Are the Ridout road rentals in breach of the Ministers’ Code of Conduct?

Are the Ridout road rentals in breach of the Ministers’ Code of Conduct?

by Jeannette Chong-Aruldoss

A minister must scrupulously avoid any actual or apparent conflict of interests between his office and his private financial interests. This is one of the rules stated in the Code of Conduct for Ministers of Singapore.

News that Cabinet Ministers K Shanmugam and Vivian Balakrishnan were living in SLA-managed state-owned colonial mansions sitting on massive land areas, evoked many questions and much indignation from the public.

Mr Shanmugam being the Law Minister under whose purview the SLA falls, while being a tenant of an SLA-managed state-owned heritage home, is a decidedly red flag.

Is there a conflict of interests?

On 23 May 2023, Prime Minister Lee Hsien Loong issued a press release, announcing the appointment of Senior Minister Teo Chee Hean to review the rental of the two SLA-managed properties to Mr Shanmugam and Dr Balakrishnan and establish whether proper processes have been followed, and if there has been any wrongdoing.

PM Lee said that the review had to be done to ensure that the Government maintains the highest standards of integrity.

The decision to constitute the SM Teo review committee may be seen as an acknowledgment that the Ridout Road rentals do not look good and a public explanation was warranted.

A look at Clauses 3.1 and 3.2 of the Code of Conduct for Ministers indicates that the Ridout Road rentals by the two ministers may be problematic, perhaps more so for Mr Shanmugam than for Dr Balakrishnan:

“3.1 A Minister must scrupulously avoid any actual or apparent conflict of interest between his office and his private financial interests. Such a conflict, or a perception of conflict, can arise –

(a) from the exercise of powers or influence in a way that benefits or may be seen to benefit private interests held; or

(b) from using special knowledge acquired in the course of his activities as Minister to bring benefit or to avoid loss (or could arouse reasonable suspicion of this) in relation to his private financial interests.

3.2 A Minister therefore must never enter into any transactions whereby his private financial interest might, even conceivably, come into conflict with his public duty.”

The key take-away from Clauses 3.1 and 3.2 is that appearances are very important.

Apart from actual conflict of interest, a minister must also scrupulously avoid situations of apparent conflict of interest or where there is a perception of conflict.

A perception of conflict could arise from the exercise of powers or influence in a way that may be seen to benefit private interests held.

It could also arise from using special knowledge acquired in the course of his activities as a minister that could arouse reasonable suspicion of bringing benefit or avoiding in relation to his private financial interests.

As for Clause 3.2, the words “might, even conceivably” seem to import the idea that transactions where there is a potential for conflict of interests between private financial interest and public duty should also be avoided.

Fundamentally, a landlord and a tenant are opposing parties to a contract. A landlord’s interest runs in the opposite direction of a tenant’s interest. Other examples of opposing contractual parties are: buyer and seller; lender and borrower. You get the picture.

By renting a state-owned house, Mr Shanmugam entered into a landlord-and-tenant relationship with the Government. SLA represents the Government as the landlord. SLA is under the purview of the Ministry of Law. Mr Shanmugam is the Law Minister.

How does that situation sit with Clauses 3.1 and 3.2?

Special knowledge

A person looking to rent a black-and-white house will access SLA’s website to see what houses are up for public tender.

Other data that house hunters may want to know but which SLA does not publish, include:

  • As to which and when certain vacant houses would be going up for public tender;

  • The Guide Rent for houses up for tender;

  • The rentals of tenanted houses (but SLA does publish the results of recent open tenders on their website for a period of time); and

  • The tenancy expiry date of tenanted houses.

Having information that others do not have, is an actual or potential advantage.

According to SLA’s statement of 12 May 2023, the Guide Rent for 26 Ridout Road was not disclosed to Mr Shanmugam when he made his bid for it in June 2018.

As Law Minister, would Mr Shanmugam have access to other SLA data relating to black-and-white properties, which other house-hunters do not?

On 2 August 2022, Mr Shanmugam, speaking as the Law Minister, answered parliamentary questions on rental demand for SLA-managed black and white houses.

It was not public knowledge then that Mr Shanmugam was himself a tenant of such a state-owned colonial home since June 2018. Mr Shanmugam informed:

“SLA currently manages 262 residential State black-and-white bungalows which exceed 20,000 sqft in land area. As of 21 July 2022, 236 of these residential State black-and-white bungalows are tenanted, with a median land size of about 38,000 sq ft and a median rental of about $13,000 per month.”

The information provided by Mr Shanmugam gives the impression that he has access to data relating to SLA’s inventory of tenanted and untenanted black-and-white houses and the rentals which the tenanted houses were fetching.

Is there an apparent or a perception of conflict of interests of a kind that is not permitted by the Ministers’ Code of Conduct? I guess this question will be considered by SM Teo’s review committee.

Suffice to say, by renting SLA-managed properties, the two ministers may well have created special challenges for SLA, challenges which SLA would not have had to face had the tenants been anyone else.

SLA‘s job of managing a property may be split into 3 stages:

  1. Finding a tenant;

  2. Managing the tenant and the tenancy; and

  3. Renewing the tenancy.

For the first stage, the two ministers went through the transparency of a public tender to become an SLA tenant. If the tender process was rigorous as to be blind to the status of Mr Shanmugam and Dr Balakrishnan, then I suppose it is all well and good.

Managing the Tenant and the Tenancy

But after that, the tenant and SLA must face and deal with each other directly for issues relating to the premises. Situations will arise whereby SLA, acting on the landlord’s behalf, will have to exercise discretion to make decisions.

For example, the tenant may wish to do up the place to suit his living arrangement; or the landlord must do some fixing up to fulfil its responsibilities.

The tenant and SLA on the landlord’s behalf would have to discuss matters such as: what sort of works may be done, when the works are to be carried out, the length of time to complete the works; as who bears the costs for what items; and so forth.

So that the minster-tenants would not be seen as “taking advantage” of their status, SLA would have to ensure that in exercising their discretion and when making decisions, they treat the minister-tenants no more favourably than other tenants i.e. take pains to show no favouritism. Thus, there would be an extra layer of vigilance and diligence that SLA would not have had to take on had the tenants been anyone but ministers.

According to Urban Redevelopment Authority (URA) records, applications were made for certain works to be carried out at both Ridout Road houses after the tenancies had commenced:

  • Mr Shanmugam’s tenancy commenced in June 2018. On 17 September 2018, URA received an application from SLA to carry out the following works at 26 Ridout Road: “Proposed additions and alterations involving a new open-sided carpark shelter to the existing 2-storey conservation detached dwelling house”.

  • Mr Shanmugam renewed his tenancy in June 2021 for another three years. On 13 October 2022, URA received an application from SLA to carry out the following works at 26 Ridout Road: “Proposed restoration and replacement of existing doors and windows to conserved detached house”.

  • Dr Balakrishnan’s tenancy commenced in October 2019 and was renewed in October 2021. On 16 July 2021, URA received an application from a company to carry out at 31 Ridout Road: “Proposed retention of temporary addition & alteration works to existing 2-storey conservation bungalow”.

There would almost certainly have been discussions, negotiations and agreement between the tenant and landlord on the proposed works before application was made to carry out those works.

Given that the tenant in both cases were ministers, and one of whom was also the Law Minister, did SLA have protocols in place to ensure that the minister-tenants were dealt with at arm’s length, with no deference being granted to the tenants by virtue of their public office?

Would SLA tenant-management processes for the Ridout Road rentals be one of the things that SM Teo’s review will check?

Renewal of Tenancies

Both ministers obtained their initial tenancies through a public tender. But the renewal of tenancy is a matter to be negotiated between the incumbent tenant and the landlord, as shown by SLA’s specimen Tenancy Agreement, which provides:

“If the Tenant wishes to have a tenancy of the Premises (in whole and not in part) for a further term, the Tenant shall serve a written request on the Landlord not less than three (3) months, and not more than six (6) months before the end of the Term, and the Landlord may, at its sole discretion, agree to grant the Tenant a tenancy for such further term from the end of the Term, at such rent and on such terms and conditions to be agreed between the Parties.”

Both ministers renewed their tenancies upon expiry. Given that the tenants were ministers, and one of whom was also the Law Minister, did SLA have protocols in place to ensure that negotiations for renewal were conducted at arm’s length and that the terms and conditions of the renewed tenancy agreement were no sweeter to the minister-tenant than for any other tenant?

Would SLA’s tenancy renewal process for the Ridout Road rentals be one of the things that SM Teo’s review will check?

Misgivings with SM Teo being appointed to head the review

The ministerial review is certainly welcomed. But the decision to appoint SM Teo to head the review has left a lot to be desired.

The irony is not lost on the public that SM Teo is a fellow cabinet minister and long-time colleague of the two ministers whose actions are the subject of SM Teo’s review.

Since 1 November 2010, SM Teo and Mr Shanmugam have taken turns to sit as Home Affairs Minister:

• Mr Shanmugam from 1 November 2010 to 20 May 2011

• SM Teo from 21 May 2011 to 30 September 2015

• Mr Shanmugam from 1 October 2015 to date

The public wants an independent review. Can SM Teo’s review can be described as such?

We will never know why PM Lee did not decide to appoint a current or retired judge or civil servant, or any other non-political, non-partisan but capable person, to head the review. A review headed by any such person would have been undoubtedly considered as an independent review.

Anyway, a review is better than no review. We shall have to trust SM Teo and his team to measure the conduct of SLA and that of the two ministers with a fair and objective yardstick.

By the way, SM Teo’s review seems to be confined to Mr Shanmugam and Dr Balakrishnan, presumably because they were the two ministers cited by Kenneth Jeyaretnam in his blogposts.

But what of the bigger question: Are there any other ministers who are or may have rented SLA-managed properties?

If there are, then such ministers should also come under SM Teo’s review. It would seem unfair to Mr Shanmugam and Dr Balakrishnan if such other ministers were exempted from review.

SM Teo should poll all ministers to ascertain whether there are other ministers who are or have been tenants of SLA-managed state-owned properties.

If there are not, then chronologically, Mr Shanmugam is the first minister ever to do so in June 2018, followed by Dr Balakrishnan.

PR Fiasco or Wrongdoing?

Let’s review what has happened so far:

  • There has been rife public speculation and disquiet on the propriety of the Ridout Road rentals.

  • SLA has come out to make a public statement, in effect, defending the Ridout Road rentals by the two ministers.

  • A review committee has been set up to scrutinise the rental processes and to check for wrongdoing, with the aim of defending the Government’s integrity.

  • Two sets of public officers would have been deployed: one set to give a detailed explanation of what transpired and the other set to study the explanation given by the first set.

  • Precious parliamentarian time will be spent to debate the findings of the review committee.

At this point in time, the decisions by the two ministers to rent the Ridout Road properties in the first place, look like bad calls.

All the ruckus would have been spared had the two ministers not rented SLA-managed state-owned houses.

More serious is the question of whether the ministers took advantage of their positions to obtain personal benefits from the Government, while others stood in line.

Ugly optics are a public relations fiasco. But conflicts of interest can send someone out of office.

• Is the public indignation merely a PR fiasco?

• By expressing its dismay, is the crowd signalling its detection of impropriety?

• On this, is the wisdom of the crowd right on the mark?

In due course, PM Teo will conclude his review, and Parliament will debate on it come July 2023.

If, at the end of the day, Mr Shanmugam’s and Dr Balakrishnan’s rentals are vindicated, their vindication will serve to clarify that the Ministers’ Code of Conduct does not operate to prevent ministers from renting SLA-managed state-owned properties in the same way that the two ministers had done.

This would mean that regardless of any negative sentiment the public may have, there would be no legitimate ground for complaint when the next minister follows suit.

Jeannette Chong Aruldoss is a practicing lawyer and a former politician in Singapore. This article is the second of a 2-part commentary.

See her earlier article, “SLA statement on Ridout Road rentals raises more questions than answers

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