SINGAPORE - The Court of Appeal on Friday (Nov 27) ordered the Workers' Party-run town council to appoint accountants, subject to the approval of the Housing and Development Board (HDB), to help fix lapses that were uncovered by an audit earlier this year.
The court, in making the order, 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 the Town Councils Financial Rules guidelines.
The court said the accountants must, among other things, help identify outstanding lapses; advise on the steps that must be taken to remedy such lapses; submit monthly progress reports to the HDB; and look into whether past payments were improper and should be recovered.
In making the order, the Appeals Court added: "To ensure transparency and efficacy in the execution of these duties, the identity and, if necessary, the terms of reference of the accountant(s) to be so appointed shall be subject to the consent of the HDB, which consent shall not be unreasonably withheld and in respect of which there shall be liberty to apply ."
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. Otherwise it is to take steps to raise funds, such as by increasing service and conservancy charges or liquidating any investments.
The judgment was delivered on Friday by Chief Justice Sundaresh Menon when the court ruled on an appeal by the Ministry of National Development (MND) against a High Court decision in May which turned down its application to have the court appoint accountants to safeguard government grants disbursed to AHPETC.
The Appeals Court agreed with this earlier decision on court-appointed accountants.
Writing in the judgement that was released on Friday, CJ Menon said 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 Appeals Court also allowed a related application for the HDB to be brought in as a party to the case - a move that was opposed by AHPETC. In May, the High Court ruled that only the HDB or residents - and not the MND - could take legal action against a town council if it failed to perform its duties.
The AHPETC saga begun in February when an Auditor-General's Office (AGO) report showed lapses by the town council, including its failure to make timely transfers to the sinking fund for long-term maintenance projects; potential conflicts of interest resulting from insufficient oversight and disclosure of related party transactions; and lapses in internal controls.
In March, the MND applied to the High Court to appoint independent accountants to safeguard government grants disbursed to the town council.
The ministry said it would release $14 million in grants only if this condition was met, and that AHPETC had not done enough to rectify the lapses since the AGO audit. The grants would be held in segregated accounts and the accountants would have had to co-sign any payments from these accounts exceeding $20,000.
But the High Court rejected the application, prompting the MND to launch an appeal.
The hearing in August was before CJ Menon, and Judges of Appeal Chao Hick Tin and Andrew Phang.
Among the issues at the crux of the hearing was the court's powers in cases where a town council is found to have been in breach of its duties.
Ms Aurill Kam, the Attorney-General's Chambers (AGC) deputy chief counsel for litigation, who acted on behalf of the MND and HDB, argued that the court can compel the town council to perform its duties and decide how this should be done. She said the court could appoint independent accountants as its "agents".
But Mr Peter Low, who represented AHPETC, said that the court can only ask AHPETC to abide by the law and declare when it has not done so.
CJ Menon, in the judgment, said the 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," he wrote. He added 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, CJ Menon wrote, it "would substitute AHPETC as the relevant actor by having the independent accountants step in and do what is needed to secure the performance of the relevant duties".
What the court can do, however, is to make court orders that "compel" the town council to perform its duties by law, he added.
CJ Menon said that while there are changing circumstances, with AHPETC having appointed an independent consultant Business Assurance, the town council has yet to fully carry out its duties.
Responding to Friday's judgment, AHTC chairman Pritam Singh said the town council will comply with all orders made by the court.
"The Town Council acknowledges its role as a guardian of public funds," he said in a statement. "We assure the MND that government grants or grants-in-aid are used solely for the upkeep of the town and in the interests of all residents."
The town council pledged to work together with the MND to facilitate the prompt transfer of the outstanding grants to AHTC, such that it can make the remaining outstanding quarterly sinking fund transfers.