The High Court has turned down the government's application to appoint independent accountants to oversee government grants made to Aljunied-Hougang- Punggol East Town Council (AHPETC), run by the opposition Workers' Party.
But the court also highlighted the gravity of the town council's lapses and raised the possibility of other parties taking legal action.
In his grounds of decision released on Wednesday, Justice Quentin Loh ruled that the Ministry of National Development (MND) had not established legal basis for its court application to appoint such accountants.
But "grave and serious questions" have been raised over the state of AHPETC's accounts and his judgment does not stop any resident or the Housing Development Board from bringing an action against the town council if they wish to, he said.
The court also noted that MND can require the town council to appoint independent accountants, as a condition for releasing the grants, without having to get a court order.
MND said in response to media queries that it would "study the judgement carefully and consider what the next steps should be".
MND's lawyers had argued that the ministry is a "person" for whose benefit the Town Councils Act (TCA) is imposed on AHPETC, but Justice Loh disagreed.
The judgement noted that when the Town Councils were set up, the whole idea was to rest the responsibility of the management of the funds as well as the estate with the Town Council.
Although MND has some interest in a loose sense in ensuring that a town council complies with its statutory duties, this does not give rise to a right on MND's part to head to court to enforce the town council's duty, the ruling said.
In March, the ministry applied to the court to appoint independent accountants to oversee government grants given to the town council and sign off on payments larger than S$20,000 made from these grants.
The ministry has withheld two years, or about S$14 million, worth of grants to AHPETC, saying that the town council has not taken sufficient measures to rectify accounting and governance lapses uncovered by an earlier Auditor-General's Office audit. It also missed two recent sinking fund payments.
AHPETC has said that it deferred its sinking fund transfers as it needed to prioritise the use of the funds for routine expenses and operations.
While the court will not appoint accountants, the judge described the town council's failure to fulfil its obligations as "the height of financial irresponsibility" and referred to questions raised over its accounts, the validity and propriety of payments made to related parties, and numerous breaches of the Town Councils Act and the Town Councils Financial Rules.
"If AHPETC was a managing corporation subject to the Building Maintenance and Strata Management Act, I have no doubt that AHPETC or its officers will be exposed to the possibility of civil liability or, in an extreme scenario, criminal liability," he said.
It is a "travesty" for AHPETC to have ignored their duties and obligations, and they "owe a duty and a heavy responsibility to their constituents to run AHPETC properly and it is incumbent on them to put their house and finances in order," Justice Loh added.
The Straits Times reported AHPETC chairman Sylvia Lim as saying, in response to the judgment: "We respect the court's decision and will be studying the judgment in detail."
"In the meantime, we remain focused on filing our audited accounts for FY13/14 and FY 14/15, and on continuing to improve our financial processes." Ms Lim is also the Workers' Party chairman and an Aljunied GRC Member of Parliament.
This article was first published on May 28, 2015.
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