AHTC wrap-up: What are the 2 lawsuits about?

The first tranche of two multimillion-dollar civil lawsuits against three Workers' Party (WP) MPs and five other defendants wrapped up last Tuesday, after a 17-day hearing in the High Court.

WP chairman Sylvia Lim, former chief Low Thia Khiang and secretary-general Pritam Singh took the stand to defend themselves against allegations that they had breached their fiduciary duties in the running of Aljunied-Hougang Town Council (AHTC).

The case centres on $33.7 million that AHTC paid to its former managing agent FM Solutions & Services (FMSS) and service provider FM Solutions and Integrated Services, between 2011 and 2015. The payments are alleged to be improper and void.

AHTC - directed by an independent panel - is suing to recover monies from the eight defendants: the three MPs, two town councillors, FMSS and its two owners.

The other suit is by Pasir Ris-Punggol Town Council (PRPTC), to recover any losses allegedly incurred when Punggol East constituency was managed by the WP-led town council. The WP had won the seat in a 2013 by-election but lost it in the 2015 General Election.

In all, 14 witnesses were called and questioned by lawyers, resulting in robust exchanges and debates, as well as unexpected disclosures before an often-packed public gallery.

Political correspondents Rachel Au-Yong and Adrian Lim recap the key issues and highlights.


HOW IT STARTED

The WP became the first opposition party to win a GRC when it wrested Aljunied GRC from the ruling People's Action Party in the May 2011 General Election. It also retained its Hougang seat.

AHTC was formed later that month. But from the start, it was unable to submit accounts without qualifications. In 2014, the Auditor-General's Office (AGO) carried out a special audit which uncovered significant lapses of governance.

The Court of Appeal later directed AHTC to appoint a Big Four accounting firm to help fix the lapses and ensure compliance with the law.

After looking into the town council's accounts, KPMGidentified 71 instances of non-compliance with regulations, on top of the 115 areas uncovered by the AGO.

AHTC then appointed an independent panel to review the findings of the KPMG report.

Last year, the panel directed AHTC to file a lawsuit to recover any improper payments made to FMSS.

 
 
 
 

PRPTC appointed PwC to look into AHTC's books, and later filed suit against eight defendants.


PLAINTIFF ARGUMENTS

AHTC lawyers allege that WP's Ms Lim and Mr Low had breached their fiduciary duties and duty to act in good faith when they appointed FMSS as the town council's managing agent in 2011.

FMSS was run by WP supporters: Ms How Weng Fan and her late husband Danny Loh. Both held key positions in AHTC - Ms How was deputy secretary and general manager, and Mr Loh was secretary.

There was also inadequate disclosure of this conflict of interest to other town councillors when the decision was made to appoint FMSS, the lawyers added.

The waiver of a tender was unjustified, and Ms Lim and Mr Low had also set up or allowed a system which facilitated or contributed to improper payments to FMSS, the AHTC's lawyers said.

AHTC is also seeking compensation from Ms Lim, Mr Pritam Singh and town councillors Kenneth Foo and Chua Zhi Hon for breaching their duties as members of the town council's tenders and contracts committee. This was because of contracts the committee awarded to a more costly architect consultant, resulting in AHTC paying an alleged $2.8 million more.

PRPTC is also seeking to recover monies which lawyers said the town council could have saved by extending the contracts of existing vendors, instead of calling fresh tenders and giving them to higher-priced firms.

PRPTC lawyer Davinder Singh charged on the first day of the hearing that the checks and balances at AHTC were "so lacking and flawed that it allowed conflicted persons to enrich themselves almost at will".


DEFENCE ARGUMENTS

The WP MPs and town councillors say they acted in good faith and in the best interest of residents. They say the MPs are given latitude to run the town council according to broad and general rules laid down by the law.

Also, the claims sought by AHTC and PRPTC are based solely on the KPMG and PwC reports respectively, and do not take into account the circumstances at the time the MPs and councillors made their decisions.

Ms How and FMSS say proper payment controls were in place, with AHTC chairman Sylvia Lim being the approving authority. Among other things, Ms How and Mr Loh cannot be regarded as having fiduciary duties because they worked under the direction of the town council and its chairman, and their appointments in AHTC were administrative in nature.


WHAT'S NEXT

In March next year, the lawyers for the town councils and defendants will give their closing statements. It will be some time later before Justice Kannan Ramesh delivers his verdict.

If the defendants are found to have breached their duties and made improper payments, a second round of hearings will start to decide what ought to be paid. It will likely stretch out for most of next year.

If the WP MPs are found liable and cannot pay up, they will be made bankrupt and lose their parliamentary seats. Last week, however, the three WP MPs, in their personal capacity, raised more than $1 million in three days for their legal fees in a crowdfunding effort.


KEY DATES IN AHTC'S SAGA

May 7, 2011: Workers' Party (WP) wins Aljunied GRC in a general election. 

May 12, 2011: Ms How Weng Fan's husband Danny Loh applies to register FM Solutions & Services' (FMSS) company name. 

May 13, 2011: Ms How sends a letter, with Hougang Town Council's (HTC) masthead, to Aljunied Town Council, saying "we" have been instructed by WP to take over the town council. 

May 30, 2011: CPG tells Aljunied-Hougang Town Council (AHTC) it wishes to terminate its contract, which has another two more years. 

June 2, 2011: FMSS presents a proposal on providing managing agent services but this is circulated only among the elected MPs. 

June 10, 2011: Action Information Management (AIM), the software company CPG uses, says it will give a one-month notice of termination. AIM does so 12 days later, but extends its services to Aug 31, and later, at AHTC's request, to Sept 9. 

June 15, 2011: FMSS takes over HTC's staff, through a formal replacement of their employment contracts. 

June 22, 2011: FMSS sends AHTC a letter of intent.

July 15, 2011: FMSS starts work as managing agent for AHTC. 

Aug 1, 2011: CPG's last day. 

Aug 4, 2011: AHTC meets for the second time since its formation, and appoints FMSS as its managing agent and waives calling a tender.

June 19, 2012: Ms Lim e-mails FMSS' owners to give a "heads up" they would need to justify their higher rates at a town council meeting.

July 14, 2015: FMSS stops work at AHTC.


On the stand: WP leaders fight allegations in courtroom battle


(From left) Mr Low Thia Khiang, Ms How Weng Fan, Ms Sylvia Lim and Mr Pritam Singh. PHOTOS: TIMOTHY DAVID, LIANHE ZAOBAO, LIM YAOHUI

Senior Counsel Davinder Singh charged that Mr Low released CPG from its contractual obligations as a managing agent without checking what those were, a move that put "political supporters (referring to FM Solutions & Services) ahead of residents' interests".

Mr Low acknowledged he did not make the necessary checks, which he agreed was part of the duties of a "responsible town councillor".

Another point Mr Singh made was that Ms How Weng Fan wrote a letter to CPG more than two weeks before the incumbent managing agent said it would leave, giving CPG the impression that the MPs had decided to manage Aljunied-Hougang Town Council (AHTC) in-house. He called it a "calculated" move to avoid calling a tender and risking an agent other than FMSS getting the job.

READ MORE HERE

Managing agent's legal obligation, and more



KPMG's Mr Owen Hawkes (left) and PwC's Mr Goh Thien Phong testified for their respective firms. ST PHOTOS: KHALID BABA

Senior Counsel Chelva Rajah, the WP town councillors' lawyer, put to Mr Hawkes that AHTC had to terminate the contract of managing agent CPG early, because the ruling People's Action Party (PAP) had a track record of making "things difficult for opposition town councils".

Mr Hawkes said the PAP-appointed CPG had legal obligations to fulfil.

He also said AHTC was so "obviously concerned" by a major accounting lapse by FMSS that it withheld $250,000 in fees, showing it was "not happy" with its services. But FMSS' lawyer Leslie Netto disputed this and said there was no such thing as a "perfect contract".

Another issue Mr Netto put to Mr Hawkes was how AHTC and FMSS had maintained the estates well. But Mr Hawkes said repeatedly that his concern was about how the town council manages itself. "Having been to Hougang many, many times, it is not my place to suggest it is some sort of Mad Max style wasteland," he told Mr Netto at one point, referring to the movie about a dystopian future.

READ MORE HERE

 
A version of this article appeared in the print edition of The Sunday Times on November 04, 2018, with the headline '2 lawsuits: what are they about?'. Print Edition | Subscribe