WP leaders acted in good faith in waiving AHTC tender, but not when it came to payments: Court of Appeal

Workers' Party leaders and others involved in running the Aljunied-Hougang Town Council (AHTC) acted in good faith when they decided to waive the tender for a managing agent soon after the 2011 General Election, the Court of Appeal said on Wednesday (Nov 9).

However, they were also aware of the potential conflict of interest involved, and failed to address it, even though they were aware of the risk of overpayments or improper payments, the court added.

"Yet, this state of affairs was allowed to persist for at least three years - from July 2011 to July 2014 - and in that period of time, AHTC disbursed over S$23 million," it said.

"The character of such neglect, in sum, was at least potentially grave. We are thus unable to see how such conduct that amounted to gross negligence can be said to have been done in good faith."

In a written judgment that allowed part of the appeals brought by the WP leaders, the five-member court led by Chief Justice Sundaresh Menon said it found that while the leaders do not owe fiduciary or equitable duties of skill and care to AHTC, they were still liable to the town council for negligence in certain aspects.

These leaders include former WP chief Low Thia Khiang and party chairman Sylvia Lim, who had been found by the High Court in 2019 to have breached their fiduciary duties to AHTC, while current party chief Pritam Singh had breached his "duties of skill and care".

CJ Menon noted that they were grossly negligent in the payments process to managing agent FM Solutions and Services (FMSS), and may still be liable for damages.

The judgment comes some 20 months after a Feb 2021 hearing, where the four lawyers representing the parties in the AHTC appeal were grilled for six hours, as the apex court sought to ascertain if the WP leaders had breached their duties towards their town council and caused monies to be misspent.

The case dates back to 2017, when an independent panel appointed by AHTC launched a suit against the town councillors, including Singh, Low and Lim, over S$33 million in improper payments made under their watch.

In 2019, High Court Judge Kannan Ramesh found that Low and Lim had breached their fiduciary duties to AHTC, among other things, and held that they were liable for losses suffered.

At the heart of the case is the WP leaders' hiring of FMSS, which was set up by How Weng Fan and her husband, Danny Loh, WP supporters who were later appointed deputy secretary and general manager, and secretary of AHTC, respectively.

In explaining why the company had been awarded the contract without a tender after the WP won Aljunied GRC in 2011, the WP leaders had said during court hearings that AHTC's then managing agent CPG was unwilling to continue in its role.

They had also suggested that CPG, which they saw as being aligned with the People's Action Party, might "sabotage" matters.

In Wednesday's judgment, CJ Menon said evidence showed that even at an early stage after the 2011 election, the WP leaders had taken seriously the feedback that the then-managing agent might soon pose issues and were also working towards a stipulated handover date within months. Their claim of the situation being one of urgency was "not incredible", he said.

The judgment also noted that the WP leaders were aware of the existence of How's and Loh's potential conflict of interest as early as May 19, 2011 - two weeks after the general election - but failed to properly address it. AHTC had awarded the first managing agent contract to FMSS, and both How and Loh - who died in 2015 - had assumed key managerial roles in AHTC, while remaining shareholders, directors and employees of FMSS.

CJ Menon noted the leaders imposed a requirement that cheques to FMSS had to be signed by either the town council chairman or vice-chairman, neither of whom had any interest in the company. He also said it appeared to the court that the WP leaders took it on faith that FMSS was performing the work it was being paid to do, and trusted it to carry out the work properly and diligently.

"While this may explain why they were open to appointing FMSS to provide the services in question, it does nothing to address the need for a system to verify the payments to FMSS," he added. "This was exacerbated by the manifest conflicts of interest which were clearly perceived and understood by all concerned. In our judgment, this was a paradigm example of poor financial governance and a breach of the duty of care."

The court added that the law does not shield the WP leaders from personal liability, saying: "Given the severity of this failure, it could not be said to have been done in good faith."

Potential damages will be assessed at a later date. THE STRAITS TIMES

Read the full judgment

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