Crypto farm's power tussle with landlord over electricity use ends up in Singapore court

Singapore

THE buzz behind crypto currencies has charged up a lawsuit in Singapore. A crypto mining firm has claimed that its landlord's interference with the electricity supply led to trading losses in crypto currencies, with the suit throwing up the question of how such losses can be quantified in fiat terms.

In turn, the landlord alleges that the crypto mining firm should not have labelled itself as a "trading business".

The crypto mining firm, Shiki Entertainment, is claiming over S$220,000 in damages from its landlord, including claims in crypto currencies Ethereum and Horizen. It is alleging that the landlord caused business disruption via unlawful re-entry into its rented premises.

The landlord, Gold Brunnen, has mounted a counter-claim against Shiki Entertainment and its director Gabriel Lim for misrepresenting the true nature of his business, causing nuisance and trespassing the former's property.

In a trial that started on Thursday, the court heard that Gold Brunnen had on May 12, 2018, entered the unit in Pantech Business Hub, which was leased to Shiki Entertainment, without giving prior notice and removed the circuit breakers supplying electricity to the unit. The plaintiff's access card was then deactivated the next day.

Shiki Entertainment, represented by lawyers Mahesh Rai and Don Loo from Drew & Napier, argued that the defendant had sent a representative to inspect the premises during the installations, and thus "must have known and accepted that (Shiki Entertainment) would use more electricity than could be supplied by existing electrical installations".

It cited the Conveyancing and Law of Property Act, which mandates that landlords who wish to exercise their right of re-entry or forfeiture in the case of a breach to the lease agreement must give proper notice, allowing the tenant to remedy the breach.

Gold Brunnen had taken issue with the high volume of electricity Shiki Entertainment used for its mining activities. It claimed that it was neither aware nor approved of the installation of additional circuit breakers to facilitate its tenant's operations.

Gold Brunnen, represented by lawyer Liew Chen Mine from Aptus Law Corporation, said it had only given approval for the plaintiff to install partitions in the premises.

Its real estate agent Poon Yau Loy had entered the premises after receiving "numerous complaints", over three weeks in April and May 2018, from a neighbouring tenant occupying an adjoining suite with regard to the heat and noise it was generating.

When informed, Shiki Entertainment had only taken steps to rectify the concerns about the noise, said Gold Brunnen. It argued that its tenant had breached the tenancy agreement as it had been "a nuisance or annoyance to occupiers of adjoining properties".

After multiple phone calls made to Mr Lim went unanswered, Mr Poon visited the unit and "felt intense heat, heard noises and smelt a burnt smell coming from (it)", the court heard.

There was concern that the set-up would pose a fire hazard, the defendant added. It also argued that it did not deactivate the plaintiff's access card, but that the card malfunctioned after the power supply was temporarily shut off on May 12, 2018.

Gold Brunnen claimed Shiki Entertainment had used 5,900 kWh and 5,300 kWh of electricity in April and May 2018, respectively - a 17-fold increase in power consumed compared to before it had started operations in the premises.

To "mine" crypto currencies like Bitcoin, computers known as mining machines are tasked with solving puzzles to verify transactions by buyers and sellers of the crypto currencies.

Miners get small amounts of crypto currencies for keeping the system running, and some entrepreneurs have entire warehouses of miners connected to the network. This operation consumes a lot of electricity with miners constantly at work.

While estimates vary, a widely-reported online tool by the University of Cambridge estimated in early July 2019 that the global Bitcoin network uses up to 64 TWh of electricity a year - more than what the whole country of Switzerland was consuming at that point.

Shiki Entertainment is claiming S$131,000 and US$6,000 in business losses, including the loss of crypto currency and loss of profits. This also includes compensation claims by its customers.

It has quantified the losses in terms of crypto currencies using a formula that takes into account mining profitability, mining difficulty, hash rate, as well as historical prices for Ethereum and Horizen. In its case, these amounted to about S$14,200.

Gold Brunnen is counter-suing Shiki Entertainment and Mr Lim for falsely representing to its real estate agent that the former was looking to rent a place to manage and administer a "trading business".

Gold Brunnen is seeking to claim S$2,700 in loss and damages from the additional electricity consumed.

Among other things, it is also claiming losses in rental income from prospective tenants as a result of the heat and noise emanating from the premises leased to Shiki Entertainment, as well as S$23,000 in rental income lost for the remaining duration of the plaintiff's tenancy agreement.

The lawyers for Shiki Entertainment and Mr Lim argued in defence that they were not under legal duty to declare the specific nature of their operations. There was also no evidence to suggest that Gold Brunnen was "induced" into the tenancy agreement due to the tenant's claim that it was a trading business.

Besides, it was not wrong to say that Shiki Entertainment was a trading business, they argued.

"The plaintiff trades in crypto currency ...The plaintiff (also) sells crypto currency mining equipment on the Carousell platform ... This falls squarely within the ordinary meaning of 'trading'," they said.

"It is more likely than not that (Gold Brunnen) was never concerned with the nature of (Shiki Entertainment's) business, and became concerned only after the tenancy agreement was signed, when it realised that the noise and electrical consumption was greater than expected."