Style Theory's abrupt closure leaves affected customers with limited options for recourse, say lawyers

SINGAPORE: Online fashion rental platform Style Theory’s sudden closure in recent days has left subscribers and consigners with no refunds and no way to retrieve their items.

Founded in 2016 to offer a sustainable solution to fast fashion, the Singapore-based platform adopted a consignment model where subscribers could rent luxury apparel and accessories from their owners.

It provided one-time rentals for designer pieces, as well as subscription plans that let members rent a set number of items each month for a monthly fee.

In a notice posted on its website on Wednesday (Oct 1), the circular fashion start-up cited rising costs and the withdrawal of key investors among reasons for its decision to shut down.

All rental, delivery, membership, support and services will be discontinued, and refunds will not be provided for unused portions of customers’ subscription plans, according to the website. 

BLIND-SIDED BY SUDDEN CLOSURE

Co-founder Raena Lim said in the notice that the current economic climate has made it increasingly difficult for the business to sustain operations, adding that the closure “was not a decision made lightly”.

“We are deeply sorry for the suddenness of this news and for any disappointment it brings,” she added. “Please know we explored every possible alternative before arriving at this decision.”

Customers with rented apparel pieces were asked to hold on to them until further notice. Those holding on to rented bags were asked to return them, “as they are either company-owned or consigned by individual owners”, said Style Theory.

Long-time customers told CNA that while the announcement came as a shock, there had been signs of trouble.

One subscriber said her most recent order arrived with missing items, and her account was terminated just three days before the company officially announced its closure.

“The first red flag was when they didn't answer the problem at hand. Instead, they only told me they are having a warehouse situation, so they are sorry that they can't do any exchanges at this point in time,” said affected customer Serene Teo.

“But if you're shifting warehouses, there is no need to pause the subscription without saying anything.”

IRREGULAR PAYOUTS, POOR HANDLING

For apparel consigners, they will not be able to receive their pending payouts directly as “the company will be placed into liquidation”, said the platform.

Consigners who are owed amounts “will be treated as creditors of the company”, it noted, adding that they may file a claim with the proposed liquidators’ team once it is formally appointed at the upcoming creditors’ meeting.

“Our top priority is to ensure that all consigned bags are properly accounted for and returned to their rightful legal owners.”

Several consigners of luxury bags told CNA that they have been hit hard by irregular payouts and poor handling by Style Theory.

“Although they told me that they have been placing (my bag) on their shelf for sales, it did not happen,” said affected consigner Melissa Ang, who then asked for it to be returned to her.

“When I got back my bag, to my dismay, there (was mould) on the bag. The leather was ruined. The chain was all mouldy,” she added.

“They offered to do a refurbishment (but) that means, of course, the value of the bag will be reduced because it's no longer in its original state.”

Another consigner who declined to be named said she did not receive any payout for nine months, and is now planning to file a complaint with the Consumers Association of Singapore (CASE).

“I don’t know what to do. Should I just wait for their updates, or should I do anything?” questioned the affected consigner, who has a Louis Vuitton bag that she bought for about S$4,000 (US$3,100) listed on the platform.

“I don't know whether the bag is with them or is in one of the customers' places,” she added. “It’s a luxury bag, it cost a lot, and they still owe me the payout.”

She said the company often gave excuses, citing technical or other issues, to explain why payouts could not be made on time.

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.