SINGAPORE — The Court of Appeal heard arguments in the prominent Aljunied Hougang Town Council (AHTC) case and reserved its judgment on Thursday (25 February).
A key issue before the apex court: whether town councillors and employees of town councils owe common law fiduciary duties and duties of skill and care, even though they are governed by the Town Councils Act and protected from personal liability under the Act "for anything which is in good faith".
The appeal was heard by Chief Justice Sundaresh Menon and Justices Andrew Phang, Judith Prakash, Tay Yong Kwang and Woo Bih Li. The court will issue its verdict at a later date.
About the case
In October 2019, the High Court ruled that three then-Aljunied GRC MPs – the Workers’ Party (WP) chief Pritam Singh, Sylvia Lim and Low Thia Khiang – were liable for damages suffered by AHTC, which is said to have made millions in improper payments under their watch.
Singh and Lim are still MPs in the GRC while Low did not contest at the last general election, stepping down after nearly three decades as an MP, first for Hougang SMC then Aljunied GRC.
High Court judge Kannan Ramesh ruled that Lim and Low had breached their fiduciary duties, while Singh had breached his duties of skill and care in the hiring of the town council’s managing agent FM Solutions & Services (FMSS).
This resulted in the town council paying at least $33.7 million to FMSS from July 2011 to July 2015.
During that period, Lim was chairman of the town council, while Low was the WP secretary-general. Singh, meanwhile, was a member of the town council’s tenders and contracts committee.
Hearings to determine the quantum of damages suffered by the town council, and how much it can recover from the defendants, have yet to be held, and will depend on the outcome of the appeal against the verdict on liability.
If the appeal is allowed, the suit will be dismissed in its entirety. But if the appeal is dismissed, then hearings will commence at the High Court to assess the quantum of damages.
Waiver of tender
The breaches found by the High Court occurred as a result of awarding managing agent contracts and essential maintenance services contracts to FMSS.
In 2011, FMSS was awarded the contracts without a tender being called. According to the WP town councillors, this was due to urgent and very special circumstances which allowed for a waiver for such tenders under the Town Council Financial Rules.
But Justice Ramesh ruled that there was no urgency justifying the waiver; it was instead a fait accompli. “Not only was there no real urgency or necessity in the public interest to waive tender, it would appear that the waiver was really motivated by extraneous considerations, including politics and a misguided sense of loyalty,” he said in his 329-page judgment.
“I am not suggesting that Mr Low Thia Khiang and Ms Sylvia Lim were expected to have no regard to any political considerations in making their decisions, which would surely be unrealistic. However, they were expected to not subordinate the interests of AHTC, not to mention their statutory and fiduciary duties, to their own political interests,” he added.
Justice Ramesh also found systemic control failures in AHTC’s payments to FMSS and its service provider FM Solutions and Integrated Services (FMSI).
“It is not in dispute that conflicted persons, ie, persons with a shareholding interest in FMSS, were involved in the approval process for payments to FMSS and FMSI. These conflicted persons held direct ownership interests, and key management and operational positions in FMSS and FMSI, and concurrently held key management and operational positions in AHTC,” the judge said.
He added, “This created a conflict between their obligations to act in the interest of AHTC on the one hand, and their obligations to FMSS and their profit motive arising from their interests in FMSS and FMSI on the other hand. In (auditor) KPMG’s report, this was described as an area of pervasive control failure with serious conflicts of interest, involving an unacceptably high degree of abdication of control to the conflicted persons. This exposed public funds to the risk of improper use. I agree that in the absence of safeguards, this created an inherent risk of overpayment or payment for work that was not adequately or satisfactorily completed.”
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