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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.

 
Lai Chee Hoe

Lai Chee Hoe

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Strata Management Case Update 5- Can a JMB/ MC deactivate access cards?

The facts are rather simple. The Plaintiff commenced this action against the Defendants, (MC and the Management Committee members) for nuisance and deactivation of the access cards.

On 8.5.2011, an explosion occurred at Hamshire Park Condominium which caused damages to certain units including 2 units owned by the Plaintiff.

On 20.9.2012, JMB received the insurance claim for the 2 units owned by the Plaintiff for a total sum of RM19,000.00.

There are outstanding maintenance charges due and owed by the Plaintiff and the MC took the insurance sum of RM19,000.00 set off against the outstanding maintenance charges and deactivated access card of the Plaintiff.

The principal issue was whether the deactivation of the access cards to the Plaintiff’s unit was lawful.

With regards to the issue, the court referred to Paragraph 6(4) of the Third Schedule which empower the MC to deactivate access without notice where a proprietor is in default of maintenance charges at the expiry of 14 days specified in paragraph 6(1)(a).

For easy reference, paragraph 6(1)(a) states:

(a) a defaulter is a proprietor who has not fully paid the charges or contribution to the sinking fund in respect of his parcel or any money imposed by or due and payable to the management corporation under the Act at the expiry of the period of fourteen days of receiving a notice from the management corporation.

By reading 6(4) and 6(1)(a) together, it is clear that the MC may deactivate one’s access card without prior notice only upon the expiry of 14 days after the defaulter receives a written notice from the MC.

The court also went on to refer to Section 78 where it states that the procedure for recovery of sums due, the MC may serve on the proprietor a written notice demanding payment of the sum due within the period as may be specified in the notice which shall not be less than 2 weeks from the date of service of the notice. If any sum remains unpaid at the end of the period specified in the notice, the MC may file a summons or claim in a court of competent jurisdiction or  beforee the Tribunal.

On top of that, the Hampshire Residence House Rules requires notice to be served to the owner before access card can be deactivated.

In the present case, since there was no such notice produced in court, the Court finds that the deactivation of the access cards are not in accordance with SMA2012 and as such is unlawful.

The  takeaway is clear whether to a Developer, Joint Management Body (JMB) or Management Corporation (MC). If you wish to deactivate any electromagnetic access device such as a card, tag or transponder, it must be preceded by a notification followed by the expiry of the notification period, usually 14 days.

 

 

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