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
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.
In bad faith
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.
The 'woefully inadequate' payment process
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.
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”.