Attorney-General v Aljunied-Hougang-Punggol East Town Council

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 27 November 2015
• Neutral Citation: [2015] SGCA 60
• Date: 27 November 2015
• Docket Number: Civil Appeal No 114 of 2015; Summons No 258 of 2015; Summons No 268 of 2015; Summons No 269 of 2015
• Published date: 28 November 2015
• Plaintiff Counsel: Aurill Kam, Nathaniel Khng and Germaine Boey (Attorney-General's Chambers)
• Hearing Date: 03 August 2015
• Defendant Counsel: Peter Cuthbert Low, Terence Tan and Christine Low (M/s Peter Low LLC)
• Court: Court of Appeal (Singapore)
• Subject Matter: Statutory Interpretation -Construction of Statute,Civil Procedure -Parties -Joinder

Sundaresh Menon CJ (delivering the judgment of the court): Introduction

Town Councils are a somewhat unique feature of our system of local government, established to control, manage, maintain and improve the common property of our public housing estates. Almost 80% of the population of Singapore reside in or own homes in housing estates built and managed by the Housing and Development Board (“HDB”), a statutory board established in 1960 and charged with the responsibility of addressing and meeting the housing needs of the general population of Singapore. Historically, the HDB was also responsible for the maintenance and management of the common property of these housing estates. By common property, in broad terms, we refer to those parts of the estate that are not encompassed within each individual unit, such as corridors, stairs and lifts. Town Councils were formed in 1989 to take over these functions from the HDB and in order to perform these functions, they clearly required funding. Such funds were to be raised from various sources, including conservancy and service charges imposed on residents as well as grants-in-aid made by the Minister of National Development (“the Minister”). These matters are provided for in the legislation that was passed for this purpose, namely, the Town Councils Act (Cap 329A, 2000 Rev Ed) (“TCA”). The TCA also deals with another important issue, namely, the obligation of Town Councils to manage their finances in accordance with the broad principles laid down in the TCA as well as the more detailed provisions contained in the Town Councils Financial Rules (Cap 329A, R 1, 1998 Rev Ed) (“TCFR”). But what if a Town Council fails to act in accordance with these principles or to comply with the detailed stipulations? What remedies avail an interested party in such a situation? Who may apply for relief in such circumstances and what are the limits of the court’s power to act? These are the questions that lie at the heart of this appeal, which was brought against the decision of a High Court Judge (“the Judge”) that is reported as Attorney-General v Aljunied-Hougang-Punggol East Town Council [2015] 4 SLR 474.

We reserved judgment after hearing the parties on 3 August 2015. Having considered the matter, we now give our judgment. We allow the appeal in part, for the reasons and on the terms that follow.

Background facts

The appellant is the Attorney-General acting on behalf of the Government in respect of a matter falling within the remit of the Ministry of National Development (“MND”). The HDB has also applied to be joined as a co-plaintiff/co-appellant in these proceedings. The HDB too is represented by the Attorney-General in this appeal. The respondent is the Aljunied-Hougang-Punggol East Town Council (“AHPETC”). On 1 October 2015, by virtue of the Town Councils (Declaration of Towns) Order 2015 (GN No S 577/2015), AHPETC was renamed as Aljunied-Hougang Town Council to reflect the change in the area of the Town. This, however, does not affect the present appeal as there was no order for the dissolution of AHPETC. For the purpose of this judgment, we will continue to refer to the respondent as AHPETC.

An overview of the TCA and the TCFR

As this appeal revolves around the lapses of a Town Council in relation to the management of its finances, it would be helpful, before we turn to the specific facts of this case, to provide a brief description of how Town Councils are funded, how those funds are regulated by the TCA and the TCFR, and to identify the main requirements of the TCA and the TCFR that are in issue here.

To perform its duties and functions under the TCA, a Town Council is empowered to levy conservancy and service charges on its residents every month (s 39 of the TCA). The amounts so collected are supplemented by grants-in-aid made by the Minister from time to time, typically on an annual basis (s 42 of the TCA). The Town Council is also empowered to raise loans for specific purposes as well as to invest its funds (ss 40 and 41 of the TCA). These are the primary sources of a Town Council’s funds, though there are others, such as fines collected by the Town Council for any infringements by the residents (ss 46 and 49 of the TCA).

All money received by a Town Council by virtue of the TCA and all liabilities falling to be discharged by a Town Council are to be paid into and out of a “Town Council Fund” which the Town Council shall establish (ss 33(1) and (2) of the TCA). The Town Council Fund consists of separate funds for different types of properties, such as residential and commercial, and these are further split into operating funds for short-term expenses and sinking funds for long-term expenses (ss 33(3) and (4) of the TCA; rr 3 and 4 of the TCFR). A portion of the conservancy and service charges, grants-in-aid and any interest received by a Town Council must be transferred into the sinking fund every quarter of every financial year (r 4(2B) of the TCFR). This is to ensure that there will be sufficient funds available, when required, for major cyclical upgrading and maintenance works such as repainting of the common property or upgrading of lifts. Proper accounts and records are required to be kept in respect of these funds as well as the transactions and affairs of the Town Council generally (s 35(a) and (b) of the TCA).

A Town Council is not allowed to disburse any money out of the Town Council Fund except for the purposes specified in the TCA (s 33(6) of the TCA). It is also required to do all things necessary in order to ensure that all payments out of its moneys are correctly made and properly authorised and that adequate control is maintained over the assets of the Town Council and over any expenditure it incurs (s 35(c) of the TCA). Aside from this, a Town Council is also obliged to comply with the financial rules set out in the TCFR. Part IV of the TCFR, for example, deals with expenditure and payments and it covers details such as the authority to sign cheques and incur expenditure on behalf of the Town Council (rr 33 and 34 of the TCFR).

To ensure that its finances are in order, every Town Council is required to prepare and submit its financial statements annually (s 36 of the TCA), and its accounts are required to be audited by the Auditor-General or such other auditor as may be appointed by the Minister (s 38 of the TCA). Other checks (such as surprise examinations of safes, cash-boxes, drawers or other receptacles for money (r 114 of the TCFR)) and procedures (such as procedures for quotations and tenders (rr 73 and 74 of the TCFR)) are also put in place to prevent loss and wrongful use of funds.

The foregoing requirements are unsurprising since they pertain to a public body that has control over and custody of public funds for specified purposes.

The breaches by AHPETC in this case

For the purpose of the present appeal, we are primarily concerned with the following requirements that were imposed on AHPETC: to do all things necessary to ensure that all payments out of its moneys are correctly made and properly authorised and that adequate control is maintained over the assets of, or in custody of, the Town Council and over the expenditure incurred by the Town Council (s 35(c) of the TCA); and to make transfers to the sinking fund within one month from the end of each quarter of each financial year (r 4(2B) of the TCFR).

Against that background, we set out a chronology of the key events that led to this appeal.

Like all Town Councils, AHPETC was obliged under the TCA to submit audited financial statements with the auditor’s observations report (if any) for each financial year to the Minister within five months of the end of the financial year so that these could be presented to Parliament. AHPETC was late in submitting these statements for two consecutive financial years −FY 2011/2012 and FY 2012/2013. AHPETC’s audited financial statements and auditor’s observations reports which were eventually issued for these financial years contained various disclaimers by its auditors. In essence, the auditors stated that they were unable to express an opinion as to the validity of certain receivables, expenses and payments; the completeness of AHPETC’s related party disclosures; and the accuracy of the cash and bank balances in the bank accounts. They also noted AHPETC’s failure to comply with the requirement to make quarterly sinking fund transfers. Arising from these events, the Deputy Prime Minister and Minister for Finance, upon the request of the Minister, exercised his powers under s 4(4) of the Audit Act (Cap 17, 1999 Rev Ed) on 19 February 2014 and directed the Auditor-General to conduct an audit into the financial accounts, records and books of AHPETC for FY 2012/2013 (“the Audit”).

The Minister decided in the circumstances that the grants-in-aid that would otherwise have been payable to AHPETC for FY 2014/2015 (typically paid in or around April or May of each year), should be withheld pending the completion of the Audit. When informed of this development, AHPETC responded, telling the MND, among other things, that it would not be able to fulfil one of its obligations under the TCFR for the first quarter of FY 2014/2015 if the grants-in-aid were withheld. The obligation in question was that arising under r 4(2B) of the TCFR which required that a stipulated portion of the conservancy and service charges, grants-in-aid and interest received be transferred by every Town Council to its sinking fund every quarter – see [6] above. Upon being apprised of AHPETC’s position, the Minister offered to disburse half of the grants-in-aid subject to certain conditions. It appears that these conditions were not acceptable to AHPETC. As a result, the grants-in-aid were not made, and consequently, AHPETC has not, since FY 2011/2012, been able to make the transfers into its sinking fund in a timely fashion, and further,...