SINGAPORE – The Workers’ Party MPs from Aljunied-Hougang Town Council (AHTC) and other employees did not owe fiduciary duties to AHTC, the Court of Appeal said on Wednesday, reversing a finding from the High Court in 2019.

The main reason, said the five-member court in a written judgment, is that the relationship between a town council and its members and employees does not bear the characteristics of a fiduciary relationship.

However, the WP town councillors and employees owed a common law duty of care and skill to AHTC to carry out their duties in a non-negligent way, and they are not immune from claims against civil wrongs committed while executing the duties under the Town Councils Act if their actions were not carried out in good faith.

The judgment led by Chief Justice Sundaresh Menon said that the key fact that prevents fiduciary duties from applying to town councillors is that they were carrying out statutory duties under public law.

“Consequently, it is both unprincipled and inappropriate to ‘convert’ these statutory duties existing under public law into fiduciary duties existing under private law. To do so would completely erode the distinction between public law and private law.”

In his October 2019 judgment on the case, Justice Kannan Ramesh had said that town councillors must serve the interests of their town council with a “single-minded loyalty” and for proper purposes. They were therefore subject to both the standards of conduct imposed by public law, and to fiduciary duties imposed by private law.

“So far as the existence of a fiduciary relationship is concerned, I can see no principled distinction between a company and its directors, a management corporation and its council members, and a town council and its town councillors,” Justice Ramesh had said.

But the apex court ruled that the position of town councillors is distinct from that of a company’s directors, and that the nature of a fiduciary relationship being generally unsuited to the public law context has been recognised elsewhere, in the Supreme Court of Canada.

A fiduciary duty is one of the highest standards of care under the law. A breach of such duties results in “generous” financial remedies meant to prevent the abuse of such powers, the judges noted.

Wednesday’s judgment – the latest development in the long-running case that began in 2017 – sought to determine whether the town councillors’ and employees’ actions were done in good faith and in the execution of the Town Councils Act, and partially allowed the appeals from WP leaders and others involved in running the AHTC soon after the 2011 General Election.

The appeal judges said that none of the Parliamentary debates concerning the Town Councils Bill have indicated that a town council’s members and employees would owe fiduciary or equitable duties to it. It was “reasonably clear” from Parliament debates when the Town Councils Bill was introduced in 1988 that Parliament intended for town councils to serve both public and political functions.

Specifically, it was contemplated that, under the Town Councils Act, elected politicians would take on a greater role in managing estate and municipal governance, which had hitherto been the preserve of the Housing Board.

At the same time, the judges highlighted a previous judgment that said the town council scheme was “seen as a political measure that would deepen the connection between Members of Parliament… and the residents they were elected to serve in their constituency”.

“In this vein... this innately political dimension of the Town Council scheme also meant that the ultimate check against errant or ineffective Town Council members was thought to be at the ballot box.”

In short, the intention was for errant town council members to face political consequences, and bolsters the view that the relationship between a town council and its members and employees is not of a fiduciary nature, said the judges.

“Therefore, in our judgment, the Judge erred in finding that the town councillors and the employees owed fiduciary duties to AHTC,” they said.

“There is no principled basis on which fiduciary duties ought to be superimposed over and above the statutory duties which the town councillors and the employees were subject to.”

Read the full judgment at https://www.elitigation.sg/gd/s/2022_SGCA_72