• Defendants from the Workers' Party (WP) are appealing against a 2019 High Court decision 
• The case centres around the improper appointment of a managing agent for Aljunied-Hougang Town Council without a tender 
• WP's lawyers said town councillors want to work with people who share the same political beliefs as them
• The plaintiffs argued that this should not stop the WP defendants from calling for a tender for a new managing agent
• Chief Justice Sundaresh Menon then pointed out the political realities of a town council

SINGAPORE — Parliament had always intended for town councils to be given “as much latitude as possible” to employ the kind of people who are necessary to get the work done. This was the argument from the lawyers for the Workers’ Party (WP) defendants, during their appeal on Thursday (Feb 25) in the long-running Aljunied-Hougang Town Council (AHTC) legal case.

This was a point that Chief Justice Sundaresh Menon said he had “great sympathy” for, which could explain why WP’s former chief Low Thia Khiang and the party’s chairman Sylvia Lim chose not to call an open tender to appoint a managing agent for the town council in 2011.

Mr Menon said: “The difficulty in this aspect of the case is that it was always contemplated to be a somewhat political decision… It is not unreasonable for people who had just taken over a town council to want to work with someone they are familiar with, someone they are satisfied would fulfil their political work.” 

The apex court has reserved its judgement on the appeal, which will be released in due course, Mr Menon added.

This political nature of town councils was a key argument in the AHTC case, which was heard by Chief Justice Menon, Justice Andrew Phang, Justice Judith Prakash, Justice Woo Bih Li and Justice Tay Yong Kwang in the Court of Appeals.

The hearing took place after a long hiatus, after the High Court ruled in October 2019 that three WP Members of Parliament and others were liable for breaching their duties to AHTC.

Mr Low and Ms Lim were found liable to have breached their fiduciary duties “as they had failed to act in AHTC’s best interests and had acted for extraneous purposes”.

WP’s present secretary-general Pritam Singh was found to have breached his "duties of skill and care".

They were part of the team that won the Aljunied Group Representation Constituency (GRC) in the 2011 General Election.

The party had combined the Aljunied Town Council with the WP-controlled Hougang Town Council to form AHTC after the poll.

The trio are being sued by an independent panel appointed by AHTC and the Pasir Ris-Punggol Town Council (PRPTC) to claw back around S$33.7 million of improper payments found by independent accounting firm KPMG.

The WP-run Sengkang Town Council (SKTC) last year took over the lawsuit from PRPTC following a redrawing of boundaries for the former Punggol East Single-Member Constituency.

The case revolves around the improper appointment of FM Solutions and Services (FMSS) as AHTC's managing agent. FMSS was run by WP supporters How Weng Fan and her late husband Danny Loh, who are also defendants in the case.

In their oral submissions, Senior Counsel Chelva Retnam Rajah who is WP's lawyer pointed to how legislation — namely the Town Councils Act — had recognised this political nature of town councils. The law allows town councils to do business with those who share the same political cause with them.

Mr Rajah, who is from law firm Tan Rajah & Cheah, said: “If you are allowed to transact with people closest to you, then the other side of the coin must be that you are also allowed to not transact with people who are deemed not to be close to you.”

This waiver of tender was at the heart of the WP defendants’ arguments, which arose because the incumbent managing agent, CPG Facilities Management, did not want to continue after the handover of Aljunied GRC to the WP in the 2011 General Election, Mr Rajah said.

When asked by Mr Menon how the MPs had acted in good faith by not calling a tender, Mr Rajah said: “It was to try to get somebody in (as managing agent) as soon as possible with the departure of CPG, because Mr Low said that we have to fend for ourselves and we cannot rely on people with interests with the People’s Action Party.”

Evidence had shown that CPG had “wanted out” even though it had two more years in its contract, and the MPs’ decision to go with FMSS without a tender was a contingency plan, the lawyer argued. Mr Low had trusted FMSS, which was the managing agent of Hougang Town Council for several decades.

To this, Justice Woo said that the latitude for town councils does not absolve them of following their legal requirements. “I don’t think any parliamentarian said having latitude means waiving this statutory requirement.”

PLAINTIFF’S ARGUMENTS

AHTC’s lead counsel David Chan from Shook Lin & Bok said that as a result of this tender waiver, the town councillors ended up with a poor system of checks and balances that led to the improper payments, as noted by KPMG in its report.

There was a conflict of interest: FMSS staff members had held positions within AHTC that allowed them to approve the invoices for their work as managing agent, he said.

The AHTC lawyer said that because AHTC’s system lacked independent checks and balances, it was not possible to know whether actual work was done for what was paid for, which was a point that KPMG also raised.

Mr Chan’s arguments led to a lengthy exchange with the Court of Appeal judges, who pointed out that these could have been mistakes that would have happened, tender or not.

Justice Phang said: “In this world, there is no monopoly on incompetence.... A lack of competence is one thing, and for there to be a breach of fiduciary duty, there needs to be a clear linkage.”

Justice Prakash said that Mr Chan’s argument was “speculative”, since no one could produce evidence saying that residents were shortchanged.

“There are, what, 100,000 people living in Aljunied? Singaporeans are not quiet. If things are not done properly, they will complain to the town council, they complain to their MP and they complain to the papers,” she said.

Mr Menon then noted that the WP defendants did indeed put out a tender for a new managing agent the following year, to which there were no bidders.

Mr Chan replied that it was because by that time, FMSS was already the managing agent.

Mr Menon said: “The fact is that there was no one else waiting to do the job. The incumbent was in the strongest position to carry on, and CPG was clear that it didn’t want to carry on.

“So if the incumbent is not there and not keen to carry on, then speaking for myself, I have great sympathy for the fact that an elected MP will not want to sue their managing agent and order them to perform. For goodness sake, as a (new) town council, you don’t want to start that way.”

SKTC’s lead counsel Marina Chin from law firm Tan Kok Quan Partnership argued, however, that no matter their political persuasion, all parties including town councillors must abide by the rules, which is to call for a tender to appoint a new managing agent.

There were around two to three months between the 2011 General Election in May and August 1 that year — the date that WP was to assume full responsibility of the town council.

She said that even if the defendants were suspicious of CPG’s affiliation, it should not have stopped a tender from being called — the town councillors could have continued on with CPG while putting out a tender for another managing agent.

“If there is already a managing agent who, for whatever reason, wants to be released, then the question is: Should (the defendants) have released them?” Ms Chin asked.

What instead happened was the appointment of FMSS without tender, a managing agent that had little experience in managing a large GRC, she argued.

To that, Mr Menon said there was evidence that CPG was not interested in continuing on, and there were concerns by the defendants that CPG could “sabotage” Mr Low’s running of the town council.

Residents would be “ultra sensitive” if services were stymied by an unwilling managing agent, he said, again noting the political nature of town councils.

“If you look at it from that vantage point, it would be a little artificial to expect (Mr Low and the WP MPs) to sue CPG to enforce their contract,” Mr Menon said.

Ms Chin then suggested that the WP MPs could have allowed CPG to stay on for a few more months, for example, while they looked for other options through a tender.

To this, Justice Phang said: “All this is fine in theory, but what is the reality? One (has to) put themselves in the shoes of the town councillors. It is politics, which is not necessarily bad in that sense, but it is what it is.”