Fiduciary duties of WP MPs under scrutiny in high-profile civil trial

SINGAPORE — In the high-profile civil trial that kicked off on Friday (Oct 5) involving three Workers’ Party (WP) Members of Parliament (MPs), one key issue will be whether they had breached "core fiduciary duties" owed to residents and former constituents in their capacity as town councillors, in managing the money and assets entrusted to them.

This could determine whether they are liable to compensate S$33.7 million that they are alleged to have wrongfully paid between 2011 and 2015 to their town council’s former managing agent FM Solutions and Services (FMSS), and contractor FM Solutions and Integrated Services (FMSI), among other purported losses in public funds.

This was set out in the opening statement of the lawyers for an independent three-member panel that is acting on behalf of the WP-run Aljunied-Hougang Town Council (AHTC).

Two civil lawsuits were initiated by this panel as well as the Pasir Ris-Punggol Town Council last year.

The two cases are being heard in the same sitting with Justice Kannan Ramesh as the presiding judge.

Lawyer David Chan from Shook Lin and Bok LLP, speaking for the AHTC panel, said that former WP chief Low Thia Khiang and chairman Sylvia Lim “deliberately embarked on a course of action” to arrange for FMSS to take over the “profit-centric role” of being the town council’s managing agent.

Even though Ms Lim and Mr Low contended that they had set up sufficient safeguards and exercised sufficient oversight, their justifications were “not grounded in factual realities”, Mr Chan said in written submissions.

“The evidence will demonstrate that the payment process was under the purview of conflicted persons all the way until the final step, where the cheque reached the chairman/vice-chairman for signature,” he added.

It all started with the “hurried” appointment of FMSS, which was incorporated on May 15 in 2011, eight days after the General Election that year. FMSS was to manage and oversee the day-to-day operations of AHTC from July 15, 2011 onwards.

The appointment was uncontested following an “unjustified and unwarranted” waiver of a tender, Mr Chan said. The town council’s then managing agent CPG Facilities Management was released from its contract that was supposed to end on July 31, 2013.

Mr Chan noted that the WP had said there was an urgency to appoint an agent which justified a waiver of tender, but he called this justification “baseless” since a report from AHTC auditor KPMG stated that “a more prudent approach would have been to call for a tender while keeping CPG in the interim”.

APPOINTMENT OF COUPLE TO KEY POSITIONS

Following FMSS’ appointment, Mr Low and Ms Lim also did “nothing meaningful” to address the appointment of the couple behind FMSS to key positions in the town council. They are Danny Loh Chong Meng, who later died in an accident in 2015, and his wife How Weng Fan.

Loh was AHTC’s secretary between August 2011 and May 2015, and Ms How was its deputy secretary between June 2011 and July 2015 and general manager in the overlapping period from August 2011.

They are among the eight defendants in this trial, who will stand to disprove the panel’s claims that they rendered “dishonest assistance” to Ms Lim and Mr Low in getting them to waive the tender for FMSS. Ms How is representing her late husband in court.

Taken together, these elements set up a faulty system, an “environment of control failures where meaningful oversight of FMSS could not be exercised”, Mr Chan said, and that made it possible for FMSS and its officers to benefit themselves.

In turn, AHTC faced audit issues for five years running, he said, noting that the Auditor-General Office and KPMG uncovered an aggregate 186 control failures in AHTC’s governance.

“Their actions were so reckless in their disregard of the interests of the residents of AHTC that it can only be viewed as breaches of (Ms Lim’s and Mr Low’s) core fiduciary duty of loyalty and fidelity and duty of good faith,” Mr Chan said.

OTHER DEFENDANTS

Earlier, when asked to give an account of profits made from the appointment of FMSS or pay damages of at least S$1.25 million, Mr Low and Ms Lim responded that they have “not benefited a single cent”.

Other defendants in the lawsuits include WP chief Pritam Singh, AHTC councillors Chua Zhi Hon and Kenneth Foo Seck Guan, and managing agent FMSS.

Mr Singh, who was the chairman of AHTC’s Tenders and Contract Committee from June 2012, is standing trial to prove that the award of contracts to LST Architects without tender is justified, and thus he is not liable for damages of S$2.8 million arising from the alleged wrongful appointment of the firm.

The AHTC independent panel claims that the committee needed to call a tender for any works estimated to cost more than S$70,000 under Town Council Financial Rules.

Like Ms Lim and Ms Low, Mr Singh is also standing trial to prove that he owes no fiduciary duty to the town council, in the same vein as Mr Chua and Mr Foo, who are resident volunteers who became appointed town councillors of AHTC on May 27, 2011.

FMSS stands trial for receiving improper payments made in breach of fiduciary duties, and dishonest assistance of breach of fiduciary duties.

TOWN COUNCILS UNDER WP

• 2011: WP won the Aljunied Group Representation Constituency (GRC) in the General Election. It merged the town councils of Aljunied GRC and single-seat Hougang ward to form the Aljunied-Hougang Town Council (AHTC).

• 2013: WP won the Punggol East single-member ward in a by-election. The Aljunied-Hougang-Punggol East Town Council was formed.

• 2015: WP lost the Punggol East seat in the General Election. Pasir Ris-Punggol Town Council took over the management of the Punggol East ward. The Aljunied-Hougang-Punggol East Town Council was reconstituted as AHTC.