AHTC case: Next step is to determine amount defendants must pay town councils

The next stage of a long-running civil suit brought against eight defendants, including three Workers' Party MPs, involves determining what monies they owe and must pay to two town councils, including Aljunied-Hougang.
The next stage of a long-running civil suit brought against eight defendants, including three Workers' Party MPs, involves determining what monies they owe and must pay to two town councils, including Aljunied-Hougang.ST PHOTO: KUA CHEE SIONG

The next stage of a long-running civil suit brought against eight defendants, including three Workers' Party (WP) MPs, involves determining what monies they owe and must pay to two town councils: Aljunied-Hougang and Pasir Ris-Punggol.

This amount hinges on the town councils showing the courts what their "true or proper loss" is.

In the case of Aljunied-Hougang Town Council (AHTC), the final amount owed would be derived from the $33.7 million which, Justice Kannan Ramesh said yesterday, consisted of improper payments that AHTC had made to its managing agent FM Solutions and Services (FMSS) between 2011 and 2015.

Meanwhile, Pasir Ris-Punggol Town Council (PRPTC) is suing the same defendants over claims related to Punggol East constituency.

The single-member constituency changed hands in the 2013 by-election and came under AHTC, which was renamed AHPETC. The People's Action Party took back the constituency in the 2015 polls.

Yesterday, Justice Ramesh said the final sum AHTC can recover, including funds related to Punggol East constituency, must take into account the services it received.

This sum is the difference between what was paid and the value of the net benefits obtained by AHTC, he wrote.

The three MPs leading AHTC then were former WP chief Low Thia Khiang, chairman Sylvia Lim and current WP chief Pritam Singh.

The trio are consulting their lawyers on the judgment. Should they appeal, they have to file it by next month.

 
 
 
 

Justice Ramesh's verdict brings to a close the trial's first tranche, which is to determine liability.

If there is no appeal, the next stage of the trial would be to determine damages.

Yesterday, the judge noted the $33.7 million consisted of payments from two major contracts AHTC had awarded to FMSS and its sister company. He said the payments could be taken to involve the misapplication of the town council's funds.

But since the AHTC had received the relevant services, the "loss cannot possibly be as much as the full amount disbursed under the impugned contracts", he added.

During the trial last year, the town councillors' lawyer Chelva Rajah said the maximum amount they should pay is around $620,000.

He had argued that auditing firm KPMG, which looked through the town council's books, could detect only $1.5 million in improper payments. It concluded that only $624,621 was recoverable, while the rest was "undeterminable".

The legal burden of proving loss falls upon the plaintiffs, said Justice Ramesh, adding that they must prove the defendants' breach was the "but-for" cause of their loss.

The "but-for" cause is a legal term to show that something would not have happened but for the contributing factor.

The judge also gave guidelines for the other remedies sought by AHTC and PRPTC on the defendants' breach of fiduciary duties.

For example, they can try to get FMSS and its co-owners, Ms How Weng Fan and the estate of her late husband Danny Loh, to repay any profits earned from the AHTC contracts. But the plaintiffs would have to choose between recovering these profits or asking the defendants to compensate them for the losses.

 
 

The judge also noted that the contracts are voidable as they were entered into in breach of fiduciary duty, which means the plaintiffs may seek to rescind them.

But doing so would require AHTC to return the benefits, which in this case are the services.

He refuted the plaintiffs' argument that the contracts can be declared void from the start as they are unlawful, saying AHTC did not lack the capacity to enter into these contracts.

The judge also rejected PRPTC's submission that the defendants are responsible for wrongful payments under the Town Council Financial Rules. There was no evidence these were made without authority or were wrongful because of an incorrect certification, he added.

The judge has allowed the plaintiffs to seek from the town councillors and the other defendants the costs of investigating their breaches of duty.

 
A version of this article appeared in the print edition of The Straits Times on October 12, 2019, with the headline 'Next step is to determine amount defendants must pay town councils'. Print Edition | Subscribe