Friday, 29 May 2015

MND v AHPETC: High Court Judge blasts Workers' Party-run council but rejects MND's oversight plea

By Walter Sim, The Straits Times, 28 May 2015

THE High Court has turned down the Ministry of National Development's (MND) application to appoint independent accountants to oversee government grants to the Workers' Party-run town council.

But Justice Quentin Loh, in explaining why the court was not in a position to do so, was scathing towards the council in his 80-page judgment released yesterday , saying it was a "travesty" that the Aljunied-Hougang- Punggol East Town Council (AHPETC) ignored its duties and obligations to residents. "They owe a duty and a heavy responsibility to their constituents to run AHPETC properly and it is incumbent on them to put their house and finances in order," he said.

 Noting the "grave and serious questions" raised over the state of its accounts and propriety of past payments, Justice Loh said such lapses would result in "severe consequences" to office holders had they occurred in a public company. And if the council were a management corporation, it could well have faced civil or criminal liabilities.



MND wanted the High Court to appoint independent accountants to safeguard government grants that had been withheld owing to serious lapses in governance and compliance by AHPETC. MND would disburse the grants - of $14 million - if the court agreed to its application.

But Justice Loh said the High Court does not need to step in as the law already allows the National Development Minister to impose conditions on grants disbursed to town councils.

It would be up to AHPETC in this instance to decide whether to accept these conditions. If it chooses not to, or wishes to challenge the conditions, it may opt for judicial review proceedings.

Although he was unable to grant MND's application, Justice Loh found the conditions proposed by MND reasonable in the light of the Auditor-General's Office's report that unearthed serious accounting and governance lapses.

Noting that problems remain unrectified, and that AHPETC's management of funds and finances is "far from satisfactory", he urged both sides to reach a consensus on the conditions. This is so that grants can be promptly disbursed, and necessary transfers made to the sinking fund.

And on the "most heavily contested issue" of whether the accountants should be empowered to scrutinise past payments, Justice Loh said Parliament's intent when passing the Town Councils Act was to give councils latitude to operate and manage funds.

So MND stepping in as a form of "regulatory oversight" would go against the intent of the law, which already gives the Housing Board and residents the right to seek orders from the court.

The MND noted that the court agreed with its concerns about AHPETC, and said last night it would study the judgment and decide on the next steps. AHPETC and WP chairman Sylvia Lim said the town council respected the decision and would study its findings.



DUTIES AND OBLIGATIONS IGNORED

 It is clear that there are grave and serious questions that have been raised regarding the state of AHPETC's (Aljunied-Hougang-Punggol East Town Council) accounts and the validity and propriety of payments previously made by AHPETC to related parties or otherwise.

There have also been numerous breaches of the provisions of the Town Councils Act (TCA) and the Town Councils Financial Rules (TCFR). If AHPETC was a managing corporation subject to the Building Maintenance & Strata Management Act, I have no doubt that AHPETC or its officers will be exposed to the possibility of civil liability... or, in an extreme scenario, criminal liability...

I can only say it is a travesty for AHPETC to have ignored their duties and obligations imposed on them by the TCA and TCFR. They owe a duty and a heavy responsibility to their constituents to run AHPETC properly and it is incumbent on them to put their house and finances in order.

 - Justice Quentin Loh





* Focus on court's power at town council hearing
At issue is whether judiciary can appoint independent accountants to town councils
By Tham Yuen-C, Assistant Political Editor and Walter Sim, The Straits Times, 4 Aug 2015

 The main question at an appeal court hearing yesterday that pitted the Government against an opposition-held town council, was how much power the judiciary has when a town council breaches the Town Councils Act.

 At one end is the Ministry of National Development (MND), which hopes to overturn a High Court decision that there was no legal basis for the court to appoint independent accountants to the town council run by the Workers' Party (WP).

Opposing the move is the Aljunied-Hougang-Punggol East Town Council (AHPETC).

Its lawyer, Mr Peter Low, argued the judiciary is largely confined to issuing court orders under the Act, and does not have the power to appoint the accountants.

Countering the point, MND's counsel, Ms Aurill Kam from the Attorney-General's Chambers, said that even though the Act was passed in 1988 to give town councils much latitude in governance, it does not stop the Government from going to court if problems arise.

But, Chief Justice Sundaresh Menon noted, this did not surface in the parliamentary debates then.

He asked if this was "counter-intuitive", saying: "I'm troubled that I don't see anything in the debates that hint that the court is vested with the considerable power to, in effect, become a regulator of sorts."

He added: "You're saying it is open-ended, that once the application is made, the court has untrammelled and unlimited discretion as to the order it could make."

Replying, Ms Kam said the Act "strikes a balance" between giving latitude and providing safeguards.

At the end of the four-hour hearing, the Court of Appeal, with Chief Justice Menon and Judges of Appeal Chao Hick Tin and Andrew Phang, reserved judgment on the High Court decision that rejected MND's bid to get accountants appointed.

Justice Quentin Loh had in his decision in May criticised AHPETC for accounting and governance lapses. But he said the Act provides only for the Housing Board or residents - not the ministry - to take legal action against a town council that fails to perform its duties.

This issue arose again yesterday. Justice Chao asked if MND's argument - that it can take legal action - was a case of "the tail wagging the dog", because the minister is not mentioned in the provision relied on by the MND but was stated elsewhere in the Act.

Ms Kam argued that although the minister is mentioned "quite liberally" in the Act, this is only in places where he is the specific party to carry out an action. The provision, she said, is phrased broadly enough such that "not every single person needs to be named".

If the court's powers were just to make mandatory orders that the town council, for example, make timely transfers into its sinking fund, it would in effect be a "mere paper judgment that does not solve the underlying issue", she said.

Mr Low, AHPETC's lawyer, argued that the Act lets the court step in only to issue orders to compel town councils to follow the law when they are in breach.

Chief Justice Menon said: "And this is somehow going to make a difference? ... The town council already knows that the (law) exists."

But if the town council does not comply after a court order, Mr Low said, it would mean possible contempt of court proceedings.

The Chief Justice also noted that AHPETC's lack of means to make timely sinking fund transfers without government grants "hints towards some sort of insolvency".

"I'm troubled by your suggestion that in such a situation, there is nothing we can do."






MND's appeal on AHPETC ruling expedited to Aug 3
Both MND and AHPETC have agreed to expedite the appeal. In her affidavit, AHPETC chairperson Sylvia Lim said she disagreed with the judge when he said that she had lied to Parliament over the issue of the transfer of monies to its sinking fund.
By Vimita Mohandas and Kyle Malinda, Channel NewsAsia, 4 Jun 2015

Chief Justice Sundaresh Menon on Thursday (Jun 4) allowed the Ministry of National Development's appeal against the court ruling on Aljunied-Hougang-Punggol East Town Council (AHPETC) to be expedited.

The case will now be provisionally heard on Aug 3 at 10am, the judge ruled.

MND filed the appeal last Friday, saying the Government cannot disburse public funds to the Workers' Party-run town council, given the findings by the Auditor-General's Office and the High Court.

The ministry had sought an expedited appeal hearing in the week of Jul 6. But while both parties agreed to bring forward the case, Chief Justice Sundaresh Menon said the appeal court's July calendar was full. The lawyer for AHPETC, Mr Peter Low, will also be overseas for the next three weeks.

Before the Supreme Court Thursday, both the appellant and respondent agreed to an expedited hearing regarding the MND appeal to ask for independent accountants to check on the finances of AHPETC. The independent accountants will be able to take steps to recover monies lost from financial mismanagement and questionable payments.

The appellant is to make their case by Jun 22, with the respondent to file their case by Jul 16. Arguments are to be made by Jul 24.

In an affidavit filed by AHPETC chairperson Sylvia Lim, she agreed to this as she wanted to focus on her job to serve the residents under the town council.

Speaking to reporters after the hearing, Ms Lim added that it is in the interests of AHPETC to resolve the matter as soon as possible.

"In principle, the town council agrees that the appeal could be heard on an expedited basis because we also want to move on from this - what we consider needless litigation - and to fully focus on our core mission of serving the residents," she said. "At the same time today, we are happy that the Chief Justice has given what we think is adequate time for the parties to prepare for the appeal."

In her affidavit, Ms Lim also said she "disagreed" with the judge that AHPETC had "ignored" its sinking funds obligations. She added that she also "disagreed" with the judge when he said that she had lied to Parliament over the issue of the transfer of monies to its sinking fund.

On May 27, the High Court had rejected MND's application for independent accountants to be hired to check AHPETC's finances as there was "no legal basis" to do so.

In response to media queries, an MND spokesperson explained that it applied to expedite the hearings as there is "urgency for the matter to be resolved quickly".


MND's full statement (4 Jun 2015) as follows:

 MND applied to expedite the hearings, because there is urgency for the matter to be resolved quickly.

First, AHPETC has breached and continues to be in breach of its duties and obligations. In the interest of residents and in the public interest, we need the Court to determine, as soon as possible, the steps that AHPETC ought to take to remedy its serious breaches. At stake are important public interest issues concerning public governance and accountability of a statutory body that collects moneys from residents and receives Government grants.

Second, AHPETC is in urgent need of fresh S&CC grants to deliver essential services to its residents and meet its legal obligations. MND wants to release the grants immediately, but can only do so with safeguards, which the High Court Judge found “reasonable”, and are necessary to ensure accountability. However, AHPETC has consistently resisted this, as it did previously when MND offered the TC half-grants in October 2014. This is presumably because it wants the grants, but without conditions and accountability. As the TC’s own Auditors and AGO has found the TC to be unable to safeguard public monies, a view that the Court has now endorsed, it would be irresponsible for MND to agree to this. The Judge observed that it “is probably right in that any conditions imposed by the Minister will be unacceptable to AHPETC and this will result in further court proceedings.”

Third, serious questions have been raised as to the validity and propriety of payments previously made by AHPETC to related parties or otherwise. Given the identified risks of loss of Town Council Moneys, and the importance of taking consequential inquiry and recovery action promptly, there is an urgent need for the Independent Accountants to be appointed with powers of inquiry and recovery. AHPETC’s Managing Agent (MA) contract with FMSS expires on 14 July 2015.





Ministry files appeal against judge's ruling; WP to resist
By Walter Sim, The Straits Times, 30 May 2015

THE Ministry of National Development (MND) yesterday filed an appeal against the High Court's rejection of its application to appoint independent accountants to the Workers' Party (WP)-run town council.

It said yesterday that it would be unable to immediately disburse government grants to the Aljunied-Hougang-Punggol East Town Council (AHPETC) in the absence of these accountants.

The grants, amounting to $14 million over two financial years, had been withheld due to the gravity of accounting and compliance lapses by AHPETC, and critical questions raised by the Auditor-General's Office (AGO) over the state of its finances.

WP and AHPETC chairman Sylvia Lim said last night that she was surprised by the MND's decision, "especially that they are not taking the advice of the judge that the MND and AHPETC should work together to arrange for the grants to be disbursed".

She added that the town council "will resist the appeal".

The MND, which filed the appeal on the advice of the Attorney-General's Chambers, said in a statement that the appointment of accountants would mean the immediate disbursement of public funds to the town council "in the interest of residents", and would also ensure that these funds "are adequately safeguarded".


The MND's decision comes despite the finding by Justice Quentin Loh that the law already allows the National Development Minister to impose conditions on grants disbursed to town councils - including the appointment of independent accountants.

He also urged both sides to reach a consensus on conditions, so grants can be disbursed soon.

But yesterday, in setting out why it was appealing, the MND noted that the High Court made serious findings against AHPETC:

"The Judge found that AHPETC had breached and continues to be in breach of its duties and obligations in law, and that there are critical questions about the state of its finances.

"The Government cannot disburse public funds to AHPETC in the current circumstances, given the very serious findings by the AGO and the High Court."

The MND applied to the High Court in March to appoint the independent accountants.

While Justice Loh agreed with AHPETC's lawyers that there was no legal basis for the court to appoint the accountants, his judgment released on Wednesday had harsh words for AHPETC, describing it as a "travesty" that it ignored its duties and obligations.

He was critical of the state of its accounts and the validity and propriety of payments previously made to related parties - a reference to its managing agent firms that were also owned by some key officials in the town council.

AHPETC's failure to make quarterly transfers to the sinking fund was also the "height of financial irresponsibility".

AHPETC's lawyer Peter Low confirmed yesterday that a notice of appeal has been served. He said MND is applying to have the appeal hearing expedited.




The Attorney-General’s Chambers will be advising the National Development Ministry on next steps, after a High Court...
Posted by Channel NewsAsia Singapore on Thursday, May 28, 2015





Shanmugam calls on Low to explain actions of WP
By Walter Sim, The Straits Times, 29 May 2015

WORKERS' Party (WP) chief Low Thia Khiang must explain what the party is doing to set right the situation, given the "grave and serious questions" raised by the High Court over the management of its town council and the conduct of its MPs in Parliament, Law Minister K. Shanmugam said yesterday.

"He is a town councillor and party to all of this," he told the media. "What are they going to do to set right the situation?"

He was asked for his comments on the High Court's dismissal of an application by the Ministry of National Development (MND) to appoint independent accountants to the WP-run town council to oversee and safeguard the disbursement of government grants, and to look at past payments.

Justice Quentin Loh, in his decision released on Wednesday, said the court does not need to step in as the law already allows the National Development Minister to impose conditions on grants disbursed to town councils.

He also said the Housing Board and residents could take legal action should a town council fail to perform its duties.

But he had sharp words for the Aljunied-Hougang-Punggol East Town Council (AHPETC) for the gravity of its lapses. These included the state of its accounts and the validity and propriety of payments previously made to related parties - a reference to its managing agent companies that were in fact also owned by some key officials in the town council.

Also, the town council's failure to make quarterly transfers to the sinking fund was the "height of financial irresponsibility".

The judge also suggested that WP and AHPETC chairman Sylvia Lim was being economical with the truth for her "curious" statement at a parliamentary debate on Feb 12, when she said AHPETC had "been making transfers for financial year 2014/2015".

But she omitted the fact that only two of three transfers due at that time had been made, the judge noted. Neither did she mention that both transfers were late, with the second transfer made only a day before Parliament met.

Mr Shanmugam noted yesterday that Justice Loh was "scathing" about the WP town councillors and their conduct: "He said that the chairman of the Workers' Party misled Parliament. It is very serious to lie in Parliament."

He added that the judgment confirmed what he said in Parliament: That the WP's conduct over AHPETC was "unlawful".

"(The judge) said their conduct was possibly criminal. And that residents and the HDB can sue them. That if they were running a public company, the officers will be in serious trouble. He said their actions were at the height of financial irresponsibility," he said.

Yesterday, he pointed out that WP town councillors had "given $26 million worth of contracts to their friends" - a reference to the managing agent - and then refused to give information on these contracts to their own auditors.

"The fact is, money cannot be traced properly. Gone. They are insolvent. Egregious conduct. Given all these and the direct criticism of the chairman Sylvia Lim, the secretary-general of the Workers' Party has to explain. What are they going to do to set right the situation?"

He said that going forward, the Government will continue to take advice from the Attorney-General on its next course of action.





Judge: Numerous breaches by town council
He tells Workers' Party-run council to put its house and finances in order
By Tham Yuen-C, The Straits Times, 28 May 2015

EVEN as he explained why the court could not appoint independent accountants to oversee government grants given to the Aljunied-Hougang-Punggol East Town Council (AHPETC), High Court Judge Quentin Loh had sharp words for the town council, which he said ignored its duties and obligations under the law.

In his judgment released yesterday, he said there were "numerous breaches" of the Town Councils Act (TCA) and Town Councils Financial Rules (TCFR) by AHPETC.

Describing them as a "travesty", he called on the Workers' Party-run town council to put its house and finances in order.

The Ministry of National Development (MND), reacting to the release of Justice Loh's decision, cited this and other segments of his judgment and noted that the court "agreed with the MND's concerns about AHPETC".

It said it will consider what steps to take next after studying the judgment, adding: "The court said (the Housing Board) and residents could have brought the action, but not MND itself."

The ministry had filed an application with the High Court on March 20 to appoint independent accountants to help manage AHPETC's finances, after accounting and governance lapses were found during a special audit of the town council by the Auditor- General's Office (AGO).

The MND wanted the accountants to be appointed by the court before it would disburse grants to the town council.

Yesterday, its application was turned down by Justice Loh, who said Section 42 of the TCA already provides for the Minister for National Development to impose conditions tied to the disbursement of grants. The minister can hence rely on the Act to appoint independent accountants, instead of relying on a court order.

Justice Loh said that the conditions set by the MND were "reasonable in the light of the findings of the AGO report, which was also accepted without reservation by AHPETC".

"AHPETC's management of its funds and finances have been far from satisfactory, and the problems continue to remain unrectified," he said, adding that controls were needed to ensure that government grants to the town council are adequately managed and used lawfully.

Justice Loh said the Government, through the MND, has a responsibility to make sure public money is used in accordance with the law.

During the two-day hearing on the application earlier this month, AHPETC's lawyers argued against the MND's proposal to appoint PwC partners Ong Chao Choon and Chan Kheng Tek as the independent accountants.

The lawyers said this was inappropriate as the accounting firm had participated in the AGO audit of AHPETC's books. Therefore, they submitted, the two men would come with "preconceived notions" that the town council has done wrong, and would appear biased.

Justice Loh disagreed, saying that if appointed, the two accountants should be seen as professionals "who were exercising their professional judgment in the discharge of their duties".

"It is unfair to the proposed independent accountants to say that they would come with preconceived notions and it would be improper to allege that their appointment will lead to an appearance of bias, as there is no basis for any such allegation," he said.

In his 80-page judgment, he also delved into the lapses identified by the AGO and noted that AHPETC's lawyers acknowledged during the hearing that the town council had not yet addressed some of these issues.

On the town council's failure to set aside money for its sinking fund, Justice Loh said it was "the height of financial irresponsibility".

He added that AHPETC had "more severely" failed to disclose its related-party transactions involving its managing agent companies, FM Solutions and Services and FM Solutions and Integrated Services. The two companies are owned by some of the town council's key officers.

"There can be little doubt that AHPETC has breached several of its duties under the TCA and the TCFR and continue to be in breach of some of them," he said.

The MND, in its statement last night, also noted that the judge said "the town council was to be blamed" for not getting the government grants - given to all town councils - as it rejected the ministry's offer to release the grant with conditions.

Earlier this month, AHPETC chairman Sylvia Lim said the town council deferred making transfers to the sinking fund so that it could pay routine expenses and "ensure continuity of operations".

On this point, Justice Loh noted that AHPETC rejected the MND's offer to release half of the grants for the 2014/2015 financial year (FY), subject to conditions. "If AHPETC has anyone to blame for failing to make the transfers on time, it was itself," he said.

He also cited Ms Lim's Feb 12 statement in Parliament that the town council accepted that it should have transferred quarterly amounts due to the sinking fund, and should have paid sinking fund expenses directly from the sinking fund accounts.

"We have taken steps and made good the transfers. For FY2011/2012 and FY2012/2013, the necessary transfers have been done. We have also done the transfers for FY2013/2014 and have been making transfers for FY2014/2015," Ms Lim had said.

Justice Loh noted that Ms Lim's statement came a day after AHPETC made a late transfer to its sinking fund and 12 days after another transfer was due. But Ms Lim failed to mention this, or acknowledge that the town council had been making late transfers to its sinking fund.

"I find the Latin phrase, suppressio veri, suggestio falsi (suppression of the truth is equivalent to the suggestion of what is false), particularly apt to this statement of Ms Lim's," he said.





WP: Council bent on improving processes
By Walter Sim, The Straits Times, 28 May 2015

THE Workers' Party-run town council remains focused on filing audited accounts and continuing to improve its financial processes, chairman Sylvia Lim said last night.

The Aljunied-Hougang-Punggol East Town Council (AHPETC) has until June 30 to submit its already-late accounts for the 2013/2014 financial year, and until Aug 31 for the accounts for financial year 2014/2015.

The Ministry of National Development (MND), which has withheld $14 million in government grants to AHPETC, applied to the High Court to appoint independent accountants to safeguard the grants and co-sign on any payments above $20,000.

Justice Quentin Loh yesterday turned down the ministry's application because there was no legal basis for the court to approve it.

When asked what this means for AHPETC, its lawyer Peter Low said: "It now goes back to the original situation. Under the law, the minister can give the money but it is up to him to impose conditions. If he wants accountants to sign off on payments, he can."

Last year, the MND offered to release half the grants for financial year 2014/2015, subject to AHPETC meeting four conditions.

 These included assuring that it will put measures in place to properly account for how the grants are used and that it will make prompt transfers to the sinking fund - monies used for long-term cyclical maintenance. AHPETC did not accept the offer.




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