LIMITED OPTIONS FOR RECOURSE
When CNA visited a Woodlands warehouse run by Style Theory on Thursday, undelivered parcels were observed but no workers were present.
Meanwhile, the National Trades Union Congress (NTUC) and the Singapore Industrial and Services Employees’ Union (SISEU) said in a statement that they are ready to support affected members and workers by facilitating job transitions and offering financial aid where necessary.
Style Theory is a non-unionised company, but some of its workers are members of the union, SISEU executive secretary Desmond Tan said in the statement on Thursday.
“In retrenchment exercises where there are members working in non-unionised companies, NTUC’s affiliated unions and/or associations will extend assistance to our members should they be affected by the exercises,” Mr Tan added.
Lawyers noted that when a business offering subscription services shuts down, affected customers typically have limited options for recourse.
For companies undergoing liquidation, it is a 12-month-long process after the commencement of winding up.
During this period, a court or the company will appoint a liquidator to assess its debts and assets.
Consumers may submit a “proof of debt” document to state the amount owed to them. The liquidator will then determine the validity of these claims.
Lawyers told CNA that consumers are likely to recover only a minimal amount — sometimes just one or two cents on the dollar, if at all.
Mr Clarence Ding, partner at global law firm Ashurst, said the purpose of liquidation is to consolidate the company’s assets and use them to pay off its debts.
“As an unsecured creditor, the consumer would have to wait until all of the debts are paid, and that includes outstanding salaries for employees, any secured creditors like banks, (and) any preferential creditors (like) the landlord,” he noted.
“All of these creditors need to be paid off first. Only at that point, if there is an amount that remains — a liquidated amount that remains for distribution — will the consumer then be paid out.”
Consumers could file a civil claim, but they must prove the company made false promises or engaged in multi-level marketing. Once liquidation begins, however, such lawsuits are suspended unless the court grants permission to proceed.
Another option is the Small Claims Tribunal, which handles disputes over goods, services or residential tenancy agreements of up to two years. There is a claim limit of S$20,000, which can be raised to S$30,000 if both parties consent.
But outcomes are not guaranteed, said lawyers.
“If the company is hopelessly insolvent, you may be looking at a situation where you spend that money to go to the Small Claims Tribunal,” said Mr Tris Xavier, associate director at legal firm Yuen Law.
“Even then, even if you get a judgment — either a judgment in default or a judgment because the magistrate agrees with you — it may still be a situation where, unfortunately, you just have to wait for the whole liquidation process to finish, and then you’re still looking at maybe a very small sum even of your judgment debt.”
Lawyers advised consumers to buy only what they can afford and use a credit card, which allows disputes if items are not delivered.
They also suggested installment plans, as spreading payments monthly lowers the risk if a company shuts down.
