Liquidators lose appeal to sue StanChart, BSI over dodgy 1MDB deals

Source: Business Times
Article Date: 13 Mar 2026
Author: Tessa Oh

The Court of Appeal found that a provision in the cross-border insolvency framework bars foreign representatives from bringing claims over transactions that predate the law.

The Court of Appeal has dismissed the appeal by foreign liquidators to sue Standard Chartered and BSI Bank over transactions allegedly linked to the 1Malaysia Development Bhd (1MDB) saga, blocking efforts to recoup assets lost in one of the world’s largest financial scandals.

In a judgment issued on Wednesday (Mar 11), Chief Justice Sundaresh Menon upheld the High Court’s decision, finding that a specific provision – Article 23(9) of Singapore’s cross-border insolvency framework, also known as the SG Model Law – explicitly bars foreign representatives from bringing such claims over transactions that predate the law.

That provision, he said, was inserted by Parliament precisely to prevent the law from being applied retroactively.

Chief Justice Menon dismissed the liquidators’ argument that a separate, broader provision in the same law gave the court discretion to grant them standing as an alternate route.

This reading of the law was “built on a false premise”, he said, and accepting it would effectively render the specific provision meaningless.

“It would be strange for Parliament to have spelt out the various limbs of Article 23 in such granular detail if the same effect could have been achieved by the exceedingly general terms of Article 21(1),” the Chief Justice said.

He also pushed back on the liquidators’ argument that the law should be interpreted generously, given its broader goal of promoting efficient cross-border insolvency proceedings. That argument, he said, pitched the purpose of the law at “too high a level of abstraction”.

To read down the restriction on the basis that it cut against the law’s broader goals would miss the point entirely, he said, adding that its limiting function was precisely its purpose.

The liquidators thus cannot use this route to pursue the banks regardless of the merits of their underlying claims.

Shell companies, dodgy deals

The liquidators of two British Virgin Islands-incorporated shell companies – Blackstone Asia Real Estate Partners and Brazen Sky – had sought to sue StanChart and BSI, as well as five of the latter’s former employees, for fraudulent and wrongful trading.

They sought to argue that the banks were liable due to their involvement in the flow of misappropriated funds into and out of the companies’ accounts.

Blackstone’s account with StanChart was allegedly used to launder the misappropriated proceeds of two bond issues by 1MDB, as well as certain loans made to SRC International.

Meanwhile, Brazen Sky’s account with BSI was allegedly used to hold units in a fund that was fraudulently overvalued to conceal the misappropriation of part of 1MDB’s investment in a joint venture with PetroSaudi International.

It was also allegedly used to launder proceeds through a series of transactions that created the impression that 1MDB was legitimately liquidating its investments.

These transactions had passed through their respective bank accounts between December 2010 and November 2014.

The liquidators, Angela Barkhouse and Toni Shukla, had earlier obtained recognition in Singapore as foreign representatives of both companies under the cross-border insolvency framework – the same framework they sought to rely on to bring the trading claims.

But the framework came into force only in 2020, years after the transactions had already taken place.

“Possible workarounds” to pursue claims

In a statement, the liquidators said they were disappointed by the ruling, but noted that the High Court had said there were “possible workarounds” to the hurdles created by the SG Model Law.

One of these is to apply directly to wind up the relevant British Virgin Islands-incorporated entities in Singapore, following which statutory claims can be brought as they are available to the liquidators of all companies being wound up in Singapore.

The liquidators had sought to do that concurrently with the appeal, and a hearing is expected in the coming weeks, they said.

These statutory claims are also being pursued in addition to other separate and ongoing claims against both banks. The claims include dishonest assistance, breach of duty of reasonable skill and care, and breach of banking mandate.

Both banks have tried and failed to have these claims struck out, said the liquidators.

The case against BSI and its former employees has been transferred to the Singapore International Commercial Court, and is fixed for trial in March 2027.

The judgment was delivered by Chief Justice Menon on behalf of a three-judge panel that also included Justices Ang Cheng Hock and Kannan Ramesh.

The liquidators were represented by Keith Han and lawyers from Oon & Bazul. StanChart was represented by a team from Drew & Napier led by Chia Voon Jiet. BSI was also represented by Drew & Napier, with Senior Counsel Cavinder Bull leading its team.