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AHTC ordered to give HDB more details on choice of accounting firm

SINGAPORE — The Court of Appeal has asked the former Aljunied-Hougang-Punggol East Town Council (AHPETC) to give the Housing and Development Board (HDB) more information on the accounting firm it wishes to appoint to fix its deficient practices.

AHTC ordered to give HDB more details on choice of accounting firm

Members of the Workers' Party arriving at court on Jan 7, 2016. Photo: Channel NewsAsia

SINGAPORE — The Court of Appeal has asked the former Aljunied-Hougang-Punggol East Town Council (AHPETC) to give the Housing and Development Board (HDB) more information on the accounting firm it wishes to appoint to fix its deficient practices.

The apex court’s intervention today (Jan 7) came after the HDB blocked the town council’s choice of Business Assurance LLP to do the job, citing concerns over whether the firm was up to the task.

The impasse arose from a court order last November for AHPETC to appoint accountants — with HDB’s approval — to identify the areas where it is still not complying with the Town Council Act, as well as advise on the remedies. These related to lapses in governance and compliance that an Auditor-General’s Office (AGO) report had flagged in the Workers’ Party-run entity — since renamed to Aljunied-Hougang Town Council, following its loss in the Punggol East single seat in last year’s General Election.

At a hearing today, AHPETC’s lawyer Peter Low said it picked Business Assurance and its team led by lead accountant Alex Chai because of a working relationship stretching back to March 2014. The firm would also be a more “cost-effective” appointment, he added.

But the Attorney-General’s Chambers (AGC), which is representing the HDB, suggested that one of the Big Four accounting firms should be appointed instead, given that the case requires a certain level of experience and expertise. If cost is a concern, the HDB is prepared to bear the difference in charges.

After hearing both parties’ arguments, Chief Justice Sundaresh Menon ordered AHPETC to provide more information by Monday to justify why it feels Business Assurance is qualified to perform the task, such as the firm’s size, the team of accountants’ years of experience in regulatory investigations, forensic services and audits of public institutions.

With the extra information, the HDB will review its position and the case will be heard again sometime around the end of next week.

A debate on the terms of reference for the audit to be carried out also ensued during the hearing, with the HDB arguing that it should not be limited to the areas of non-compliance flagged in the AGO report.

CJ Menon ruled that the scope of work cannot be an “open-ended ambit”. Both parties agreed to have the audit cover the issues highlighted in the AGO report issued in February last year and the two independent audits for FY13/14 and FY14/15.

CJ Menon also turned down HDB’s call to spell out the contents to be covered in the accountant’s report, which is due by Aug 31. Accountants are professionals and they do not need to be spoon-fed on what they should or should not do, the judge added.

The other issue that was resolved in the hearing today was the costs of the legal proceedings on this matter, from the time the authorities applied to have accountants appointed to look at AHPETC’s practices.

AHPETC argued that it is entitled to claim legal costs from earlier hearings in the High Court and Court of Appeal as the authorities’ applications had been dismissed then.

In rebuttal, the AGC said that even though the HDB is not asking for costs so as not to penalise AHPETC, the town council had also failed in their contentions in those hearings. AHPETC’s position had been that town councils are not legally accountable for financial management and that the court has no powers to give effective remedies.

The AGC added that AHPETC’s conduct during the proceedings — the time and money it spent on affidavits and submissions on late transfers to its sinking fund — disentitled the town council to costs.

In his judgment, CJ Menon said each party will bear its own costs since both prevailed in certain areas during the hearings. AHPETC succeeded in proving the Ministry of National Development (MND) had no legal standing to bring a town council to court for falling short of its obligations but ruled in favour of the authorities’ argument that there are remedies to address the lapses in town councils.

He added that he does not think it “can be fairly said that either party’s conduct in these proceedings, whether at first instance or before us, was such as to disentitle it to costs”.

“This was a case that involved important questions of public law and governance with novel issues and each party put forward its best effort,” said CJ Menon.

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