Selvarajan A/L Veeriah v 1. ) Bangsar Aman Management Corporation (WA-22NCvC-777-12/2024)

BANGSAR AMAN MANAGEMENT CORPORATION

KARTHIGASU A/L K. RATNASINGAM

FOO JIA–HOU

ANG LING LING

ADRIAN HO TUCK DJI

RUBAN SATKUNA NATHAN

PLANET GARDENS SDN BHD (NO. SYARIKAT: 201101002535 (930672-A)) 11/11/2025 23:33:46 WA-22NCvC-777-12/2024 Kand. 196 S/N c5w4wBNjvUe8Nat090Oh9w GUAMAN SIVIL NO: WA-22NCvC-777-12/2024 8. LIEW TZE HANN

ISAAC DANIEL (NO. K/P: 641009-10-5563) …DEFENDAN-DEFENDAN GROUNDS OF JUDGMENT Introduction 1. The Plaintiff had named nine parties as defendants in this civil suit, praying for various orders.

The subject matter herein is the 9th Defendant’s application to strike-out the Plaintiff's claim against him, on the ground that it is frivolous and vexatious, and tantamount to an abuse of process of court.

The first issue for determination is a question of law on whether there is a duty of care owed by an external auditor (the 9th Defendant) to an individual proprietor of a parcel in a strata development. The second issue is whether the Plaintiff’s claim against the 9th Defendant is obviously unsustainable. The principles applicable to a striking-out application under Order 18 rule 19 Rules of Court 2012 are trite, as expounded in Bandar Builder Sdn Bhd & Ors v United Malayan Banking Corporation Bhd [1993] 3 MLJ 36.

On the said question of law, there are authorities to support the 9th Defendant’s contention that an external auditor of the accounts of a management corporation – whose contractual relationship is with the management corporation – does not owe any duty of care to individual proprietors in a strata development. On the facts, I find that S/N c5w4wBNjvUe8Nat090Oh9w there is no basis whatsoever for the Plaintiff to name the external auditor as a co-defendant. It was an abuse of court process for the Plaintiff to have ‘dragged’ the auditor into his suit against the management corporation (the 1st Defendant) and the other proprietors of parcels within the strata development. Therefore, I decided to allow the 9th Defendant’s striking-out application. My reasons are explained in detail below. Background Facts 5. The Plaintiff and his sister – who has been named as a third party in this suit – are co-proprietors of one unit of apartment in the strata development known as Bangsar Aman in Kuala Lumpur.

The 9th Defendant is a registered auditor and a chartered accountant by profession.

On 26th November 2021 a resolution was passed at an Annual General Meeting (“AGM”) of the 1st Defendant to appoint the 9th Defendant’s firm, namely Messrs Daniel & Co, as the external independent and licensed auditor of the 1st Defendant (the management corporation).

The Plaintiff’s sister, who is the Plaintiff’s co-proprietor of his unit, was elected the treasurer of the 1st Defendant (management corporation) during the same AGM as when the 9th Defendant was engaged as auditor.

The Plaintiff’s said sister is a Third Party in this suit following the issuance of Third Party Notice by the 3rd to 6th Defendants. S/N c5w4wBNjvUe8Nat090Oh9w

The Plaintiff’s Claim against the 9th Defendant The Plaintiff’s Statement of Claim is very lengthy; the English translation is 120 pages long. However, as against the 9th Defendant, little was pleaded by the Plaintiff.

In para 174 of his Statement of Claim, the Plaintiff pleaded as follows against the 2nd and 9th Defendants: “174. It was foreseeable that the Plaintiff and other parcel proprietors would rely on the accounts, financial statements, and audit reports prepared by Crest Consulting Services and Daniel & Co to assess Bangsar Aman Management Corporation’s financial standing.”

In para 175, he alleged that the “negligence” of the 2nd and 9th Defendants caused the Plaintiff to “sustain measurable harm, including the continued financial management” by the management committees. The exact words of para 175 are as follows: “175. As a direct result of the negligence of Crest Consulting Services and Daniel & Co, the Plaintiff sustained measurable harm, including the continued financial mismanagement by the October 2023 and/or May 2024 Management Committees”.

Lastly, in para 176 the Plaintiff pleaded liability for “negligence”: “176. By reason of the matters aforesaid, Dato Mohan Karthigasu of Crest Consulting and Isaac Daniel of Daniel & Co are jointly and severally liable in damages to the Plaintiff for negligence.”

In the prayers in his Statement of Claim, the Plaintiff came up with a prayer against the 9th Defendant based on allegation of “constructive S/N c5w4wBNjvUe8Nat090Oh9w trust” and “unjust enrichment” simply because the 9th Defendant had been remunerated for acting as the auditor of the MC.

The 9th Defendant’s Contention The 9th Defendant contends that he was appointed as an independent external auditor for the Management Corporation of Bangsar Aman (the 1st Defendant) without any managerial or operational control of the 1st Defendant. For clarity of reference, the 1st Defendant Management Corporation shall be referred to below as “the MC”.

According to the 9th Defendant, his job was simply to examine financial statements already prepared by the MC's bookkeeper and management committee, verify their accuracy according to auditing standards, and report his findings.

The 9th Defendant further avers that he had no authority over fund management, payment authorisations, or financial decision-making of the MC.

On a point of law, learned counsel for the 9th Defendant submits that no legal duty of care is owed by the 9th Defendant to the Plaintiff or any individual proprietors. His contract was exclusively with the MC, and since there is no contractual nexus between him and individual proprietors, and hence, no duty of care should be imposed upon him.

The 9th Defendant’s learned counsel relies on Caparo Industries plc v Dickman [1990] 2 AC 605 which has been applied by the Federal Court in Malaysia, stating that the following three elements must be S/N c5w4wBNjvUe8Nat090Oh9w considered in determining whether a duty of care ought to be imposed:

reasonably foreseeable harm;

(ii) relationship of proximity;

(iii) whether it is fair, just and reasonable to impose a duty. The 9th Defendant argues that none of these three elements exist between him and the Plaintiff.

Learned counsel for the 9th Defendant emphasises his contention that as an external auditor, the 9th Defendant merely relied on the financial statements and data provided by the MC for his audit, and therefore the Plaintiff’s prayer based on an allegation of “unjust enrichment” gained by the 9th Defendant is wholly misconceived, erroneous and without basis.

It was finally averred by the 9th Defendant that the Plaintiff’s claims are frivolous and vexatious, and tantamount to an abuse of the court’s process, and should therefore be struck out forthwith.

Analysis of the Law and Facts Even though the judgment of the Federal Court in Loh Kok Beng & 49 Ors v Loh Chiak Eong & Anor [2015] 4 MLJ 734 is about the scope of an architect’s duty, it provides guidance as to whether an auditor – such as the 9th Defendant in this case – owes a duty of care to to an individual proprietor of a parcel in a strata development. When Loh Kok Beng (supra) is read with the Federal Court’s judgment in Majlis Perbandaran Ampang Jaya v Steven Phoa Cheng Loon & Ors [2006] 2 MLJ 389, a rational analogy may be drawn between an architect whose contractual relationship is with the S/N c5w4wBNjvUe8Nat090Oh9w developer (not with the purchasers) and an auditor whose contractual relationship is with the MC (not with any individual proprietor of a parcel in the strata development, such as the Plaintiff in this case).

In Majlis Perbandaran Ampang Jaya v Steven Phoa Cheng Loon (supra), reference was made to the English case of Caparo Industries Plc v Dickman [1990] 2 AC 605 and by answering those three Caparo questions, the Federal Court held that the architect does not owe a duty of care. The relevant passage from the judgment of the Federal Court in Majlis Perbandaran Ampang Jaya (supra) is as follows:- “Under English law, the general duty of care test enunciated in Caparo Industries Plc v Dickman [1990] 2 AC 605 is applicable to all negligence claims, including claims for pure economic loss. Pursuant to this test, three questions have to be addressed, namely, whether the damage suffered by the plaintiff is reasonably foreseeable; whether there is a relationship of proximity between the plaintiff and defendant; and whether it is fair and reasonable that the defendant should owe the plaintiff a duty of care.”

Two years after Majlis Perbandaran Ampang Jaya (supra) was decided, the Federal Court had to decide on the imposition of duty of care on a firm of property valuers. That was in the case of The Co-Operative Central Bank Ltd v KGV & Associates Sdn Bhd [2008] 2 MLJ 233, whereby the Federal Court reiterated the Caparo Test and held that to widely impose a duty of care in favour of all those persons who might choose to act on advice given by a professional S/N c5w4wBNjvUe8Nat090Oh9w to his client would impose “an intolerable burden” on the professional. The exact words of Alauddin FCJ (as he then was) are as follows:- “In our respectful view, the situation is akin to the professional referred to by Griffiths LJ in Smith v Eric Bush who ought not on policy grounds to be held to owe a duty to persons unknown. At p 865 of the report His Lordship observed: It would impose an intolerable burden upon those who give advice in a professional or commercial contract if they were to owe a duty not only to whom they give the advice but to any other person who might choose to act upon it.”

In other words, the Federal Court held that professionals who give advice and professional opinion in a commercial contract do not owe any duty of care to other persons who have received a copy of the opinion and who might choose to act upon it.

Now, why did the MC appoint an auditor? The answer is in s.62(1)(b) and (c) of the Strata Management Act 2013 (“SMA 2013”). The main reason an auditor is appointed by every management corporation is simply because there are statutory provisions that make it mandatory.

S.62(1)(b) of SMA 2013 makes mandatory for an approved company auditor to be appointed to carry out the audit of the accounts annually. It reads: “S.62(1) A management corporation shall in respect of the maintenance account and the sinking fund account

appoint an approved company auditor to carry out the audit of the accounts annually;” S/N c5w4wBNjvUe8Nat090Oh9w

The statutory requirement for every management corporation to file audited accounts is in s.62(1)(c) which reads: “A management corporation shall in respect of the maintenance account and the sinking fund account

file with the Commissioner a certified true copy of the audited accounts together with the auditor’s report within fourteen days of the accounts being audited.”

Thus, it is clear that the main purpose of appointing an auditor is for compliance of s.62(1)(c) SMA 2013, to enable the MC to file with the Commissioner of Buildings a certified true copy of the audited accounts together with the auditor’s report.

Delving deeper into the SMA 2013, I find that the 9th Defendant is justified to take the position that there was no need for him to play any part in the preparation of the accounts of the MC. It is indeed the responsibility of the MC to prepare the accounts for its auditor to audit. This is statutorily provided in s.62(1)(a) that: “A management corporation shall in respect of the maintenance account and the sinking fund account

cause to be prepared such accounts and records of accounts …”

Further, as mentioned above, s.62(1)(b) mandates the appointment of an auditor to audit the accounts, i.e. the accounts as described in subsection (1)(a) annually. S/N c5w4wBNjvUe8Nat090Oh9w

Conclusion By applying the law to the undisputed facts of this case, it is my judgment that the 9th Defendant was appointed as an external auditor for the MC without any managerial or operational control of the MC. His job was indeed just to examine the accounts already prepared by the MC and/or its bookkeeper and management committee, and to verify their accuracy according to auditing standards, and report his findings. On a balance of probabilities, the 9th Defendant has discharged his duty as the auditor appointed by the MC.

Based on the above authorities, I am constrained to hold that in the performance of his duty as the auditor of the MC’s accounts, the 9th Defendant owes no duty of care to the Plaintiff.

The fact that the Plaintiff’s sister/co-proprietor for his unit (the 3rd Party in this civil suit) was the treasurer of the MC is an additional fact in favour of the 9th Defendant. If there were indeed fraud in the expenditure of the MC – as alleged by the Plaintiff – the first person who ought to have lodged a police report for fraud ought to have been the treasurer, i.e. the Plaintiff’s sister and co-proprietor of his unit. At the very least, she ought to have lodged a report with the Commissioner of Buildings – if she had really detected any fraud as alleged by her brother (the Plaintiff). This is an additional point that goes towards showing that the Plaintiff has no cogent reason to justify adding the 9th Defendant into this suit as a defendant. It is my judgment that it was an abuse of process of court for the Plaintiff to have named the 9th Defendant in his suit against the MC and the committee members – which actually included his own sister (treasurer) at the material time. A striking-out order would be justified S/N c5w4wBNjvUe8Nat090Oh9w S/N c5w4wBNjvUe8Nat090Oh9w Counsel for the Plaintiff: Leah Marie Samuel SOLICITORS FOR THE PLAINTIFF: MESSRS STEVEN THIRU Advocates & Solicitors Unit A1-12-01, Arcoris Mont Kiara, Jalan Kiara, 50480, MONT KIARA KUALA LUMPUR. Counsel for the 1st Defendant: Sarah Ho Yixin (Tan Yoong Chang with her) SOLICITORS FOR THE 1ST DEFENDANT: MESSRS SREENEVASAN Advocates & Solicitors Suites B-1C & D, Level, Block B The Five @ Kompleks Pejabat Damansara, Jalan Dungun, Damansara Heights, 50490 KUALA LUMPUR. Counsel for the 2nd Defendant: Syahana Binti Azhari SOLICITORS FOR THE 2ND DEFENDANT: MESSRS NANDRAJOG Advocates & Solicitors 3-9-9, Tower 3, UOA Business Park, 1, Jalan Pengaturcara U1/51, Kawasan Perindustrian Temasya, 40150 SHAH ALAM, SELANGOR. S/N c5w4wBNjvUe8Nat090Oh9w Counsel for the 3rd-6th Defendants: Pavitra Pillai A/P Ramesh Pillai (James Lau Jian Hui with her) SOLICITORS FOR THE 3RD-6TH DEFENDANTS: MESSRS M DAVID MORAIS Advocates & Solicitors 274, Lorong Maarof, Bukit Bandaraya, 59100 KUALA LUMPUR. Counsel for the 7th-8th Defendants: Tong Wei Chen SOLICITORS FOR THE 7TH-8TH DEFENDANTS: MESSRS YAP LIEW & PARTNERS Advocates & Solicitors No. 89 Jalan Ara, Bangsar Baru 59100 KUALA LUMPUR Counsel for the 9th Defendant: Lai Chee Hoe (Deyvinah dan Low Yen Hau with him) SOLICITORS FOR THE 9TH DEFENDANT: MESSRS CHEE HOE & ASSOCIATES Advocates & Solicitors Tingkat 1, Conservatory, No. 7, Lorong Travers, Federal Hill, 50480 KUALA LUMPUR. S/N c5w4wBNjvUe8Nat090Oh9w

Bandar Builder Sdn Bhd & Ors v United Malayan Banking Corporation Bhd [1993] 3 MLJ 36.

Caparo Industries plc v Dickman [1990] 2 AC 605.

Loh Kok Beng & 49 Ors v Loh Chiak Eong & Anor [2015] 4 MLJ 734.

Majlis Perbandaran Ampang Jaya v Steven Phoa Cheng Loon & Ors [2006] 2 MLJ 389.

The Co-Operative Central Bank Ltd v KGV & Associates Sdn Bhd [2008] 2 MLJ 233.

Hadi Bin Hassan v Suria Records Sdn Bhd [2005] 3 MLJ 522).

Order 18 rule 19 Rules of Court 2012.

Section 62(1)(a)(b) & (c) of the Strata Management Act 2013. S/N c5w4wBNjvUe8Nat090Oh9w