PARK HOTEL GROUP MANAGEMENT PTE. LTD. v AW ENG HAI & 2 Ors

Facts

Park Hotel CQ Pte Ltd (PHCQ) leased a hotel property at 1 Unity Street from Ascendas Hospitality REIT (AH-REIT) for 10 years from 28 June 2013. PHCQ defaulted on rent in 2020. AH-REIT, through its trustee Perpetual (Asia) Ltd, terminated the lease on 28 August 2021 after a handover period and took possession; a related entity, Ascott International Management Pte Ltd, ran the hotel, and from 1 October 2022 the property was leased to Ascott Hospitality Business Trust, a related party. PHCQ was wound up on 19 November 2021.

On 1 August 2024 PHCQ's liquidators admitted in full AH-REIT's revised proof of debt of $32,066,825.30 in a one-page letter. Park Hotel Group Management Pte Ltd (PHGM), another creditor, asked the liquidators to reconsider and, when they declined, applied in Originating Application No 96 of 2025 under r 133(2) of the Insolvency, Restructuring and Dissolution (Corporate Insolvency and Restructuring) Rules 2020 to expunge or reduce the proof. It challenged net rent for the rest of the lease term, property tax for that period, a $1,555,841 claim for replacement works and legal costs; it dropped its challenge to the handover charges.

Issues

1. Who bears the burden of proof when a creditor challenges a liquidator's admission of another creditor's proof of debt
2. Whether AH-REIT reasonably mitigated its loss so that the net rent claim was properly admitted
3. Whether property tax after the lease ended was properly claimed from PHCQ
4. Whether the replacement works and legal costs were costs PHCQ was liable for under the lease

Holding

The High Court allowed PHGM's application in part and reduced AH-REIT's proof of debt by excluding property tax from 1 October 2022 to 27 June 2023 totalling $273,792 and the costs of items four, seven to nine, and 12 to 15 on the list of works, totalling $679,454. The net rent of $20,387,563.30, the earlier property tax, the remaining works items and the Colliers fee stood. Costs were to be argued.

Reasoning

On the burden of proof, the court hears a r 133(2) application afresh on the evidence before it, with the same standard as an appeal against a rejected proof. Where a disputing creditor raises a bona fide challenge, the liquidator, and in effect the creditor whose proof was admitted, must show on a balance of probabilities that the proof was rightly admitted, since the liquidator holds the materials and performs a quasi-judicial function.

On rent, the test was whether the mitigation measures were reasonable, not the best possible. Using a related, expert manager and then a related-party lease was not unreasonable given the short remaining term and the period of emergence from COVID-19, and the evidence showed the hotel stayed open during phased works.

On property tax, the lease made PHCQ liable even after termination, so tax up to 29 September 2022 was properly admitted. But no one explained why the related-party lease put the tax on AH-REIT rather than the new tenant, and the court found AH-REIT had not taken reasonable steps to mitigate for the later period.

On the works, PHCQ was liable only for defects arising during the lease, not fair wear and tear. Staining, the pool deck awning, water seepage and mould work were damage; but for wallpaper, several equipment items, pool deck items, façade cleaning and kitchen air-conditioning the documents did not show remedial work within PHCQ's obligations, and the works were done two or more years later, around the rebranding. The court accepted the Colliers fee on the strength of its invoice and made no finding on the law firm's fees, which PHGM stopped disputing. It also criticised the liquidators for giving no reasons and for answering queries only by pointing to the creditor's documents.

From the judgment