FXA INVESTMENT HOLDINGS PTE. LTD. v TAN WEI CHEONG (CHEN WEIZHANG) & 2 Ors

Facts

FXA Investment Holdings Pte Ltd (FXA) applied in Originating Application No 1083 of 2024 to reverse the liquidators' rejection of its proof of debt for $270,057.40 against Fusionex Pte Ltd (the Company), which had been wound up on 26 January 2024 after its holding company's management team resigned abruptly in early December 2023.

On 5 July 2022 FXA took a lease of office premises at 1 George Street from the landlord for 1 November 2022 to 31 October 2025, at a monthly rent of $26,370 plus a service charge. FXA claimed it was set up only to hold this lease for the Company, under an oral back-to-back arrangement it called a Gentlemen's Agreement: the Company would sub-let the premises and pay FXA the rent and expenses plus an administrative fee of $1,500 per month. FXA said the Company paid its invoices until it stopped in December 2023 without notice, forcing FXA to find a replacement tenant. Its proof of debt claimed rent, service charge and the fee from December 2023 to June 2024, electricity charges and an agency fee. The liquidators rejected it in full on 27 September 2024 for lack of supporting documents, arguing that no sub-lease was shown, that one would have breached the master lease's ban on sub-letting, and that any sub-lease ended in early 2024.

Issues

1. Whether FXA proved the existence of the sub-lease and the Gentlemen's Agreement with the Company.
2. Whether the sub-lease continued after December 2023 or had been terminated, and when.
3. Which parts of the proof of debt, including electricity charges and the agency fee, should be admitted.

Holding

The court allowed FXA's application in part and directed the liquidators to admit the proof of debt partially: $110,701.54 for rent, service charge and the administrative fee from December 2023 to 7 March 2024, and $49,582.19 for the agency fee. The claim for electricity charges was not admitted. Costs were to be heard later.

Reasoning

The court heard the application afresh, with the burden on FXA to prove the debt on a balance of probabilities. It found the sub-lease and Gentlemen's Agreement proved. The liquidators did not dispute that the Company occupied the premises from 2022 until around January 2024, that its name appeared on the building signage and its website, or that it paid FXA's invoices for rent, service charge and the fee from December 2022 to November 2023. The lack of a written agreement was unsurprising because the same person was sole director of both FXA and the Company at the time. A ban on sub-letting in the master lease did not make the sub-lease void, applying Jubilee Electronics Pte Ltd and others v Tai Wah Garments and Knitting Factory Pte Ltd [1996] 1 SLR(R) 352; any breach was a matter between FXA and the landlord, who appeared to know of the arrangement. The court found the sub-lease was a month-to-month tenancy, since the Company's shareholders would not approve a long-term commitment.

The court rejected the arguments that the master lease's re-entry clause applied to the sub-lease or that the Company had surrendered or given notice to quit; its furniture stayed in the premises and no notice was given despite FXA's repeated requests. However, the Company's unilateral abandonment was a continuing repudiatory breach, since repudiation and acceptance apply to leases as recognised in Klerk-Elias Liza v K T Chan Clinic Pte Ltd [1993] 1 SLR(R) 609. FXA accepted that breach, at the latest on 7 February 2024, by arranging viewings for new tenants and allowing the liquidators in only in its presence, which was inconsistent with the Company's exclusive possession. FXA could not blow hot and cold by demanding rent while denying possession. With one month's notice, it could recover up to 7 March 2024.

There was no evidence that the Company ever had to pay electricity charges or had paid them before, so that claim failed. The agency fee, by contrast, was a reasonable step to mitigate loss and recoverable as damages under The “Asia Star” [2010] 2 SLR 1154, and its amount was not shown to be unreasonable.

From the judgment