WP MPs acted in bad faith, face damages after Court of Appeal found “gross negligence” in AHTC’s payment process.

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Workers’ Party leaders involved in the Aljunied-Hougang Town Council (“AHTC”) civil suit face damages involving $23 million after the Court of Appeal found gross negligence in the town council’s payment process.

While the five-judge panel said that the WP MPs acted in good faith when they appointed FMSS as the Managing Agent, they maintained that the MPs were grossly negligent in payments made to managing agent FM Solutions & Services (“FMSS”) and its service provider FM Solutions & Integrated Services (“FMSI”).

No actual verification of work done

Not only was the payment process grossly flawed, it was clear at the outset that there was no actual certification or verification of work being done, Chief Justice Menon said.

Channels for residents to raise feedback and complaints can only provide a general means for AHTC to monitor FMSS’s general work performance and not verify if work was done in relation to each particular cheque that was signed off.

Indeed, by Ms Sylvia Lim’s own concession, she said that it would not be practicable for her to “personally verify on the ground that every item of work is completed before appending [her] signature to the cheque”. Chief Justice Menon said this only serves to underscore the how ‘woefully inadequate’ the safeguard was in the light of the involvement of the Conflicted Persons.

The various steps of the payment approval process simply involved tallying numbers to ensure that the figures were consistent. 

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In bad faith

This failure to verify actual work done right at the outset amounted to gross negligence, the Chief Justice said.

We are unable to see how such conduct which we consider amounted to gross negligence can be said to have been done in good faith. The importance of ensuring that the disbursement of public moneys be subject to oversight cannot be gainsaid.

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This was not mere negligence. This is because it is clear that the Town Councillors were aware of the existence of Ms How’s and Mr Loh’s potential conflict of interest as early as 19 May 2011, but failed to properly address such conflict.

Sundaresh Menon, Chief Justice

The judgement says that payments made according to stipulated rates did not absolve the the Town Councillors from having to satisfy themselves that the work was in fact done (and done satisfactorily), given that this risk of improper payment subsisted irrespective of the type of payment obligation under the Contracts.

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The 'woefully inadequate' payment process

The payments process instituted was woefully inadequate. AHTC simply did not have the adequate protocols or processes in place to assess independently and objectively the service levels of the work done by FMSS and FMSI.

The Chief Justice said 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.

In that period of time, AHTC disbursed over $23m under the Contracts.

The character of such neglect, in sum, was at least potentially grave, he said. 

The town councillors did nothing to address the need for a system to verify the payments to FMSS. They simply took it on faith that FMSS was performing the work it was contracted for and being paid to do. This was exacerbated by the manifest conflicts of interest which were clearly perceived and understood by all concerned.

“In our judgment, this was a paradigm example of poor financial governance and a breach of the duty of care.”

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The judgement says that the Town Councillors and Employees were in breach of duty for the “control failures”. But the recovery of damages is not going to be easy. This is because ‘the involvement of the Conflicted Persons, who were on the ground, also meant that it would be difficult to identify, with any precision, the losses that were incurred’.

In view of this, the Chief Justice agreed with the Apex Court that “the burden is on [the Plaintiffs] to prove that loss was indeed suffered, in the same way one would for breach of a duty of skill and care in tort”.

sgmatters.com wp mps acted in bad faith face damages after court of appeal found gross negligence in ahtcs payment process wp mps acted in bad faith face damages after court of appeal found gross negl

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