The Court of Appeal has reserved its judgement on an appeal by the Workers' Party (WP) in the high-profile Aljunied Hougang Town Council (AHTC) lawsuit.

What is this appeal about?

The case, which investigated the misuse of town council funds, found the three WP leaders liable by a high court judge in October 2019.

The party's chairman Sylvia Lim and former secretary-general Low Thia Khiang were found to have breached their fiduciary duties in appointing FM Solutions and Services (FMSS) as managing agent of AHTC.

As for current Secretary-General Pritam Singh, he was found to have breached his duties of skill and care to the town council.

High Court Justice Kannan Ramesh noted that all three leaders had "collateral motives" in having the managing agent FM Solutions & Services (FMSS) appointed without tender and they were involved "from the beginning" to effect the process.

This resulted in FMSS being paid S$33.7 million from July 2011 to July 2015.

An appeal was then filed by lawyers for the three WP leaders and two town councillors in 2019.

A hearing by the court was subsequently held on Feb. 25, with lawyers representing the following four parties making their oral submissions in court, about events that transpired in 2011.

They were:

• Chelva Retnam Rajah, representing the three WP leaders and the two town councillors,
• Leslie Netto, representing How Weng Fan, and her late husband Danny Loh — the founders of the managing agent for AHTC, FM Solutions & Services (FMSS),
• Marina Chin, representing Sengkang Town Council (SKTC), taking over from Senior Counsel Davinder Singh who previously represented PRPTC, and
• David Chan, representing AHTC.

What were their respective submissions in court?

Here's what each of the lawyers submitted in court, on behalf of their clients.

Rajah, on behalf of the WP leaders and town councillors argued:

• Low did not trust the existing managing agent, CPG Facilities Management (CPG), at the time, given its affiliation with the PAP and his belief that they did not want  to serve the WP wholeheartedly,
• Low also was receiving feedback from the ground that CPG was preparing to move out,
• As such, the WP found itself strapped for time, when CPG eventually did indicate its intention to exit,
• A deadline for AHTC to fully take over the reins of the town council on Aug. 1 was also set by the Ministry of National Development (MND),

  • CPG also indicated that it would fully terminate its services on the same date,

• In addition, the WP had received a notice from IT firm, Action Information Management (AIM), indicating the termination of the town council's management system,

  • This system is required by CPG for its operation.

• The town council's right to waive a tender for a managing agent was therefore exercised on the grounds that it was in the interest of the public to minimal disruption of services to residents.

In response to Rajah, the Court of Appeal questioned if the AHTC could have raised a tender in two months given that the notice put forth by AIMS was on June 22, 2011 while CPG gave its indication on May 30 of the same year.

The Court of Appeal also asked if Rajah's position was essentially that the period of two months was not viable and that it was preferable to have a managing agent politically aligned with the WP (FMSS) to help the elected MPs.

To this, Rajah said yes.

As for Chin, she argued on behalf of SKTC:

• That it is "not wrong in itself" for Low to have his own preference for contractors politically aligned with him, or be concerned about CPG's affiliation with PAP,
• However, whatever concerns he had, he had to work within the rules of the Town Council Act which apply across the political spectrum — a tender should have been called in the first place,

  • Was CPG wanting to be released enough grounds for the town council to get a waiver for the tender?

• Chin highlighted that CPG had remained onboard with the town council for several projects,

  • The town council could have therefore held CPG to its contract to stay on for two more years and consider a tender during this interim period,
  • She also raised the question of whether the managing agent should even be released in the first place, if it indicated that it wanted to exit.

• The WP also appeared to have decided very early on that they wanted to change managing agents, prior to CPG stating that they wanted to be released.

Here, Chief Justice Sundaresh Menon highlighted that Low had already received an email indicating that CPG had started to go into inactive management and that Low at least appeared to have thought there might be a risk of sabotage as well.

Menon also noted that he did not see how it was good for a town council to begin its work by quarrelling with the managing agent.

The town council also cannot be expected to do nothing and lack a contingency plan, like getting people they trusted, he added.

He was echoed by Justice Andrew Phang who said that while Chin's position was "fine in theory", familiarity was not necessarily a bad thing.

Phang gave the following analogy, "If I have an applicant for academia and I know them am I going to say I cannot consider the applicant at all?... It's to the applicant's advantage, not the disadvantage of others."

Meanwhile Chan argued, on behalf of AHTC:

• That one cannot say with certainty that work was performed, given that FMSS was both receiving the money and confirming that work was done, and
• Such an issue stems from the failure of holding a tender, which put in place a process that would have created an inherent risk of conflict.

In response, the Court of Appeal asked if there was an allegation that the WP leaders should have terminated FMSS for not performing, and added that a lack of work on the part of FMSS would have been noticed, given the systemic nature of estate maintenance.

"Trees were not falling over and lifts were not stopping. If work was not done on a systemic scale, one would have thought one would have noticed it," Menon pointed out.

The Court also noted that Chan did not have evidence of abuse of the payment system.

As such, this meant Chan's case against the defendants was a matter of hiring people who did not do a good job.

Phang added, "A lack of competence is one thing. Mistakes are one thing, but to say it rises to a level of breach of fiduciary duty, you need to establish a causal connection."

Court had previously posed questions

After the appeal was submitted last year, The Straits Times reported that The Court of Appeal posed several questions of different parties in the case in a letter on Sep.2020, after reading and considering the papers and submissions.

The court asked the parties to address whether Parliament had intended for town councillors or town council employees to owe fiduciary duties when carrying out statutory functions.

ST added that the letter asked parties to address the implications of the High Court's finding that seven defendants owed fiduciary duties, on the normal distinction between private law and public law.

Parties were to also address the scope of Section 52 of the Town Councils Act and whether any of the defendants are entitled to claim immunity under that particular section and in relation to which claims.

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Top image via AHTC website and WP’s Facebook page