AHTC case: Defendants breached fiduciary duties to town council, says judge

Setting out whether the defendants owed Aljunied-Hougang Town Council fiduciary duties, the judge said the Town Council Act provides for the town council to be seen as a body corporate.
Setting out whether the defendants owed Aljunied-Hougang Town Council fiduciary duties, the judge said the Town Council Act provides for the town council to be seen as a body corporate.ST PHOTO: KUA CHEE SIONG

When people are put in charge of a town council, they enter into a relationship of trust and confidence.

This, in turn, means they have fiduciary duties to the town council, Justice Kannan Ramesh said yesterday.

A fiduciary duty is one of the highest standards of care, obligating one party to act solely in the interest of the other.

So, this duty requires town councillors to "manage the estate and serve the interests of their town council with single-minded loyalty, and for proper purposes", he said.

The judge made the point in a 338-page judgment on whether eight defendants, including three Workers' Party (WP) MPs, had made improper payments to their managing agent, FM Solutions & Services (FMSS).

Yesterday, he found them liable for various breaches, with former WP chief Low Thia Khiang and chairman Sylvia Lim having breached their fiduciary duties.

Current WP leader Pritam Singh was found liable for having breached his duty of skill and care - a less serious breach of fiduciary duty.

The suit had also named FMSS and Ms How Weng Fan, who was also representing her late husband's estate, as well as two other town councillors, Mr Chua Zhi Hon and Mr Kenneth Foo Sek Guan.

The defendants were also found to be liable for part of the damages suffered by the town council.

 
 
 
 

Ms How had breached her fiduciary duty over the hiring of FMSS as well as its sister company FM Solutions and Integrated Services (FMSI), while her late husband had breached his fiduciary duty over the FMSI contract.

Meanwhile, Mr Chua and Mr Foo had breached their duty of skill and care over both the contracts with FMSS and FMSI, as well as other contracts entered into by the town council for various projects.

Setting out whether the defendants owed Aljunied-Hougang Town Council (AHTC) fiduciary duties, the judge said the Town Council Act provides for the town council to be seen as a body corporate.

This means that there is a close analogy between town councillors and directors of a company or members of a strata development management corporation and, as such, similar expectations of duty, he said.

He also said the political nature of town councils does not prevent town councillors from having fiduciary obligations.

"In fact, the analysis which I have adopted means that the fiduciary relationship between town councillors and their town council is entirely distinct from the political relationship between town councillors and their constituents," he said.

He added that the voluntary status of appointed town councillors - such as defendants Mr Chua and Mr Foo - does not preclude them from having fiduciary duties.

Each of them was paid an honorarium of $300 a month.

Justice Ramesh said a fiduciary relationship does not depend on any financial reward being paid to the fiduciary, and that it did not matter that they were likely to be lay persons inexperienced in estate management.

"There is no prerequisite for fiduciaries to have a particular level of skill or expertise, or to profess to do so, although they may be held to a higher standard of skill and care if they do," he added.

 
 

Justice Ramesh said FMSS co-owners How Weng Fan and her late husband Danny Loh owed fiduciary duties to AHTC as they were part of the town council's senior management.

"Employees are fiduciaries if their duties require them to act with a single-minded loyalty, and 'top management' will commonly have undertaken such duties to their employers," he said.

Ms How was deputy secretary and general manager of the town council, while Mr Loh was secretary.

"These roles were part of the top management of AHTC - there were no other employees of AHTC more senior than them," said the judge.

He noted that those taking on the roles of general manager and secretary for the town council were intended to also be senior employees of the managing agent and, as such, they also owe duties to the company - which could lead to conflicting duties.

But, he added, the takeaway is that any potential conflicts of interest that arise from these roles must be managed.

It does not mean that Ms How and Mr Loh cannot owe fiduciary duties to AHTC, he said.

 
A version of this article appeared in the print edition of The Straits Times on October 12, 2019, with the headline 'Defendants breached fiduciary duties to town council, says judge'. Print Edition | Subscribe