Reply to Media Queries on the Court of Appeal Hearing of 7 Jan 2016

Jan 7, 2016

HDB and Aljunied-Hougang Town Council (“AHTC”) appeared before the Court of Appeal today, to seek further directions on the Court of Appeal’s judgment of 27 Nov 2015 (the “Judgment”) (see Background below).

2.    We note, in this regard, that the media release issued by AHTC this evening (the “AHTC Statement”) is misleading, and presented a selective and incomplete account of the events that transpired before the Court of Appeal today.

(i) Appointment of Accountants – AHTC’s Statement indicates that it will “further correspond with HDB on its nomination”.

However: HDB had, earlier this week, written to AHTC to request for further information on AHTC’s proposed candidate, Business Assurance (see Background for details) so that these can be placed before the Court.

AHTC did not respond to HDB’s queries by the time of the hearing. The Court ordered an adjournment, and directed AHTC to file an affidavit to respond to HDB’s queries.

(ii) Accountants’ Terms of Reference – AHTC’s Statement refers to the Court’s “helpful clarification that the accountants… were not being given a carte blanche to look into the TC’s affairs”.

However: the Statement fails to disclose that AHTC had tried, unsuccessfully, to limit the accountants’ terms of reference, to:

(a) Only the non-compliances identified by the Auditor-General’s Report (the “AGO Report”) of Feb 2015, and

(b) Only any improper past payments involving its former managing agent, FM Solutions & Services (“FMSS”) and FM Solutions and Integrated Services (“FMSI”).

The Court disagreed with AHTC, and said that:

(a) The Terms of Reference should include all non-compliances under Section 35(c) of the Town Councils Act which had been identified (i) by the AGO Report, and (ii) by AHPETC’s own auditors, in its subsequent audited financial statements for FY 13/14 and FY 14/15.

(b) The Terms of Reference should extend to examining whether any past payments made by the Town Council were improper and should therefore be recovered, and should not be limited to only transactions involving FMSS and FMSI.

(iii) Legal costs – AHTC’s Statement says that the Court rejected HDB and MND’s submission that AHTC’s conduct of its defence was egregious.

However: the Statement did not disclose that AHTC had attempted to seek legal costs and disbursements from MND and HDB for the hearings before the High Court and Court of Appeal.

The Court of Appeal dismissed this attempt, and agreed with HDB’s and MND’s submission that each of the parties should bear their own legal costs for the hearings before the High Court and the Court of Appeal.

3.    HDB looks forward to AHTC’s compliance with the CA’s direction and to receive the information it had earlier requested from the AHTC. Parties will appear before the Court of Appeal again late next week.
 
HDB and MND

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Background

• In its ruling on 27 November 2015, the Court of Appeal had found various breaches on the part of then-Aljunied-Hougang-Punggol East Town Council (“AHPETC”).

• The Court consequently ordered AHPETC to appoint accountants to assist in identifying its outstanding non-compliances with Section 35(c) of the Town Councils Act¹, advise it on appropriate remedial steps to be taken, and establish whether any past payments made by AHPETC were improper and ought therefore to be recovered.

• Given the complexity of the work entailed, the appointed accountant(s) should have the requisite depth of expertise and experience, as well as a proven professional track record. The accountant(s) should also have the resources to conduct a thorough audit to address the public interest issues noted by the Court. On this basis, HDB had suggested to Aljunied-Hougang Town Council (AHTC) that it appoint any of the major four public accounting firms in Singapore.

• The Town Council proposed to nominate M/s Business Assurance. HDB subsequently conveyed to AHTC that based on the information it had submitted, Business Assurance did not appear to have the requisite expertise, experience and capacity to carry out the duties envisaged by the CA’s orders. The Town Council disagreed and proceeded to apply to the CA on 11 Dec 2015 for directions on the appointment of its accountants.

• The Court of Appeal has directed AHTC to provide the following information on Business Assurance to HDB:

(a) Size of Business Assurance;

(b) Whether the team proposed by Business Assurance are Chartered Accountants, and their respective years of experience in each of the areas of (i) regulatory investigations, (ii) forensic services, and (iii) audits of public institutions including Town Councils;

(c) A list of all notable engagements undertaken by members of the team proposed by Business Assurance in the areas of (i) regulatory investigations, (ii) forensic services, and (iii) audits of public institutions including Town Councils; and

(d) Latest ACRA’s Practice Monitoring Programme (PMP) inspection results of members of the team proposed by Business Assurance

¹ Under Section 35(c) of the Town Councils Act, a Town Council shall do all things necessary to ensure that all payments are correctly made and properly authorised, and that adequate control is maintained over the Town Council’s assets and expenditures.