| Company Law | 50 |
16. Subjects
- Insolvency
- Bankruptcy
- Trusts
- Company Law