Wisma Cosway Management Corporation v Dubon Berhad (J-02(A)-768-04/2018)

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DALAM MAHKAMAH RAYUAN MALAYSIA 5 (BIDANG KUASA RAYUAN) RAYUAN SIVIL NO. J-02(A)-768-04/2018 ANTARA 10 WISMA COSWAY MANAGEMENT … PERAYU CORPORATION DAN DUBON BERHAD … RESPONDENT 15 (Syarikat No: 046138-x) [Dalam Mahkamah Tinggi Malaya Di Johor Baru Penggulung Syarikat NBo. 28-187 Of 19999 (4) Pasca Companies (Winding-Up) No. JA-28PW-99-11/2017] 20 Dalam perkara Seksyen 218 Akta Syarikat, 1965 Dan Dalam perkara Dubon Berhad 25 (terdahulu dikenali sebagai Dubon Sdn. Bhd) Dan Dalam perkara Seksyen 471 Akta Syarikat, 2016 30 Dan Dalam perkara Seksyen 226(3) Akta Syarikat 1965 Antara 35 Golden Expension Sdn Bhd … Pempetisyen No. Syarikat: 270525-H) Dan 40 Dubon Berhad … Respondent (Syarikat No: 046138-X) Wisma Cosway Management Corporation … Pemohon (Strata Pendaftaran No.: 1152) 45 2 CORAM 5 HAMID SULTAN ABU BACKER, JCA HANIPAH FARIKULLAH, JCA KAMALUDIN MD SAID, JCA 10 GROUNDS OF JUDGMENT Introduction [1] This is the Appellant's appeal against the decision of High Court in which the Learned Judicial Commissioner (“Learned JC”) had dismissed the Appellant’s application in Enclosure 1 for leave 15 to defend and to proceed with the counterclaim against the Respondent in the Strata Tribunal Putrajaya (Suit Claim No: TPS/W-2116-7 /17). [2] The Learned Chairman in the Strata Tribunal had granted the 20 right to representation pursuant to Section 110(2) of the Strata Management Act 2013 (“the Act”) to the Appellant as well as the Respondent and stayed the hearing pending leave being obtained by the Appellant pursuant to Section 226(3) of Companies Act 1965 and Section 471 of Companies Act 2016. 25 Brief Facts [3] The Appellant is the Management Corporation for a Strata Development known as "Wisma Cosway" located at No. 88, 30 Jalan Raja Chulan, 50200 Kuala Lumpur. 3 [4] The Respondent is a proprietor for Unit No: 22.05 on the 22nd 5 Floor of Wisma Cosway and pursuant to the Act, the Respondent is required to pay the monthly maintenance charges and sinking fund to the Appellant. [5] On or about 18.1.2000, the Respondent was wound up by the 10 High Court wherein two (2) individuals named Ooi Chee Kun and Khoo Pek Ling were appointed as the liquidators for the Respondent and to date the Respondent refuses to pay the monthly maintenance charges on grounds that it has been wound up. 15 [6] On or about 27.7.2017, the Respondent initiated a claim against the Appellant and a Developer known as Stephens Properties Sdn Bhd at Strata Tribunal Putrajaya vide Claim No: TPS/W-2116-17/17 claiming the following reliefs: - 20

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(ii) The Appellant is an unsecured creditor of the Respondent and the remaining assets of the Respondent must be distributed pari passu amongst the unsecured creditors of the company; 20

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(iii) It will be unfair and prejudicial to the other unsecured creditors of the Respondents if the Appellant is granted with leave to proceed with the counterclaim at the Tribunal proceedings, as it will afford the Appellant an unlawful preference as an unsecured creditor;

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(iv) By allowing the application, the Court will fortuitously allow the Appellant to circumvent the ordinary winding up process without filing a proof of debt; 30 7

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(vi) The dispute between the Appellant and the Respondent does not involve a complex issue of facts and law. The Appellant’s claim can be sufficiently dealt by the winding up court; and 15

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(viii) Once the monetary dispute between parties is decided by the court, the claim at the Tribunal proceeding will be deemed academic and will not necessary to be continued. 20 This Appeal [13] The Appellant sets out various grounds in its memorandum of appeal. In summary, the reasons warranting Appellate intervention are as follows: - 25

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(2) Each proprietor shall be liable under such guarantee 15 referred to in subsection (1) only for such proportion of the money so incurred as the share units of his parcel or the provisional share units of his provisional block bear to the aggregate share units. 20

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(3) 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 a court of competent jurisdiction or before a Tribunal as a debt due to it. 25 [19] He submitted that by subsection (3) above, it is very clear that any amount lawfully incurred by the Appellant being the management corporation in this case is guaranteed by the proprietors i.e. the Respondent being the proprietor and the 30 guarantor of the account for Unit No: 22.05 and therefore is legally bound to settle the outstanding sum of RM183,201.37 as at 3.8.2017. In other words, the said outstanding sum is a guaranteed sum be paid to the Appellant. 35 11 [20] It was further submitted that the intention of section 77 of the Act 5 is to make the proprietor liable to pay amount lawfully incurred by the management corporation. In this case the outstanding Services Charges, Sinking Fund, Quit Rent, Fire Insurance, Utility are the amount incurred by the Appellant as the management corporation which are guaranteed by the 10 Respondent. In other words, the guaranteed amount incurred is attached to the property held by the owner of which the Respondent has not discharged or fully discharged his liability to settle the amount lawfully incurred by the Appellant. 15 [21] It is the Appellant’s case that it has the right under the statute to claim the outstanding sum of RM183,201.37 as at 3.8.2017 against the Respondent and that the Respondent cannot compel Stephens Properties to execute the memorandum of transfer for the strata title issued for parcel unit No. 22.05 and compel the 20 Appellant to issue a letter of clearance for the transfer of the said unit without the outstanding sum owed and due to the Appellant being the guaranteed amount under the said Act be paid to the Appellant. The issue of the Appellant filing a proof of debt does not arise or become a determining factor for the Learned JC to 25 refuse leave. The Appellant had shown a prima facie case and leave must be given by the Court for the Appellant to proceed with its defence and counterclaim against the Respondent at the Strata Tribunal proceeding. 12 [22] The Appellant had also submitted that the Learned JC erred in 5 dismissing the Appellant's application on the grounds that the Appellant's claim was time barred by Limitation Act 1953. Counsel referred to Section 105(2) of the Act which clearly states that "For avoidance of doubt, the Limitation Act 1953 [Act 254] shall not apply to proceedings of the Tribunal". It is the 10 Appellant’s case that the amount due is attached to the property and the cause of action to recover the amount due and payable to the management corporation follows the property. The cause of action commences from the date the proprietor disposes the property. 15 [23] We are minded that there is a presumption that the judge had rightly exercised his discretion and the appellate court must not reverse the judge’s decision on a mere “measuring cast” or on a bare balance as the mere idea of discretion involves room for 20 choice and difference of opinion (See: Vasudevan v T Damodaran & Anor [1981] 2 MLJ 150). [24] It is trite that an appellate court will be slow in intervening in the discretionary exercise of the trial court. [See Kyros 25 International Sdn Bhd v. Ketua Pengarah Hasil Dalam Negeri [2013] 3 CLJ 813; [2013] 1 LNS 1; [2013] 2 MLJ 650; ECM Libra Investment Bank Bhd v. Foo Ai Meng & Ors [2013] 1 LNS 99; [2013] 3 MLJ 35]. 13 [25] We are also minded that generally the threshold for court in 5 exercising its power to grant leave is very low. The function of the court in exercising its power to grant leave is to sieve through the application before it and determine that the application is not frivolous and vexatious and there is an arguable case to merit further argument at the trial. 10 [26] The Appellant’s leave application is made pursuant to section 226(3) of the Companies Act 1965 and section 471 of the Companies Act 2016 which provide as follows: - 15 S.226 of Act 1965

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(3) When a winding up order has been made or a provisional liquidator has been appointed no action or proceeding shall be proceeded with or commenced against the company except- 20

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(1) When a winding up order has been made or an interim liquidator has been appointed, no action or proceeding shall be proceeded with or commenced against the 30 14 company except by leave of the Court and in accordance 5 with such terms as the Court imposes.

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(2) The application for leave under subsection (1) shall be made in the Court granting winding up order and shall be served on the liquidator.

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(3) The office copy of the order for leave under subsection (1) shall be lodge by the applicant referred to in subsection 470(1) with the Registrar and with the Official Receiver within fourteen days from the making of 15 the order. [27] It was not disputed that the issue related to section 77 of the Act in particular had been canvassed before the Learned JC. It was argued that the amount due from the Respondent is a 20 guaranteed sum under the said section 77 which is a statutory right to claim. Based on that argument, it is our preliminary view that the Appellant had convinced us that there is a valid point of law needed to be further discussed to resolve the issue whether the Appellant would still remain as an unsecured creditor of the 25 Respondent and subjected to the remaining assets of Respondent to be distributed pari passu amongst the unsecured creditors of the Respondent or the amount due from the Respondent being a guaranteed sum under the Act afforded the Appellant a lawful preference as a secured creditor of the 30 15 Respondent. Most importantly, the issue whether section 77 of 5 the Act applies to a wound up company. We believe that there is a prima facie case that the Appellant’s claim involves legal issue or an arguable case. [28] It not disputed that the test is such that if all reliefs sought may 10 be obtained in the winding up Court, then leave will be refused. However, the Appellant’s case can be distinguished in that the management corporation is entitled under the Act to recover from the proprietor the guaranteed sum in a court of competent jurisdiction or before a Tribunal as a debt due to it. In another 15 Court of Appeal’s case of Brightvite Sdn Bhd v Pantai Towers Management Corporation and Another Appeal [2018] 1 LNS 769, it was held that the filing of the claim vide the proof of debt form does not preclude the MC from seeking recovery against the appellants particularly when the debt remains unpaid 20 to date vis a vis Metroplex. The filing of the proof of debt form against Metroplex does not operate as an estoppel against recovery of the debt from the appellants in light of the express statutory provisions of section 45(5) and (6) of the Act. Debt necessarily mean that there is an undisputed debt. If the debt 25 has been disputed in a bona fide manner then there is a duty and obligation for the Management Corporation to resolve the dispute preferably by mediation or arbitration within the members themselves failing which due process of law has to be adhered to. 30 16 [29] Be that as it may the Brightvite’ case is distinguished from its 5 facts. There, the issue involves the reading of section 45 (5) and

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(6) of the Act. It does not relate to section 77 of the Act. Premised on the argument in relation to section 77 of the Act and the “guaranteed sum” it is our view that, had the Learned JC appreciated the fact that the amount due is the guaranteed sum 10 permitted to be recovered under the Act by virtue of section 77 of the Act, we believed he would have found that there is a prima facie case for leave to be granted to the Appellant to proceed with its defence and counterclaim against the Respondent at the Strata Tribunal proceeding. 15 [30] The function of a court when construing an Act of Parliament is primarily to interpret the statute in order to ascertain what the legislative intent is; and this is primarily done by reference to the words used in the provision (see: the Federal Court in Gula 20 Perak Berhad V. Datuk Lim Sue Beng & Other Appeals [2018] 1 LNS 1617). The Federal Court cited Crease on Legislation (9th Ed. 2008) at page 611 which states: "The cardinal rule for construction of legislation is that it 25 should be construed according to the intention expressed in the language used. So the function of the Court is to interpret legislation "according to the intent of them that made it" and that intent is to be deduced from the language used". 30 17 5 [31] Section 77 of the Act uses the words “shall by virtue of this section be guaranteed by the proprietors”. It must be accepted at the moment that the Act imposes a mandatory obligation on the proprietors to pay any amount incurred by the management corporation in the course of the exercise of any of its 10 powers or functions or carrying out its duties or obligations. It is our preliminary view that the law is such that the proprietors of strata units in the development project must settle any outstanding amount owed to the management corporation before they can sell or transfer the properties to third parties. Therefore, 15 the settlement of any outstanding amount due and owing by the proprietors to the management corporation must be observed or followed before the transfer of the properties can be affected or executed. This means that it has to be a conditioned precedent in the legal documents of transfer or sales of strata unit shares 20 prepared by lawyers. [32] It was pointed to us that the argument on the true construction of section 77 of the Act has not been argued before or decided by the apex court. It becomes more important for the matter to be 25 further ventilated. We are of the view that the outcome may have effect on the stake holders in the Strata properties industries including lawyers involve in preparing the legal documents, therefore, it is in the public interest that leave should be given. 30 18 [33] It had also been pointed out that section 105(2) of the Act clearly 5 states that the Limitation Act 1953 [Act 254] shall not apply to proceedings of the Tribunal. We would agree with the Appellant that the payment of management charges amounts to a running account such that limitation does not come into play. 10 [34] In that premise, we allowed the Appellant’s appeal with cost of RM15,000.00 here and below subject to allocator fee and the deposit is to be refunded to the Appellant. Dated this 9th January, 2018 15 Sgd KAMALUDIN MD. SAID JUDGE 20 COURT OF APPEAL MALAYSIA PUTRAJAYA Parties 25