SINGAPORE: Workers’ Party (WP) leaders have been found liable for the misuse of tens of millions in town council funds, the High Court ruled on Friday (Oct 11).
High Court judge Kannan Ramesh said that WP Members of Parliament Mr Low Thia Khiang and Ms Sylvia Lim were not only derelict in appointing a managing agent for Aljunied-Hougang Town Council (AHTC) without calling for a tender, they had also painted a narrative that was "misleading and not honest" in order to do so.
"Their conduct was improper and the attempt to cloak the same with a veneer of truth and credibility collectively leads to the conclusion that they had not acted honestly and therefore breached their duty of unflinching loyalty to AHTC as fiduciaries," he said.
The judgment for the first stage of the landmark case, which Justice Ramesh likened to a “hydra” for its complexity, was given in a 329-page document.
This following is a summary of key points raised in the judgment:
Who’s involved and what were their roles?
The three main defendants are WP Members of Parliament for Aljunied GRC: Ms Sylvia Lim, who is also chairperson of the party, Mr Low Thia Khiang and WP secretary-general Pritam Singh.
They were elected as town councillors of Aljunied-Hougang Town Council (AHTC) following the 2011 General Elections.
The other defendants are:
- AHTC councillors Mr David Chua Zhi Hon and Mr Kenneth Foo Seck Guan.
- Mr Danny Loh, the town council's secretary and Ms How Weng Fan, who held positions as deputy secretary and general manager.
- FM Solution and Services (FMSS), AHTC’s managing agent, which was owned by Mr Loh and had Ms How as a director. As Mr Loh died in 2015, he is represented by his wife Ms How.
They were sued by AHTC and Pasir Ris-Punggol Town Council (PRPTC) on the back of audit reports, which flagged "serious flaws" in AHTC’s governance.
What were defendants accused of?
The plaintiffs alleged that the MPS and town councillors had breached their fiduciary duties in the following ways:
- That they appointed FMSS as AHTC’s managing agent and awarded contracts for Essential Maintenance Services Unit (EMSU) services to the company without calling tenders.
- That they failed to ensure meaningful oversight of payments to FMSS and its service provider FM Solutions & Integrated Services (FMSI).
- That they improperly awarded contracts to companies for maintenance and other works in the estates they managed
What were they found in breach of?
The defendants are liable for most of the claims made against them, mainly for lapses in appointing FMSS as the AHTC managing agent without a tender.
There was also a lack of safeguards for payments to FMSS and FMSI, creating an “inherent risk of overpayment”, said Mr Ramesh.
They were faulted for the contracts awarded to some third-party contractors. The defendants’ liabilities are summarised in the two tables below:
Appointment of FMSS as managing agent
The judge found that there was “a clear plan for FMSS to replace the incumbent managing agent CPG” after the 2011 GE, regardless of CPG’s intention to stay on or withdraw from its contract.
While Ms Lim and Mr Low had argued that they were forced to hire FMSS because CPG wanted to terminate its contract with the town council, the judge said that correspondence between the parties involved during that period showed that this was not the case.
“The defendants, or at least some of them, wanted CPG out. This means that the waiver of tender and the appointment of FMSS was not a contingency at all, but a fait accompli,” he said in the judgment.
One of the reasons was that Mr Low had a distrust of CPG and entities he thought were linked to the People’s Action Party, he added.
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Mr Ramesh called the decision to waive the tender for a new managing agent “inexcusable”, as CPG was bound by contract to serve until mid-2013 and the circumstances were not urgent as claimed by the WP MPs.
"None of the town councillors explored the possibility of asking CPG to stay on for a longer period so that a tender could be called, even though there was nothing stopping them from doing so," he noted.
Mr Low and Ms Lim had also made a “deliberate and calculated” move to keep CPG and the town council in the dark about their plan to appoint FMSS without a tender, the judge concluded.
The judge pointed out how Mr Low involved Mr Loh in the hiring of his own company by asking Mr Loh to help draft a report on the assessment of and the decision to appoint FMSS.
Ms Lim later circulated a revised version of the report and asked Ms How and Mr Loh to examine it to see if it would "pass the auditors' eyes".
"I find this to be quite extraordinary and casts serious doubt on the integrity of Ms Sylvia Lim," said the judge.
"They should have been the last persons involved in any step in the process by which FMSS was appointed. Their conflict of interest is crystal clear."
The way FMSS was appointed thus pointed to "extraneous considerations", including politics and a "misguided sense of loyalty" to Hougang town council staff members who had worked with Mr Low for 20 years, said the judge.
“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,” said Justice Ramesh.
“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 found Ms How also liable as she was “heavily involved” in the award process, but said that Mr Singh’s involvement in these early events was less clear.
READ: Managing agent 'enjoyed' 300% profit increase as town council's finances suffered, say lawyers
However, he, Mr Chua and Mr Foo should have asked about the circumstances of the waiver and thus have breached their duties of skill and care to AHTC.
Justice Ramesh made a similar ruling on a contract to have FMSS provide EMSU services to AHTC.
He added that the WP MPs painted a "misleading picture" to the public with a press release issued on Aug 5, 2011 which said that there was insufficient time to call a tender.
"That was not the true picture and it camouflaged the real reasons why tender was waived. It is particularly unsatisfactory that this misleading narrative was conveyed to the public, and specifically the very constituents that the elected MPs were elected to serve," he said.
“Improper payments” to FMSS and FMSI
People who were shareholders of FMSS were also tasked to approve payments from the town council to the company, the judge found, giving rise to conflicts of interest and “systemic” control failures.
“I find that the approval process for payments to FMSS was insufficiently rigorous given the involvement of the conflicted persons,” said Mr Ramesh.
Standing instructions for the payments to be co-signed by the AHTC chairman or vice-chairman was not a sufficient safeguard as there was no system for independent parties to verify each cheque, he added.
The judge also found breaches in the award of certain contracts to LST Architects, Red-Power Electrical Engineering, Titan Facilities Management and J Keart Alliances, a provider of fire-safety equipment and services.
What were they not found liable for?
One of the contracts the plaintiffs took issue with, awarded to Rentokil for pest control, was found to be justified.
There were no breaches of duties for a total of 68 invoices for more than S$845,000 made to third-party contractors.
AHTC also did not show that payments of about S$1.2 million to FMSS for project management fees were unjustified.
What might they need to pay?
That has yet to be determined.
This first stage of the trial focuses on the defendants’ liability, a second stage is planned to assess the quantum of compensation that the plaintiffs – AHTC and PRPTC – are entitled to.
If the defendants are unable to pay damages, AHTC could commence bankruptcy proceedings against them, and the WP MPs may lose their parliamentary seats as undischarged bankrupts cannot be MPs nor contest in parliamentary elections.