The Court of Appeal yesterday ordered the Workers' Party-run town council to appoint accountants, subject to the approval of the Housing Board, to fix lapses uncovered by an audit this year.
In doing so, Singapore's highest court said it had to "focus sharply on what Aljunied-Hougang-Punggol East Town Council (AHPETC) is obliged to do and has not done".
It noted various lapses in governance and accounting, and said that "on the facts before us, there is no real dispute that AHPETC has not fully complied" with its obligations under the Town Councils Act and guidelines under the Town Councils Financial Rules.
The accountants will help to identify outstanding lapses; advise on steps to be taken to fix the lapses; submit monthly progress reports to the HDB, until they are "reasonably satisfied" that AHPETC is compliant with the law; and look into whether past payments were improper and should be recovered.
The appeals court said the HDB must consent to the identity and, if need be, the terms of reference of the accountants so as to "ensure transparency and efficacy in the execution of these duties".
What town council must do
• Make all outstanding sinking fund transfers within three months from yesterday; rectify breaches and contraventions of the Town Councils Act.
• Decide whether to accept grants-in-aid made by National Development Minister or take other measures to raise funds for the transfers.
• Appoint accountants subject to the consent of the Housing Board.
• Identify outstanding lapses.
• Advise on steps to fix lapses.
•Produce and submit monthly progress reports to HDB until it is reasonably satisfied the town council is fully compliant with the law.
•Look into whether any past payments made were improper and should be recovered.
On its part, the HDB should not "unreasonably withhold" consent.
In the event of any dispute over this, it added, either party can seek assistance from the court.
The court also ordered the town council to make all its outstanding transfers to the sinking fund within three months.
The town council must also decide, by then, whether to accept the grants-in-aid previously offered by the Minister for National Development subject to conditions, so as to make the sinking fund transfers.
Otherwise, it is to take other steps to raise funds, such as increasing service and conservancy charges or liquidating investments.
The 72-page judgment yesterday was delivered by Chief Justice Sundaresh Menon, who heard the case in August with Judges of Appeal Chao Hick Tin and Andrew Phang.
In May, the Ministry of National Development (MND), which has withheld $14 million in government grants from the AHPETC, appealed against a decision by the High Court, which rejected MND's application for the court to appoint independent accountants to safeguard the grants to AHPETC.
The Court of Appeal yesterday upheld the High Court's dismissal of that MND application. CJ Menon wrote that under the Town Councils Act, "the court can only make orders compelling the Town Council to perform its statutory duty. It cannot appoint its own agents to perform these powers, duties and functions of the Town Council".
The High Court had also ruled in May that only the HDB or residents - not the MND - could take legal action against a town council if it fails to perform its duties.
The appeals court said it agreed with the High Court on this. It thus allowed an application by the HDB, made in June, to join MND as a plaintiff in the case - a move that was opposed by the AHPETC.
One of the issues at the crux of the appeal hearing was how much power the court has when a town council is in breach of its duties.
Ms Aurill Kam, the Attorney-General Chambers' deputy chief counsel for litigation, who acted for the MND and HDB, had argued that the court can not only compel a town council to perform its duties, but also "do whatever is necessary" to remedy a breach of duty.
Therefore, the court could appoint the independent accountants as its "agents".
Mr Peter Low, who represented AHPETC, said the court could only ask the town council to abide by the law - and make declarations when it had failed to do so.
The appeals court disagreed with both parties.
"It is inconceivable that the court could be put in such a position in a matter that involved an aspect of local government," CJ Menon wrote, adding that Mr Low's contention "reduced the court to an irrelevant and ultimately toothless observer".
If the court were to appoint accountants to the town council, it would effectively "substitute" AHPETC by having accountants "step in and do what is needed to secure the performance of the relevant duties".
What the court could do, however, is compel the town council to perform its duties by court orders.
CJ Menon noted that AHPETC has appointed an independent consultant, Business Assurance, to address the lapses, although the town council has yet to fully carry out its duties.
"There is no reason why AHPETC should not or cannot engage external consultants to assist it in fulfilling the statutory duties and responsibilities that are incumbent upon it," he wrote. "The various interests at play would be adequately secured by an order requiring AHPETC to make the necessary appointment itself."