AHPETC: No necessity for MND to commence court action against town council

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Ministry of National Development (MND) has commenced legal proceeding against Aljunied-Hougang-Punggol East Town Council  (AHPETC) through the Attorney General Chambers (AGC) in a two-day hearing at the Supreme court to seek to impose conditions onto grants disbursed to the town council and to have the court to appoint independent auditors to the town council.

This comes after the Attorney General Office (AGO) report on AHPETC that was released on 9 February 2015. The audit for this report commenced in March 2014 and took 16 auditors – 8 from AGO and another 8 from PricewaterhouseCoopers (PwC) to go over the financial transactions and systems of AHPETC.

What MND is seeking through the court order to appoint the proposed independent auditors from PwC to AHPETC, who would then co-authorise and co-sign all payments in excess of S$20,000 from segregated bank accounts established by AHPETC and grants payable for financial years 2014/15 and 2015/16 from MND.

The independent auditors to be appointed will also ensure that all payments are properly authorised and sought to recover payment that are not properly authorised or lawfully made and to take appropriate action against any person action for AHPETC if there has been any breach of duty or unlawful conduct.

MND has said it would release about S$14 million in grants to the town council which have been withheld  if these independent auditors are appointed.

Independent auditors to be given power through court to obtain documents from town council and 3rd parties.

Attorney-General’s Chambers deputy chief counsel for litigation Aurill Kam in her submissions, repeated the findings from the AGO report on the lapses which AHPETC had in their financial procedures.

AHPETC’s argument against AGC’s submission is that the AGO report did not come to any conclusion that there was cause to do further audits on AHPETC. What the report concluded was that there was a need to address lapses and weakness in order to have assurance that public monies were properly spent and does not amount to any finding that public monies were improperly spent.

In response, Ms Kam pointed out that while AGO did not highlight any fault, the purpose of the AGO’s report was not meant to find contraventions or wrong doing in the town council’s financial processes.

She also noted that the auditors had problems with obtaining documents from the town council and that the court order which MND is seeking will give the powers to the independent auditors through the court to request documents to access whether oo not any incorrect, improper or unlawful payments made by the town councils.

Ms Kam also addressed the assertion by AHPETC that the legal proceeding is one of a political nature, by stating that all town councils are required to fulfill their statutory obligations through the town council and therefore not an issue between political parties.

Presiding judge, Justice Quentin Loh asked Ms Kam if there was any preceding case where the court appoints an independent auditor into a company to oversee the operations of the company. Ms Kam presented a case where the court appointed independent auditors to a company which had been proven to have issues in the business, to ensure that the operations are proper.

The judge also asked Ms Kam if the appointment of the independent auditors to the town council would mean that the auditors would be able to gain access to information from third party, such as FM Solution and Services (FMSS) and FM Solutions and Integrated Services (FMSI) through the court. Ms Kam said yes.

No necessity for court action

Representing lawyer for AHPETC, Mr Peter Low in his submission, says that the town council sees no necessity for the Government to commence court action to impose conditions on grants it wishes to disburse.

Citing section 42 of the Town Councils Act, Mr Low said that the Minister already has the power to disburse grants to town councils with reasonable conditions imposed upon the grant as he deems fit.

Furthermore, Mr Low also referred to a letter sent on 29 April from the town council to MND to offer out-of-court mediation, that AHPETC had agreed to most of the terms set out by MND in the originating summons apart from the government’s nomination of independent auditors from PwC’s accountants.

The town council explains in the letter that there is a conflict of interest as PwC was involved in the previous AGO audit. Instead, the town council proposes the independent audit firm to be nominated by a retired Supreme court judge or senior counsel.

However, MND still decided to continue with its legal proceeding despite the offer by the town council to have the matter settled out of court.

Legal proceeding derailing efforts in submission of financial report to MND and core functions

AHPETC also states in its submission that the legal proceeding brought forward by MND will not just derail its efforts to meet MND’s deadlines for the financial reports, but also divert management attention away from AHPETC’s core functions to serve residents in the town council.

However, Ms Kam argues that the auditors are professionals and may come before the court to resolve issues should there be any. Ms Kam also argues that chairman of AHPETC, Ms Lim has said in parliament that the town council may not be able to meet the given deadline by MND and therefore should not be a factor in determining the appointment of independent auditors.

Justice Loh turned to ask if AHPETC is able to meet the deadline as stipulated by MND but the town council was unable to give a firm answer to Justice Loh on whether the town council is able to meet the given deadline of 30 June and 31 August to submit its financial reports to MND.

Mr Low said that the Business Assurance has completed their work on the disclaimers and it is up to annual report auditors to confirm if the work by the town council with the assistance from Business Assurance is enough.

Legislative intention of town council act does not allow government intervention 

The question of whether the court could intervene in town councils’ operations was brought up in the hearing when Mr Low in his submission, said that the town councils act has inadequacy in allowing anyone to seek corrective measures against an errant town council.

Mr Low noted that when the town council act was put in place in 1988, member for Bowen, Dr. S. Vasoo questioned how town councils are monitored under the town council act. The then-minister for National Development, Mr S. Dhanabalan replied to the member that residents will have to suffer any wrong doing of the town council and the government will not step in to interfere.

“…if they elect an MP who chooses a bunch of crooks to help him and together they run through the coffers in no time and leave the constituent in the lurch, well, they have to take the consequences”. – Mr S. Dhanabalan

Mr Low said that legislative intention of the town council act is meant to be as such that the government does not step in even if there are issues with the town council.

Justice Loh then asked if that meant no one or entity could take an errant town council to task even if they wanted to and wanted Mr Low to explain if that is the submission by AHPETC that town councils cannot be taken to task even if there are errant officers.

Mr Low answered by stating that it was the stance taken by the then-MND minister in 1988 and the current Minister for National Development, Mr Khaw Boon Wan, who had said in parliament over the 2013 AIM saga about the latitude given to MPs in running of town councils.

Justice Loh then followed on his questioning by asking Mr Low if there could be any remedy for a supposed town council which had used money in a manner which constitutes a breach of trust. Mr Low replied that one could then simply refer the supposed town council to the Corrupt Practices Investigation Bureau (CPIB) or Commercial Affairs Department (CAD).

No clear schedule by to resolve lapse

Justice Loh took issue with appointment of Business Assurance as there is no clear schedule stated in the submission of what the consultants are to do to remedy the lapses of the town council as highlighted in the AGO report. Citing Ms Lim’s speech in parliament, Justice Loh said that the town council has committed itself in cleaning up the house but has not come up with anything that he could see. After a brief discussion with Ms Lim, Mr Loh replied that AHPETC will submit the schedule to Justice Loh today in court.

At the end of hearing, Ms Kam expressed to the court that AGC would be amending their application to the court on the part for sinking funds and there was no objection from the defense.

The hearing will continue today at Supreme Court, members of public are able to attend the hearing.

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