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HomesingaporeCNA Explains: What happened in the AHTC court case, what the latest...

CNA Explains: What happened in the AHTC court case, what the latest findings are and what's next

SINGAPORE: The Court of Appeal on Jul 7 ruled on the liability of the Workers’ Party (WP) leaders embroiled in the Aljunied-Hougang Town Council (AHTC) civil suits.

The court found Ms Sylvia Lim and Mr Low Thia Khiang liable for negligence in the AHTC payments process, but cleared WP chief and Leader of the Opposition Pritam Singh over this issue.

The Apex Court also found all three leaders and other town councillors liable for negligence to Sengkang Town Council over the same payments process.

CNA traces the history of the years-long case, what the findings mean and what is likely to occur next.


To understand this complex case fully, we first look at the history of how WP came to govern the areas involved. 

In May 2011, WP won the five-member Aljunied GRC in the General Election and retained its single seat of Hougang. This was the first time an opposition party had won a GRC.

WP formed the Aljunied-Hougang Town Council, and FM Solutions and Services (FMSS) was set up and hired as the town council’s managing agent.

After WP won the single seat of Punggol East in a by-election in 2013, it folded it into its existing town council and the entity was renamed the Aljunied-Hougang-Punggol East Town Council (AHPETC).

Months later, People’s Action Party (PAP) Members of Parliament questioned WP during a parliamentary debate about a possible conflict of interest. This was because AHPETC’s managing agent, FMSS, was owned by WP supporters.

In February 2015, the Auditor-General’s Office audited AHPETC and found lapses in governance and compliance, including the fact that FMSS owner Danny Loh was the secretary of the town council, with the power to co-sign cheques, while his wife How Weng Fan was the general manager of AHPETC.

WP lost Punggol East to the PAP in the September 2015 General Election, and the town council was named AHTC again.

In November 2015, the Court of Appeal ordered AHTC to appoint accountants to fix lapses found by the Auditor-General’s Office.

Accounting firm KPMG ran an audit and found what it termed “improper payments” worth over S$33.7 million (US$25.4 million) paid to FMSS and its subsidiary FMSI.

In February 2017, AHTC appointed an independent panel to review the findings of the report. 

On behalf of AHTC, the independent panel filed a civil suit against the three WP MPs – Ms Sylvia Lim, Mr Low Thia Khiang and Mr Pritam Singh – to claim the money back.

Shortly after, Pasir Ris-Punggol Town Council also filed a separate suit against the three WP leaders, for losses allegedly incurred while WP ran Punggol East constituency.

In 2020, after WP won the newly carved-out Sengkang GRC, Pasir Ris-Punggol Town Council handed its suit over to Sengkang Town Council, which the defunct Punggol East constituency was now under.

Although the suit by AHTC and the suit by Pasir Ris-Punggol Town Council, and later Sengkang Town Council, were separate, the court allowed them to be heard together.

This is not a criminal case, where a person is found guilty and sentenced to a range of options like jail or a fine, but is a civil one where a person found liable might have to pay damages to the suing party.


The defendants of the suits are: Ms Lim, Mr Low, Mr Singh, town councillors David Chua Zhi Hon and Kenneth Foo, FMSS’ leaders How Weng Fan and her late husband Danny Loh, and FMSS itself.

The trial for both suits opened in October 2018, with intense coverage by the media and high-profile lawyers on both sides. Senior Counsel Davinder Singh led the team acting for Pasir Ris-Punggol Town Council, while a team from Shook Lin and Bok, led by Mr David Chan, represented AHTC.


An 'egregious, cavalier misuse of public funds': Town council lawyers rip into Workers' Party leaders

Workers' Party MPs, AHTC town councillors acted in good faith, did not breach duties: Defence

On the defence side, Senior Counsel Chelva Retnam Rajah led a team from Tan, Rajah & Cheah for the three WP leaders and two town councillors.

Ms How, her late husband and FMSS were represented by Mr Leslie Netto and his team from Netto & Magin.

In the course of the trial, allegations were hurled back and forth. The plaintiffs asserted that the defendants had misused town council funds by allowing their own WP supporters to enrich themselves at the expense of AHTC’s coffers.


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They charged that the defendants did not act in the best interests of the town council when they waived tenders for a managing agent and for Essential Maintenance Service Unit contracts – a 24-hour service provided by town councils to attend to maintenance and emergency requests from residents. Instead, they hired FMSS for these roles.

The plaintiffs also had multiple other claims, including what they called “control failures” in how the defendants set up a payments process for the town council to pay FMSS and its subsidiary FMSI.

According to the plaintiffs, there was an unacceptably high degree of abdication of control to Ms How and Mr Loh, who had a conflict between their obligations to act in the interest of AHTC and their obligations to FMSS and their profit motive.

The plaintiffs also pointed to how contracts had been “improperly” awarded to third parties for various services the town needed, such as for electricity or pest control.

The gist of the defence was this: The WP leaders, town councillors and employees said they were not fiduciaries. A fiduciary is a person who acts for or on behalf of another, in a legal or practical relationship of trust, such as one between a trustee or beneficiary. 

Instead, they pointed to an indemnity clause in the Town Councils Act that protects town councillors from any legal proceedings for acts done in good faith.

The defendants described the unique and time-sensitive conditions they were in, being the first opposition party to win a GRC and inheriting what they called an unwilling incumbent managing agent – CPG Facilities Management – that was aligned with the PAP.


AHTC trial: Low explains reason for distrust of CPG, Davinder Singh says he's lying to the court

Workers' Party took on a town council which was ‘stripped of its computer system’: Defence

Fearing that CPG might “sabotage matters” and after hearing that CPG would not want to stay on, the WP leaders had to come up with a solution fast, and turned to Ms How and her husband, who had been helping Mr Low manage Hougang.

The question of Ms How and her husband’s potential conflicts of interest had been raised, but the WP leaders mistakenly believed it could be managed, as they saw how similar dual roles were taken in PAP town councils.


Hard for opposition town councils to find managing agents, AHTC’s previous vendor an ‘unwilling horse’: Defence

AHTC's previous managing agent CPG also had conflict of interest, defence suggests


Justice Kannan Ramesh agreed with the plaintiffs that the defendants were fiduciaries. He largely found that the defendants had breached various types of duties to the town council, ranging from fiduciary duties to duties of skill and care. In a large table, he summarised his findings:

The court found that this was not a sufficient safeguard, as there was no independent verification on whether FMSS or FMSI had adequately carried out the before payment was authorised.

The court said that the payments process was “woefully inadequate”, with AHTC simply not having adequate protocols or processes in place to assess independently and objectively the service levels of the work done by FMSS and FMSI.

“Accordingly, the extent of this risk cannot be overstated. Yet, this state of affairs was allowed to persist for at least three years – from July 2011 to July 2014 – and in that period of time, AHTC disbursed over S$23 million under the contracts,” said the court.

“The character of such neglect, in sum, was at least potentially grave.”


AHTC case: Court of Appeal finds 'gross negligence' in 'woefully inadequate' payments process

In terms of the payments process, the court found that all the defendants were liable to Sengkang Town Council (SKTC) for negligence in allowing the system to persist despite the conflict of interest involved.

The same payments process was used in AHTC – however, because AHTC did not have a case for Mr Singh, Mr Chua and Mr Foo, the court said they could not find the three men liable as it would prejudice them.

Therefore, only Ms Lim, Mr Low, Ms How and Mr Loh were found liable to AHTC for negligence in allowing the control failures to persist in the payments process.

The court also found Ms Lim liable for negligence when she did not renew contracts with cheaper providers and instead awarded a contract to Red-Power.


Now that the issue of liability has been determined, the next stage is for the court to assess what damages are payable, by whom and to whom. 

The court at various times had referred to the likely difficulty of this exercise. The Apex Court said in its first judgment that AHTC and SKTC, as claimants, would bear the burden of proving any losses that came as a result of the control failures.

“One difficulty that may stand in the way of the recovery of damages is the manner in which the plaintiffs framed their claim in relation to the ‘control failures’,” said the court.

The plaintiffs had relied on the KPMG payments report, which expressly did not preclude the possibility that there were additional payments to FMSS or FMSI that may be deemed improper. The report stated that these remained undetected due to the “failure of the control environment that (stems) from this flawed governance (which) has the potential to conceal and hinder the detection and identification of all instances of improper payment”.

“The plaintiffs’ case appears effectively to have been constructed on the perceived risks inherent in the payments process,” noted the court.

The court added that it was not clear if AHTC or SKTC had provided evidence of any instance where the control failures actually resulted in improper payments, such as for uncompleted works or works that were not performed up to par.

The court said the control failures may only demonstrate the risk of improper payments, and not the actualisation of that risk.

While it was theoretically possible that payments were certified and disbursed to FMSS or FMSI without the work being done properly, the burden lies on AHTC and SKTC as claimants to prove it, the court noted.

Costs of the trial will be decided by the trial judge only after damages have been assessed, but costs for the appeals will be settled by the Court of Appeal after they receive submissions from those involved.


Even after the court rules on damages, the defendants can still appeal against the ruling. If so, there will be another round of appeal hearings before a final verdict is out. It could take months or even a few years before the entire saga comes to a close.

If the WP MPs are unable to pay whatever damages they are ordered to pay, AHTC could commence bankruptcy proceedings against them.

Under the Singapore Constitution, a person is not qualified to be a Member of Parliament if he is an undischarged bankrupt.

If it gets to this, and the court declares the sitting MPs bankrupts, they will immediately lose their seats. Undischarged bankrupts will not be allowed to contest in any parliamentary election.

However, in October 2018, members of the public raised more than S$1 million in under a week after the three WP leaders called for help to raise funds to fight the case.

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