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Lai Chee Hoe

Lai Chee Hoe

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Strata Management Case Updates 6 – Does a committee member of JMC / MC owes a fiduciary duty?

 

3 Two Square Sdn Bhd v Perbadanan Pengurusan 3 Two Square & Ors 

[2018] MLJU 111 

Brief Facts:

3 Two Square Sdn Bhd, the developer sought a mandatory injunction to compel the Management Corporation to maintain properties on the basis they are common property of 3TwoSquare. The subject property includes, cooling tower, lifts and toilets.

The Developer also sought personal liability of the council members since they owe fiduciary duties to the Management Corporation.

The High Court ruled that those subject areas are common property and mandatory injunction was granted to compel the Management Corporation to manage those areas.

On the issue of fiduciary duties, the court referred to, among others, company law principles and ruled that:

(a) A council member of a management corporation owes a fiduciary duty to act bona fide in the interests of the management corporation.

(b) This duty is owed to the management corporation and to the proprietors comprised in the development managed by the corporation.

(c) This fiduciary duty is not, however, owed to individual proprietors.

(d) The nature of the fiduciary duty includes:

      (i)  a duty to exercise due care and skill, having regard to the particular skill and experience of the council member in question; 

      (ii)  a duty of fidelity or loyalty that requires the council member:

  • (1) not to exercise a delegated power to advance a personal interest to the detriment of the management corporation or the proprietors as whole;
  • (2) to disclose any personal interest (arising other than by way of proprietorship in a parcel) that he or she may have in any transaction or undertaking proposed to be carried out by the management corporation.
  • (3) Once such interest is disclosed, the council member would be free to exercise his or her vote in any way he or she considers fit at any council meeting or at a general meeting of the management corporation. In particular, the council member would be free to exercise his or her voting rights at such meetings to advance a personal interest that he or she may have in his or her capacity as a proprietor, and to suborn the interests of the collective to his or her personal interests.”

The Court however finds that a council member does not owe fiduciary duties to each and every proprietor since it would place too great a strain on council members. The court took cognizance that a joint management body or a management corporation is not for-profit enterprise that seeks to undertake a venture or activity for commercial gain. Its role is more conservatory one, concerned primarily with the preservation and upkeep of assets in the common interest of the proprietors.

Takeaways:

1. JMC and MC members should be more cautious when making decision and disclosing any personal interest that he or she may have.

2. Any decision made by the JMC and MC must be recorded in clear words in the minutes of meeting to avoid speculations of wrong doings.

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Strata Management Case Update
(34-pages in PDF format)

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Lai Chee Hoe

Lai Chee Hoe

Partner at Chee Hoe & Associates. With 10+ years of experience under his belt, he specializes in civil and corporate litigation. He is also the current Chairperson of various Joint Management Bodies.

 
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