SINGAPORE - The High Court will not appoint independent accountants to oversee government grants to the Workers' Party (WP)-run town council.
Justice Quentin Loh said that the Ministry of National Development (MND) has not established legal bases for its court application to appoint the accountants.
Despite the "grave and serious questions" raised over the state of accounts at Aljunied-Hougang-Punggol East Town Council (AHPETC), the judge wrote that "when the Town Councils are set up, the whole idea is to rest the responsibility of the management of the funds as well as the estate with the Town Council."
The Court therefore will not appoint independent accountants to oversee payments made by AHPETC.
MND had wanted independent accountants to sign off on AHPETC payments over $20,000 before it released several million in government grants to the town council.
But in his grounds of decision, released on Wednesday, Justice Loh said that it is a "travesty for AHPETC to have ignored their duties and obligations imposed on them by the Town Councils Act and Town Council Financial Rules."
"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."
"If AHPETC was a managing corporation ... I have no doubt that AHPETC or its officers will be exposed to to the possibility of civil liability or, in an extreme scenario, criminal liability," he added.
Justice Loh said that his decision should not stop the Housing Board or AHPETC residents from bringing legal action against AHPETC for the lapses.
In a two-day court hearing earlier this month, the MND said that questions remain over the cash flow position and accounting practices of AHPETC, which recently missed two sinking fund payments.
AHPETC said that it did not make those payments as it needed the funds to keep daily operations going.
MND has withheld two years of grants to AHPETC - a total of about $15 million - as it said it has no guarantee that those funds would be used properly.
On March 20, MND applied to the court to appoint independent accountants to AHPETC to safeguard government grants.
Earlier this year, serious accounting and governance lapses were discovered at AHPETC by the Auditor-General's Office.
Commenting in the judgment on Wednesday night, AHPETC chairman Sylvia Lim, who is also WP chairman and an MP of Aljunied GRC, said: "We respect the court's decision and will be studying the judgment in detail.
"In the meantime, we remain focused on filing our audited accounts for FY 13/14 and FY 14/15, and on continuing to improve our financial processes."
Separately, the ministry noted in a statement that the Court agreed with its concerns about AHPETC.
A spokesman, citing the judgment, said: "The Court said there were 'grave and serious questions' that have been raised regarding the state of AHPETC's accounts and the validity and propriety of payments previously made by AHPETC to related parties (amounting to $25.9 million), and that 'there have also been numerous breaches of the provisions' of the Town Councils Act and Town Councils Financial Rules. The Court added that the TC's conduct was the height of financial irresponsibility."
She added: "The judge also stated that if AHPETC was a managing corporation subject to the Building Maintenance and Strata Management Act, he would have no doubt that AHPETC or its officers will be exposed to the "possibility of civil liability… or, in an extreme scenario, criminal liability".
"The Court added that it was a travesty for AHPETC to have ignored their duties and obligations. And that the TC was to be blamed for not accepting MND's offer to release the grant.
"The Court said that HDB and residents could have brought the action, but not MND itself. The Court has also noted that MND can require the TC to appoint Independent Accountants (as a condition for release of grants), without having to get a court order."
The spokesman added that MND will carefully study the judgment, and consider what its next steps should be.