By Raymond Mah and Karmen Fung

On 4 October 2019, the Court of Appeal unanimously allowed the appeal by Muhammad Nazri Bin Muhamad (Appellant / Plaintiff) against the Joint Management Body (“JMB”) of Menara Rajawali and Denflow Sdn Bhd (Respondents / Defendants) in Civil Appeal No: W-02(NCVC)(A)-2057-10/2018. 

The decision by the Court of Appeal is significant as it binding authority for the principle that a JMB is required to determine and fix only a single rate of maintenance charges for all types of parcels in a development project. 

Background

Menara Rajawali is a mixed development comprising of residential, retail and car park units. There are approximately 208 parcel owners in Menara Rajawali. The Plaintiff is an individual parcel owner whereas the 1st and 2nd Defendants are the JMB of Menara Rajawali and the owner of all the car parks in Menara Rajawali respectively. Share units have been allocated for all parcels pursuant to the Strata Management Act 2013 (“SMA”).

At the 1st Annual General Meeting (“AGM”) of the JMB on 25 June 2016, it was resolved that mandate be given to the Joint Management Committee (“JMC”) to fix the maintenance charges for:

  • Residential and retails units at a rate not more than RM3.26 per share unit; and
  • Car park units at a rate not more than RM1.68 per share unit.

At the 3rd JMC Meeting on 12 August 2016, the JMC fixed the maintenance charges for:

  • Residential and retails units at a rate of RM2.80 per share unit; and
  • Car park units of a rate of RM1.68 per share unit.

On 26 January 2018, the Plaintiff commenced an Originating Summons at the Kuala Lumpur High Court against the Defendants for declarations that both resolutions by the JMB and JMC were null and void.

On 4 September 2018, the learned High Court Judge dismissed the Appellant’s Originating Summons with costs of RM5,000 to each Respondent. The High Court held: 

“In my view, the issue here concerns the proper interpretation to the relevant sections of SMA 2013, and whether these sections can be read as limiting or curtailing the power of the JMB/JMC to determine such rate of charges as are deemed appropriate in the circumstances. To me, it is quite clear that there is nothing in these sections of the SMA 2013, which prevents the JMB/JMC from fixing different rates of charges for different types or categories of units in the strata project, so long as this is approved by the AGM. Here, the approval was clearly given by a unanimous resolution at the AGM on 25 June 2016.”

Dissatisfied with the decision of the High Court, the Plaintiff filed an appeal on 1 October 2018 to the Court of Appeal.

Court of Appeal

On 24 June 2019, counsel for the Appellant/Plaintiff, Mr Raymond Mah (together with Dato’ Joy Appukutan, Ms Esther Ong and Mr John Chan) submitted, in summary: 

  • Sections 21 and 25 of the SMA require the JMB to determine one consistent maintenance charges rate for all parcels;
  • The words ‘in proportion’ appearing in Sections 21 and 25 of the SMA require the JMB/JMC to determine and fix only one consistent maintenance charges rate to be applied to all categories of parcels;
  • The legislative framework in the First Schedule of the SMA already provides weight differentiation (which acts as discounts) for the calculation of the share units of each parcel;
  • The 2nd Respondent is already enjoying a 40% discount by way of the calculation of its share units pursuant to the WF formula in the First Schedule of the SMA. With the JMB’s Resolution and JMC’s Decision, the 2nd Respondent enjoys an unfair and further 42% discount;
  • The legislative framework in the SMA and Strata Titles Act 1985 is meant to avoid this inequitable, unfair and discriminatory practice in determining maintenance charges and maintenance charges rate;
  • That the SMA only allows the JMB to determine one maintenance charges rate for all parcels is supported by and consistent with the provisions of the Housing Development (Control and Licensing) Regulations 1989;
  • The fact that the JMB’s Resolution and JMC’s Decision are in accordance with a resolution passed during the 1st Respondent’s 1st AGM is immaterial, given that the 1st Respondent cannot act beyond the provisions of the SMA.

The Court of Appeal reserved its decision at the conclusion of oral arguments on 24 June 2019. On 4 October 2019, the Court of Appeal unanimously allowed the appeal and overturned the High Court decision. 

Vernon Ong JCA read the grounds of judgment and explained the Court’s finding that “the JMB is required to determine and fix only a single rate of maintenance charges applies for all types of parcels accordingly, to the allocated share units”

In light of the fact that the 3 weightage factors had been applied to the calculation of share units for car park parcels which calculations premise on equitable considerations, it would appear that the JMB is only empowered to fix one rate suitable for all types of parcels. If that cost is adopted, then the owners for different types of parcels will be paying maintenance charges in proportion to the allocated share unit of the respective parcel because the rate of share unit is the same.

“We are therefore inclined to agree with the Plaintiff’s argument to say that the car park unit is already enjoying a 40% discount, by way of the calculation of the share unit pursuant to the WF formula in the Schedule. They would enjoy a further 42% discount given the lower rate of maintenance charges for the car park units. This additional discount would, in our view, run counter the with legislative framework which is intended to avoid inequitable, unfair and discriminatory practice in determining maintenance charges rate. Therefore, the imposition of the two different rates of maintenance charges for different types of parcel is incompatible with the meaning of the words ‘in proportion’ in Sections 21 and 25 of the SMA.”

We therefore take the view that on the proper construction of the said sections, the JMB is required to determine and fix only a single rate of maintenance charges applies for all types of parcels in allocated share units. Accordingly, we do not think that the JMB’s resolution in fixing different rates for different types of parcel is in conformity with Sections 21 and 25 of the SMA.”

The Court of Appeal also held that the JMB cannot delegate its decision making power on the rate of maintenance charges to the JMC:

“There is no provisions either in the SMA or the STA which confers the JMC with power to decide on the rates of a matter which permits the JMB to delegate its decision making power under subsection 21(1)(b) of the SMA to the JMC. We do not think that in this case such powers can be implied. In our view, the duty to make the decision is the duty imposed on the joint management body and that duty is non delegable.” 

“In short, the decision to fix maintenance charges must be made by the JMB. It therefore follows, that the JMB’s resolution to delegate its duty to the JMC is in excess of its powers under statutory duty.  As such, the mandate given to the JMC is invalid, null and void.”

The Court of Appeal allowed the appeal with costs of RM20,000.00 and RM15,000.00 against the 1st and 2nd Defendants respectively.

COUNSEL FOR THE APPELLANT/PLAINTIFF – RAYMOND MAH, JOY APPUKUTTAN, ESTHER ONG, JOHN CHAN, ETRUS TAN AND MASHA SYLVESTER 

COUNSEL FOR THE RESPONDENT/DEFENDANT – A ONN, HP CHUAH

By Raymond Mah and Karmen Fung

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