Thomson Plaza (Pte) Ltd v Liquidators of Yaohan Department Store Singapore Pte Ltd (in liquidation)

• Jurisdiction: Singapore
• Judge: Choo Han Teck JC
• Judgment Date: 06 July 2001
• Neutral Citation: [2001] SGHC 172
• Date: 06 July 2001
• Subject Matter: De novo hearing,Liquidator rejecting claims,Whether binding and enforceable contract exists between parties,Agreement to lease,Winding up,Words and Phrases,Whether claim for costs accruing before liquidation qualify as preferential claim,Meaning and effect of phrase,Formation,Subject to contract,Approach of court to application,Application to court for relief,Proof of debt,Contract,Insolvency Law,Whether claim for restoration of premises as can be made,Preferential claim,"Subject to contract",Formal lease not executed
• Docket Number: Companies Winding Up No 325 of (Summons in Chambers No 603083 of 2000)
• Published date: 11 November 2003
• Defendant Counsel: Suhaimi Lazim and Pradeep Pillai (Shook Lin & Bok)
• Court: High Court (Singapore)
• Plaintiff Counsel: Harish Kumar and Thomas Sim (Engelin Teh & Partners)

: In this case, the applicants, Thomson Plaza (Pte) Ltd (`Thomson Plaza`) made an attempt to recover $3,598,111.57 as damages for breach of contract against the liquidators of Yaohan Department Store Singapore Pte Ltd (in liquidation) (`Yaohan`).

Thomson Plaza were the owners of a building, also called Thomson Plaza (`the premises`). Yaohan became the lessees of Thomson Plaza in 1979. The lease was renewed several times. The last tenancy period was from 1 August 1994 to 31 July 1997.

On 24 October 1997, Yaohan was placed under judicial management. Ong Yew Huat, Fang Ai Lian and Wong Tui Sun of Ernst & Young were appointed as the judicial managers of Yaohan.

The judicial managers saw no purpose in continuing with the judicial management. So they passed a resolution for Yaohan to be wound up by the court. Provisional liquidators were appointed on 12 December 1997. By an order of court dated 16 January 1998, Yaohan was ordered to be wound up. The same persons who were judicial managers were appointed the liquidators.

Proofs of debt were lodged by creditors with the liquidators. One of them was by Thomson Plaza. The statement of account was for the sum of $3,598,111.57. The details were as follows:

Duty to restore premises	$	2,379,300.00
Duty to deliver in good repair	$	10,197.00
Duty to pay rent	$	1,205,444.89
Interest for late payment of rent	$	3,169.57
	$	3,598,111.57

Paragraph 1 of the Statutory Declaration verifying the Proof of Debt (General Form) made by one Yong Tseng Hah, on 3 March 1998 read as follows:

That Yaohan Department Store Singapore Pte Limited the abovementioned company was, at the date of the commencement of the winding up (namely, the 12th day of December, 1997) and still is justly and truly indebted to (see note (a) overleaf) Thomson Plaza Pte Ltd in the amount of ($3,598,111.57) for damages for breach of contract as shown by the account on the reverse. [Emphasis is added.]

So, the proof was against the company for damages . It was not a claim for debts incurred by the judicial managers or the liquidators in those capacities. Additionally it is not to be forgotten that the winding-up order was made in January 1998 after possession of the premises was surrendered with all the fittings. The proof of debt was accompanied by a letter dated 2 March 1998 from DBS Property Services which read as follows:

We hereby lodge the Proof of Debt (Form 77) in respect of our claims.

All our rights are reserved in full. The submission of the Proof of Debt shall not constitute or be construed in any way as any waiver on our part of any of our rights or any release of [ sic] discharge of any of your obligations or liability, including but not limited to any personal liability you may have incurred in the liquidation or judicial management of the company. This submission shall also be without prejudice to our position that our claims fall within costs and expenses of the winding up pursuant to section 328(1)(a) of the Companies Act (Cap 50) and, as such, our claims rank as preferential claims ahead of all unsecured creditors.

Please keep us informed of the status of our claims.

Before the expiry of the lease on 31 July 1997, an agreement was reached in principle between Thomson Plaza and Yaohan. It was agreed that Thomson Plaza would grant Yaohan a fresh lease of the premises for a term of one and a half years from 1 August 1997 to 31 January 1999. It was contained in a letter of offer dated 19 May 1997. Clause (j) of the letter is important. It read as follows:

This tenancy shall be subject to all the terms and conditions as contained in the specimen Lease Agreement. On or before commencement of the tenancy, a formal Lease of the same form as the specimen Lease Agreement shall be executed between you and the Landlord. [Emphasis is added.]

The tenancy was expected to commence on 1 August 1997 for one and a half years. The intended lease agreement was not signed on or before the commencement of the tenancy. Yaohan did not execute the formal lease but continued to occupy the premises.

Then Yaohan was placed under interim judicial management. Later, there were orders for judicial management and winding up as mentioned earlier. The judicial managers continued to pay rent on a month-to-month basis. Thomson Plaza accepted the rent. Thomson Plaza`s property managers, Property Services Pte Ltd (DBS Property Services) acknowledged and asserted that there was a month-to-month tenancy held by the judicial managers in a letter to the judicial managers. Their letter dated 28 October 1997 said this:

Dear Sirs

Yaohan Department Store Singapore Pte Ltd

Lease of Part of Unit 01-01 & Units 03-25 to 03-31

Thomson Plaza

We refer to the recent discussions we had with your Mr Ong Yew Huat in relation to the lease of the above premises.

As you know, until now, the Company has still not executed the Lease Agreement in accordance with our Letter of Offer dated 19 May 97. Notwithstanding the same, the Company continues to occupy the premises on a month to month basis and you have as judicial managers continued to pay rental as such.

Please note that we are unable to let the situation continue and unless you proceed as judicial managers to adopt and to execute the Lease Agreement, we will have to take all necessary actions to protect our interest, including the termination of the current monthly tenancy. In such event, we shall require the premises to be returned to us forthwith upon such termination.

Kindly let us hear from you within five (5) days from the date hereof.

Yours faithfully,

HEIDI YONG

[Emphasis is added.]

The judicial managers never adopted the lease. They continued to have a month-to-month tenancy. Subsequently the judicial managers decided to close down the business of Yaohan by 31 December 1997. On 26 November 1997 the judicial managers wrote to DBS Property Services. The letter said, inter alia, `the intention is to close the store by 31 December 1997 but this date may be delayed by one or two weeks given the staff constraints at that time of the year`. So there was no question of a fresh tenancy as originally contemplated or at all. Thus, the judicial managers put an end to the month-to-month tenancy. Thomson Plaza accepted it. So on 1 January 1998 there was neither a lease as originally contemplated nor a month-to-month tenancy.

In the event, the judicial managers/provisional liquidators gave vacant possession of the premises to DBS Property Services on 31 December 1997 and DBS Property Services accepted it. All rents due were paid.

Following that, NTUC Fairprice Co-operative Ltd (`NTUC`) became a tenant of the premises for the period 2 January 1998 to 31 March 1999. But in January 1999, Thomson Plaza sold the premises to NTUC and reportedly made a profit of $34m.

The liquidators rejected Thomson Plaza`s claims. Mr Ong Yew Huat stated the grounds for rejection as follows:

Take notice that, as Liquidator of the above-named company, I have this day rejected your claim against the company to the extent of S$3,584,744.89 on the following grounds:

(a) Restoration of premises to original condition

The proof in respect of the costs of restoration of the premises to its original condition amount to S$2,379,300.00 is rejected on the grounds that there is no evidence of any restoration works required and that the property had been sold by your clients without the premises being restored to its original condition.

(b) Loss of rental

The claim in respect of the alleged loss of rent for the sum of S$1,205,444.89 is also rejected on the grounds that the tenancy had been duly terminated and no further rent is payable by the liquidators to your client upon termination of the tenancy.

(c) Cost of repairs

I have rejected your claim for the cost of repairs amounting to S$10,197.00 as a preferential claim but I have admitted the same as part of your claim on which dividend will be calculated.

Dissatisfied with the rejection of the claims, Thomson Plaza has applied to the court for a second bite at the...