Issue:

Menara Rajawali is a mixed development comprising 208 residential, retail and car park parcels.
Our client Muhamad Nazri bin Muhamad was an individual parcel owner.

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, Muhammad Nazri commenced an Originating Summons at the Kuala Lumpur High Court against the Defendants – the Joint Management Body (JMB) and owner of the car park parcels Denflow Sdn Bhd respectively in Menara Rajawali – for declarations that both resolutions by the JMB and JMC were null and void. He claimed that different rates of maintenance charges for different parcels was unfair and inequitable.

However, on 4 September 2018, the High Court dismissed the Plaintiff’s Originating Summons and held that there is nothing in the Strata Management Act 2013 (SMA) which prevents the JMB/JMC from fixing different rates of charges for different types of parcels as long as this was approved at the AGM.

Dissatisfied with the decision of the High Court, the Plaintiff appealed to the Court of Appeal in October 2018. Our Mr Raymond Mah was appointed as counsel to lead the arguments at the Court of Appeal.

Approach/Strategy:

In summary, we submitted that Sections 21 and 25 of the SMA expressly require the JMB to determine only one consistent maintenance charges rate for all types of parcels. We further submitted how unfair and inequitable it would be for a parcel owner to pay a lower rate of maintenance charges despite having more share units and higher voting power. As far as the 2nd Defendants’ car park parcels were concerned, those units already enjoyed a lower weightage factor in the calculation of its share units.

Result:

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 judgement and explained the Court’s finding that “the JMB is required to determine and fix only a single rate of maintenance charges for all types of parcels” to avoid an “inequitable, unfair and discriminatory practice in determining maintenance charges rate”.

The Court of Appeal allowed the appeal with costs of RM20,000 and RM15,000 against the 1st and 2nd Defendants respectively.

Dissatisfied with the decision of the Court of Appeal, the Defendants filed an application for leave to appeal to the Federal Court. On 21 May 2020, the Federal Court dismissed the Defendants’ application for leave to appeal. Given the Federal Court’s decision, the Court of Appeal’s decision in favour of our client and reasons remain good law and binding precedent.

Impact:

The Court of Appeal’s landmark decision in the Menara Rajawali case is significant to all strata developments and the strata management industry. It has clarified the law for many joint management bodies who have since abandoned the practice of multiple rates for maintenance charges in favour of a single rate. The case has been reported by The Edge Markets in its article “Residential and commercial lots in mixed developments must be charged same maintenance rates, court rules” and “Federal Court rejects application to appeal single maintenance rate ruling”.

The decision has not prevented all disputes over the issue of multiple rates. Litigation has continued between parcel owners, JMBs, MCs and developers in other strata developments on the basis that the Menara Rajawali case should not be followed due to differing circumstances. The result has been that the Menara Rajawali case has been referred to and cited in no less than four other reported judgments (as at January 2023).

In a significant development of the law, the High Courts in Amity One Sdn Bhd v Binjai Residency Management Corporation, SCP Assets Sdn Bhd v Perbadanan Pengurusan PD2, Sodalite Sdn Bhd v 1 Mont Kiara dan Kiara 2 Management Corporation and KB Loh Sdn Bhd v Perbadanan Pengurusan SOHO followed and applied the judgement in Menara Rajawali to management corporations. In particular, the respective High Courts held that management corporations, like joint management bodies, are also required to charge a single rate of maintenance charges to all parcel owners.

Our Strata Management team deals with all strata and strata management related matters and disputes, involving developers, joint management bodies, management corporations, parcel owners, local authorities and service providers.

For more information, please contact our team or Request a Free Consultation.

 

Raymond Mah, Managing Partner

Tel: 03-7887 2702

raymond.mah@mahwengkwai.com

 

 

John Chan, Partner

Tel: 03-7887 2702

john.chan@mahwengkwai.com

 

By Raymond Mah, John Chan & Lisa Goh

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Note: This article does not constitute legal advice to any specific case. The facts and circumstances of each and every case will differ and therefore will require specific legal advice. Feel free to contact us for complimentary legal consultation.