Sungei Wang Plaza Management Corporation (Reg No 2297) v Leong Soo Nyean (W-04(NCVC)(W)-132-04/2017)

This was an appeal by the appellant/plaintiff against the decision of the learned High Court Judge in allowing the respondent’s/defendant’s appeal against the decision of the Sessions Court in allowing the appellants/plaintiff’s claim for recovery of one time capital expenditure (“CAPEX”) charges together with interests and costs. We had unanimously dismissed the appeal. We now give our reasons.

For ease of reference, in this judgment, parties will be referred to as they were in the Sessions Court.

The plaintiff is the management corporation established under the Strata Title Act 1985 (“the STA”) in respect of one shopping complex known as Sungei Wang Plaza, Jalan Bukit Bintang, Kuala Lumpur (the Plaza).

The defendant is an individual and the registered proprietor of one parcel known as Lot F065 in the Plaza. Pursuant to the strata title issued for Lot F065, the defendant is the proprietor of 17 share units of his parcel. 3

In the 2nd Extraordinary General Meeting held on 3.5.2012 (“the 2nd EGM”), approximately 97% majority of the parcel proprietors in the Plaza had voted and approved a resolution for the plaintiff to levy and collect the CAPEX charges from the parcel proprietors (“the resolution”).

The resolution authorised the plaintiff to incur a sum of RM28,061,000.00 for the upgrading and refurbishment of the whole of shopping complex for which each parcel proprietor of the Plaza will have to contribute RM1,000.00 for each share unit of the parcel.

The resolution passed for the collection of the CAPEX charges was submitted to the Commissioner of Building (“the COB”) and was received without objection by the COB as confirmed by its letter dated 27.6.2012.

Notwithstanding that the repair, refurbishment and upgrading works on the whole Plaza had been completed, the defendant failed to effect payment of the CAPEX charges for his 17 share units and failed to respond to the letters of demand sent to him by the plaintiff’s solicitors.

Consequently, the plaintiff brought an action against the defendant at the Sessions Court to recover (a) the sum of RM17,000.00 being the CAPEX charges; (b) the sum of RM1,123.75 being the late payment interest at the rate of 10% per annum on the charge accrued as at 8.5.2013 until the date of full realisation; and (c) interests on RM17,000.00 from 9.5.2013 until full realisation. 4

The defendant did not dispute the quantum of the CAPEX charges but contended that the plaintiff’s claim was unfounded and cannot be sustained in law or fact. It was the defendant’s case that the plaintiff had no authority or jurisdiction to collect CAPEX charges as well as the late payment interest and other interest and costs as they are not provided for in the STA.

The plaintiff’s case was that there was no prohibition under the STA for the plaintiff to incur CAPEX charges and that in the 2nd EGM, the plaintiff had been given the mandate to collect CAPEX charges. The plaintiff relied on sections 43, 45 and 52 of the STA which provide for the duties and powers of the management corporation, the establishment of the management fund and for the recovery of sum as debt due to the management corporation, respectively.

To establish its case, the plaintiff led evidence inter alia through Marini binti Suhaimi (“SP4”), the representative from Jabatan Penilaian Dewan Bandaraya Kuala Lumpur (DBKL) that the plaintiff can incur and collect the one time CAPEX charges so long as the plaintiff had obtained the mandate from the majority parcel owners in an AGM or EGM.

Evidence was also elicited through the cross-examination of the defendant that the defendant had attended the 2nd EGM and had not objected to the resolution passed for the CAPEX charges. In fact, the defendant had suggested that 50% of the CAPEX charges ought to be collected to work on the more urgent aspects of 5 refurbishment. In this regard, the plaintiff contended that the defendant is estopped from denying the authority of the plaintiff to collect such charges.

Essentially, the defendant took the position that the provisions relied upon by the plaintiff do not justify the imposition and collection of the CAPEX charges and that under the STA, the plaintiff is only entitled to impose and collect maintenance charges. The defendant had also challenged the election of the plaintiff’s council members at the 3rd AGM on the ground that a few of them were from a single property owner and that out of the seven (7) council members of the plaintiff elected at the 3rd AGM, a few of them were merely proxies. Accordingly, it was the defendant’s case that the 2nd EGM called by these improperly elected council members was null and void.

The trial in the Sessions Court raised the following issues, namely (i) whether the plaintiff had the authority and jurisdiction to collect the CAPEX charges; (ii) whether the plaintiff had the jurisdiction to collect late payment interest; and (iii) whether the council members of the plaintiff were validly appointed.

In considering the first issue, the learned Sessions Court Judge (“SCJ”) asked herself the following question: “Where should the Court look for such authority and jurisdiction? The answer will be the AGM’s that was held in relation to the issue of the One Time Capex charges.”.

The learned SCJ agreed with the plaintiff on the applicability of sections 43, 45 and 52 of the STA. She found that the plaintiff was merely carrying out its obligations and duties as a management 6 corporation in collecting the one time CAPEX charges which had been authorized and mandated by its members in the 2nd EGM.

On whether the plaintiff can impose and collect the late payment interest, the learned SCJ held that the plaintiff was authorized to impose interest on the outstanding CAPEX charges where the calculation and how it is to be compounded is provided for in the Occupier’s Handbook which had also been approved and adopted by the proprietors of the Plaza.

On the third issue concerning the validity of the council members of the plaintiff, the learned SCJ resolved the issue in favour of the plaintiff. The defendant contended that since four out of the seven members appointed were corporate representatives representing the same parcel owner i.e. Am Trustee Bank, the constitution of the council members was invalid. The learned SCJ held inter alia that they were validly appointed since the STA is silent on “the constitution of their appointment and even if there is such a proviso it never hinders the work of the Plaintiff since there is a remaining 3 validly appointed council members.”.

The learned SCJ concluded that on the balance of probabilities, the plaintiff had proved its claim against the defendant. Judgment was therefore entered against the defendant as per the plaintiff’s statement of claim. Aggrieved by the decision of the Sessions Court, the defendant appealed to the High Court. 7

Before the learned High Court judge, parties repeated their position in the Sessions Court. The defendant however raised one pertinent point, i.e. that the appeal ought to be allowed on the ground that res judicata applies as the issue in this case had been decided in favour of the defendant in another High Court case of Leong Soo Nyean v Sungei Wang Plaza Management Corporation [Kuala Lumpur High Court Civil Appeal No. 11ANCVC-42-06/2015] (“Appeal No. 42”).

The learned High Court judge found that the appeal before her and Appeal No. 42 had the following similarities:

Both cases were in respect of the CAPEX charges where the plaintiff claimed for payment of the charges as principal sum against the defendant. Only the strata units and the amounts claimed were different.

(ii) One of the defences in Appeal No. 42 was that the plaintiff had no authority to collect the CAPEX charges as it is not provided for under the Act.

(iii) The defendant had also challenged the validity of the resolution which allowed the collection of the CAPEX charges, passed at the 2nd EGM on the ground that the plaintiff’s council members elected at the 3rd AGM were improperly constituted. [23] The learned High Court judge perused the grounds of judgment in Appeal No. 42 and having done so, found that although Appeal No. 42 concerned an O14A application under the Rules of 8 Court 2012, the learned judge in Appeal No. 42 had gone into the merits of the matters raised and had decided the issues in the defendant’s favour. In particular, it was decided that the collection of one time CAPEX charges was not authorized under the STA and that the council members of the plaintiff were improperly constituted, and as a consequence, the resolution purportedly authorizing the collection of one time CAPEX which was passed at the 2nd EGM was null and void. [24] The learned High Court judge noted that even though learned counsel for the defendant had highlighted the decision in Appeal No. 42 to the learned SCJ, which she was bound to follow, she made no mention of this decision in her grounds of judgment. The learned High Court judge therefore found that the learned SCJ had fallen into grave error in failing to adhere to the doctrine of stare decisis. [25] Relying on the High Court decision in Appeal No. 42, the learned High Court judge found that the plaintiff had no power to levy and collect the one time CAPEX charges and to pursue the outstanding payments. The defendant’s appeal was thus allowed and the judgment of the Sessions Court set aside. [26] Dissatisfied with the decision of the High Court, the plaintiff, having obtained leave, appealed to this Court. The Appeal [27] It was the submission of learned counsel for the plaintiff that the learned High Court judge’s reliance on the decision in Appeal No. 42 was flawed for two reasons, namely that the decision of 9 another High Court of coordinate jurisdiction was only persuasive and not binding on her Ladyship; and that the decision of the High Court judge in Appeal No. 42 was later reversed by this Court. [28] It was further submitted for the plaintiff that the learned High Court judge erred in the following respects:

in failing to consider that the collection of moneys other than the maintenance fund and sinking fund is allowed under section 52(3) of the STA;

(ii) in failing to consider the evidence of SP4 that charges other than maintenance charges and sinking fund can be collected by the plaintiff so long as it was agreed upon by the majority of the parcel owners in an AGM or EGM;

(iii) in failing to consider that the defendant ought to be estopped from challenging the validity of the imposition of CAPEX charges;

(iv) in failing to consider that the imposition of interest in respect of the non-payment of CAPEX charges is lawful pursuant to section 44(2) of the STA and the Occupier’s Handbook;

in failing to hold that the election of the plaintiff’s council members during the 3rd AGM was valid. In this regard, the plaintiff submitted that the issue had been ventilated and decided in Originating Summons No. 24-57-07/2013 (“the OS”) where it was held by the High Court that the AGM was proper and that no appeal was filed against that decision; and 10

(vi) in failing to consider that the defendant’s refusal to pay the CAPEX charges was an afterthought. [29] In opposing the appeal, learned counsel for the defendant submitted that the learned SCJ had asked herself the wrong question. It was further submitted that the one time CAPEX charges was unlawful; that the election of the council members of the plaintiff at the 3rd AGM was improper; that there was no estoppel against the defendant on the issue of illegality; that the plaintiff also had no authority to impose the interest charges and that the order in the OS had no impact on this appeal. Our Decision [30] Having perused the appeal records and having considered the submissions of both parties, we found that the pivotal question for our consideration was whether the CAPEX charges imposed by the management corporation fall within the purview of the STA. If it does not, neither the management corporation nor the general body of proprietors may authorise such a payment or collection. [31] The plaintiff contended that it derived the power to collect CAPEX charges through section 43 of the STA and that the imposition and collection of the CAPEX charges through the passing of the resolution in the 2nd EGM was carried out in accordance with section 52(3) of the STA. 11 [32] Section 43 of the STA reads: “43. Duties and powers of management corporation.

The duties of the management corporation include the following:

to manage and properly maintain the common property and keep it in a state of good and serviceable repair;

to insure and keep insured the subdivided building or land to the replacement value thereof against fire and such other risks as may be prescribed under this Act;

to effect such other insurance of the subdivided building or land as may be required by law;

to insure against such other risks as the proprietors may by special resolution direct;

to apply insurance moneys received by it in respect of damage to the subdivided building or land in rebuilding and reinstating it in so far as it may be lawful to do so, subject to any order made by the court under section 56;

to pay premiums on any insurance effected by it;

to comply with any notices or orders given or made by any competent public or statutory authorities requiring the abatement of any nuisance on the common property, or ordering repairs or other work to be done in respect of the common property or any building or land or other improvements on the lot;

to comply with any such notices or orders as are referred to in paragraph (g) given or made in respect of any of the parcels, if the proprietor fails to do so within a reasonable time;

to prepare and maintain, in such form as may be prescribed, a strata roll for the subdivided building or land.

(Deleted). 12

The powers of the management corporation shall include the following:

to recover from any parcel proprietor any sum expended by the management corporation in respect of that proprietor’s parcel in complying with any such notices or orders as are referred to in paragraph (h) of subsection (1);

to purchase, hire or otherwise acquire movable property for use by the parcel proprietors in connection with their enjoyment of the common property;

to borrow moneys required by it in the exercise of its powers or the performance of its duties;

to secure the repayment of moneys borrowed by it and the payment of interest thereon by negotiable instrument or by a charge of unpaid contributions to the management fund, (whether already levied or not) by a charge of any property vested in it or by a combination of any of those means;

to collect during the initial period by way of contributions from proprietors in proportion to the share units or provisional share units of their respective parcels or provisional blocks; and

to do all things reasonably necessary for the performance of its duties under this Part and for the enforcement of the by-laws set out in the Third Schedule.”. [33] As for section 52 of the STA, it provides: “52. The recovery of sum as debt due to management corporation.

The payment of any amount lawfully incurred by the management corporation in the course of the exercise of any of its powers or functions or carrying out of its duties or obligations shall by virtue of this section be guaranteed by the proprietors for the time being constituting the management corporation, each proprietor being liable under such guarantee only for such proportion of the money so incurred 13 as the share units of his parcel or the provisional share units of his provisional block bear to the aggregate units.

Where any proprietor has not discharged or fully discharged his liability for the purpose of subsection (1), the management corporation shall be entitled to recover from the proprietor in any court of competent jurisdiction as a debt due to it.

Where for reasons of insufficiency of fund to meet the sum guaranteed under subsection (1), the management corporation may at an annual general meeting or at an extraordinary general meeting determine the amount to be contributed by each proprietor and decide any other issue or matter relating to the settlement of the said sum.”. [34] The plaintiff’s powers and duties are explicitly set out in section 43(1) and (2) of the STA and the functions of the plaintiff are also expressly provided for under by-law 5 of the Third Schedule of the STA. By section 43(1)(a), the duties of the management corporation was to manage and properly maintain the common property and to keep it in a state of good serviceable repair whilst by-law 5 of the Third Schedule the management corporation was to maintain in a state of good and serviceable repair, the fixtures and fittings (including lifts) existing on the lot and used or capable of being used in connection with the enjoyment of more than one parcel or the common property. [35] By the resolution, it was apparent that the imposition for the CAPEX charges was not for the maintenance as provided for under section 43(1) and (2) of the STA but for purposes of refurbishment and upgrading works on the whole of the Sungei Wang Plaza which was undertaken mainly to improve the aesthetics of the Plaza, to bring it in line with the other malls. This is evident from the minutes of the 2nd EGM which recorded the following: 14 “8.1. The meeting proceeded with the first and second Agendas as follows:- Agenda No. 1 - Special Resolution No. 1 “That the Management Corporation be and is hereby authorized to incur and collect from the parcel proprietors a One Time Capex for upgrade and refurbishment of Sungei Wang Plaza as set out in the breakdown/description of the proposed One Time Capex annexed to the Notice of EGM and at the times and in the manner set out in the Notice of EGM”. Agenda No. 2 - Special Resolution No. 2 “That the Council be and is hereby authorized to implement the One Time Capex at such times, in such manner and upon such terms as the Council deems fit or expedient including authorizing any variations or changes thereto as the Council deems fit or expedient at any time and from time to time.”

8.2 …Mr Allan Soo mentioned that since the formation of the Management Corporation, there has been a well plan and concerted effort to improve the asset value of the mall and upgrading works has been undertaken mainly on the equipment area. It is also critical to improve the aesthetics of the mall to enhance the shoppers experience in light of surrounding malls’ ongoing improvements and changes. Sungei Wang Plaza being a 35 years old building certainly calls for a change.”. [36] To our minds, the imposition of the CAPEX charges does not fall under section 43(2)(f) because the provision makes specific reference to the duties under the Act, which was to manage and maintain the Plaza. Neither does it fall under section 52, because section 52 refers to the recovery of a lawfully incurred amount which must necessarily relate to the lawfully levied payment envisaged by the STA. 15 [37] In its attempt to justify the imposition and collection of the CAPEX charges, the plaintiff had also relied on section 45 of the STA which states: “45. Management fund.

The management corporation shall establish a management fund sufficient in the opinion of the management corporation to meet the administrative expenses as may be incurred for the purposes of controlling, managing and administering the common property, paying rent, rates and premiums of insurance and discharging any other obligation of the management corporation.

The management corporation may invest any moneys in the management fund, but only in such investments or in such manner as may be approved at a general meeting.

Subject to section 41A, for establishing and maintaining the management fund the management corporation may at a general meeting –

determine from time to time the amount to be raised for the purposes mentioned in subsection (1);

raise the amounts so determined by levying contributions on the proprietors in proportion to the share units or provisional share units of their respective parcels or provisional blocks; and

determine the amount of interest payable by a proprietor in respect of late contributions which shall not exceed the rate of ten per cent per annum.”. [38] As regards section 45, it was the submission of learned counsel for the plaintiff that since section 45 had provided for the collection of management fund, it would be a repetition to say that section 52 is also referring to the management fund. As such, it was 16 argued that section 52 of the STA must be in relation to other charges besides the management fund. [39] With respect, we disagreed with learned counsel for the plaintiff. The STA prescribes for only one payment by the parcel proprietors, namely payment into the management fund under section 45. By section 45 of the STA, the only charges that can be levied on parcel proprietors are the administrative expenses as may be incurred for the purposes of controlling, managing and administering the common property, paying rent, rates and premiums of insurance and discharging any other obligation of the management corporation. [40] The plaintiff admitted that the imposition of the CAPEX charges to improve the look and aesthetic of the Plaza and to bring it in line with the nearby malls, was outside the scope of section 45 of the STA which only allows collection of moneys from parcel proprietors to maintain/paint/replace or renew fixtures or fittings. The refurbishment and the upgrading works were thus not within the statutory scope of duties of the management corporation provided under the STA. And the STA does not confer power to the plaintiff as a management corporation to collect separate contribution from the management fund. [41] We were fortified in our view by the decision of this Court in Perbadanan Pengurusan Endah Parade v Magnificent Diagraph Sdn Bhd [2013] 6 MLJ 343, where it was stated at p 360: “[34] This dispute concerns charges that can be imposed, and the means by which they can be imposed within the context and confine of 17 the statute. Within the context of the statute too, the term ‘consumption-based expenditure’ does not appear or is anywhere reflected by any other term. Likewise the term ‘service charges’ is absent, but the STA uses the term ‘contributions to the Management Fund’, as appears in s 41(5)(b) and (ba), as seen earlier. Within the context of the STA again, in reading section 45 in conjunction with section 46, the expenses incurred or to be incurred by the management corporation can include not only ‘administrative expenses’ but also expenses related to the maintenance of the building. As clearly indicated in ss 45(1) and 43(1), the duties of the management corporation include the duty to insure and keep insured the subdivided building and to pay premiums on any insurance effected by it. The core duties and functions of the management corporation are of course concerned with the management and the proper maintenance of the common property, as seen in s 43 (1)(a) … [35] … we agree with the proposition advanced by the respondent that the management corporation as a body incorporated under statute can only levy payments which are mandated by the statute. It will be ultra vires its powers for the management corporation to levy payments which are not sanctioned by the statute. This is where a proper interpretation of s 45 of the STA becomes of fundamental importance. Section 45(1) states very clearly that the management corporation ‘shall establish a management fund sufficient in the opinion of the management corporation to meet the administrative expenses as may be incurred for the purposes of controlling, managing and administering the common property, paying rent, rates and premiums of insurance and discharging any other obligation of the management corporation’. This is a very comprehensive provision. The expenses referred to includes the payment of ‘premium of insurance’ and other payments connection (sic) with ‘discharging any other obligation of the management corporation’.” [42] Section 52 is not a repetition of section 45 of the STA. Rather section 52 complements section 45. While section 45 speaks of the establishment of a management fund, its purpose and how it is 18 going to be maintained, section 52 specifically relates to how the management corporation could recover the amount lawfully incurred by the management corporation in the course of the exercise of its powers or functions, from the parcel proprietors. [43] The plain reading of section 52(3) of the STA clearly does not provide for or empower the plaintiff to impose and to collect the CAPEX charges. In the circumstances, it was irrelevant that the 2nd EGM had passed such a resolution. Put another way, notwithstanding that there was a resolution passed during the 2nd EGM, the resolution was not within the purview of the STA. The resolution passed was therefore void ab initio and the imposition and collection of CAPEX charges was ultra vires the STA, and was unlawful. [44] Having found that the plaintiff’s claim is unlawful for being in contravention of the STA, estoppel cannot be raised against the defendant despite the fact that the defendant was present at the 2nd EGM and had not objected to the imposition of the CAPEX charges. In Kok Hong v Leong Cheong Kweng Mines Ltd. [1964] AC 998, Viscount Radcliffe said at pg. 1015: “The respondent has invoked in support of its defence a principle which appears in our law in many forms, that a party cannot set up an estoppel in the face of a statute. Thus a corporation upon which there is imposed a statutory duty to carry out certain acts in the interests of the public cannot preclude itself by estoppel in pais from performing its duty and asserting legal rights accordingly… Given a “statutory obligation of an unconditional character” it is not open to the court to allow the party bound by that obligation to be barred from carrying it out by the operation of an estoppel. Similarly, there is, in most cases, no estoppel against a defendant who 19 wishes to set up the statutory invalidity of some contract or transaction upon which he is being sued, despite that fact that by conduct or other means he would otherwise be bound by estoppel.” [45] Likewise, the evidence led by SP4 that the plaintiff had the power to collect the charges so long as the plaintiff had obtained mandate from the majority parcel owners, could not advance the plaintiff’s case. It did not matter what the plaintiff’s witness said if what the plaintiff did was not allowed under the law. The testimony of a witness certainly could not override the law. Conclusion [46] For all the above reasons, we found no merits in the plaintiff’s appeal. The learned SCJ had erred in her finding that in looking for the jurisdiction and authority of the plaintiff to impose the CAPEX charges, the court should look at the AGM. The correct source of authority or jurisdiction is not the AGM but the STA itself. [47] Looking at the provisions of sections 43, 45 and 52 in totality in the context and confines of the statutory regime of the STA, it was our view that the CAPEX charges do not fall within the purview of the STA. The plaintiff therefore had no power or authority to impose the CAPEX charges and its imposition was thus unlawful, illegal and ultra vires the STA. [48] In view of our finding on the pivotal question, we found no necessity to consider the issues relating to the imposition of interest on the late payment pursuant to the Occupier’s Handbook and the election of the plaintiff’s council members at the 3rd AGM. Given that the plaintiff had no authority to impose the CAPEX charges in the 20 first place, the issue of interest does not arise and whether or not the council members were validly appointed would be of no relevance. [49] In light of all the above, we unanimously dismissed the appeal with costs and we affirmed the order made by the High Court. Dated: 28th February 2019 signed (TENGKU MAIMUN BINTI TUAN MAT) Judge Court of Appeal Councel/Solicitors: For the Appellant: Dato’ Manpal Singh Sadev (Adrian Oswald, Amos Ong & Noor Syuhada binti Hashim with him) Messrs Manjit Singh Sachdev, Mohammad Radzi & Partners For The Respondent: Ira Biswas (Annabel Tan with her)