Distrii Singapore, which owes over S$2 million in rent to CDL, sues ex-CEO for breach of duty

Distrii Singapore, which once operated one of Singapore’s largest co-working spaces, is suing its former chief executive officer for failing to act in good faith and breaching her fiduciary duties. 

Court documents say that Distrii, which failed to pay City Developments Ltd (CDL) over S$2 million in rent (as at February 2024) for its 62,000 square feet of commercial space in Republic Plaza, vacated the premises in March.

Distrii alleged that its inability to pay rent was due to actions taken either by its former CEO Hu Yan or its former employee, Yap Chie Lan.

The company claims Hu or Yap had been misappropriating funds for their own benefit from as early as 2020. 

Restaurant woes 

In its statement of claim filed in April, Distrii named four other companies with ties to Hu – City Wow, Nalati SG, Bolonia SG and Hofon SG – as defendants. Hu is the sole director and shareholder of Nalati and Bolonia, which were restaurants formerly operating in Republic Plaza.

According to Accounting and Corporate Regulatory Authority records, City Wow is a management consultancy whose sole director is Hu; Hofon is a furniture manufacturer owned by Yap’s husband Chooi Wei Hong. Hu was previously a director and shareholder of Hofon. 

Incorporated in 2017, Distrii is part of the AgiiPlus group of companies which provides workspace solutions. Hu was appointed as Distrii’s CEO in 2018, and held the position until she was fired in March this year. 

As CEO, she was responsible for driving business performance to maximise value for Distrii’s stakeholders; her fiduciary duties to the company thus included ensuring that the company’s assets and property were “properly managed and not dissipated or exploited”, Distrii said. 

The company claimed that Hu “made false representations” to AgiiPlus’ management or Distrii’s board of directors, and induced them to provide over S$1.5 million.

The funds were meant for purposes such as paying rent to CDL. But instead, Hu or Yap allegedly “siphoned” funds to City Wow, Nalati, Bolonia and Hofon. Distrii said that between May 2020 and March 2024, it paid over S$1.7 million to these companies. 

In her written defence, Hu claimed that Distrii’s business was “severely affected” during the Covid-19 pandemic, in that the occupancy rate in the co-working space fell to as low as 40 per cent.  

She also claimed that Nalati restaurant was opened to generate revenue for Distrii by drawing customers who would then come to know its co-working space in Republic Plaza. 

To minimise the risks for Distrii – as restaurants “often have to deal with suppliers and customer complaints” – Hu proposed setting up a separate company to run Nalati in 2022. Bolonia was opened in 2023 for the same purpose, Hu said. 

Distrii has denied that Bolonia is related to the company and claims that Nalati’s business was “wrongfully diverted” by Hu or Yap to Nalati’s holding company. 

The company accused Hu or Yap of causing it to “enter into sham service agreements” with City Wow for corporate service or brand and marketing consultancy services for Nalati and Bolonia. Some S$486,166 was paid to City Wow.

Hu or Yap are also said to have caused Distrii to pay S$101,400 to Hofon, which allegedly “did not at any material time, provide any services”. Hofon has refuted this, claiming that it was paid for renovation services it had provided.

Insurance policies

Hu is also said to have bought six personal insurance and investment policies; the premiums for these, incurred between February 2020 and March 2024 and which surpassed S$372,000, were paid for by Distrii.

In her defence, Hu cited Distrii’s 2018 employee handbook that said the company “views health insurance as the foundation of a comprehensive benefits package for its employees, and that the company provides employer-sponsored health and related insurance policies”. She was thus “entitled” to claim for such premiums, she said.

Meanwhile, Yap has denied the accusations against her, claiming that any alleged payments were made legitimately and, in any event, with the authorisation of Hu or the AgiiPlus management. 

Yap described herself as a “mere employee… who was at all times under the supervision and review” of Hu, AgiiPlus’ group CEO, or the group management. 

Hu, together with City Wow, Nalati and Bolonia, has filed a counter-claim against Distrii and AgiiPlus chief financial officer Dai Jing.

In her counter-claim, she claimed that AgiiPlus or Dai constantly requested that Distrii make payments to third parties or other group subsidiaries on an “urgent and immediate basis”. 

These constant and unplanned payments created cash-flow issues for Distrii, to the extent that it could not pay rent to CDL on time, Hu claimed.

She further claimed that Dai had “decided to target” her and some of the other defendants to “take over control” of Distrii, as well as to “claw back monies that were legitimately paid”. 

In March, with the case being heard in court, Distrii sought a Mareva injunction against Hu. The court order prevents the defendants from disposing of their assets worldwide.

These assets include, but are not limited to, money in bank accounts, Hu’s insurance policies, 28 bottles of Moutai wine in a locked cabinet in Republic Plaza, three antiques, one Midtown Modern condominium unit belonging to Hu, and the fixtures and fittings of Nalati and Bolonia. 

All defendants have claimed that there were no grounds for Distrii to apply for the Mareva injunction, and that they have incurred “loss and damage” as a result.

In response to queries from The Business Times, CDL said that since Mar 12, its subsidiary City Serviced Offices has managed the co-working facility in Republic Plaza.

In 2017, CDL announced it was investing 72 million yuan (S$14.9 million) for a 24 per cent stake in Shanghai Distrii Technology Development, which fully owns Distrii.

AgiiPlus has since restructured its companies, and Distrii is now fully owned by AgiiPlus Holdings, which is registered in the British Virgin Islands. Shanghai Distrii is indirectly owned by AgiiPlus Holdings, which is ultimately owned by AgiiPlus Inc. 

CDL said: “We have not exited our investment in Shanghai Distrii and continue to hold an indirect stake of about 24 per cent through Shanghai Distrii’s parent company.”

Distrii is represented by a team from WongPartnership led by Tang Shangwei. Lawyers Ang Ann Liang, Nur Afiqah Mohamed Ashefjah and Rachel Boey from Wong Tan & Molly Lim act for Yap and Hofon. Hu and her related companies are unrepresented, but had previously engaged CHP Law. 

Source: Business Times © SPH Media Limited. Permission required for reproduction.

ADV: Legal Innovation Workshop More complaints from those who take out loans to buy life insurance