In Target Term Sdn Bhd v Waldorf and Windsor Management Corporation (Malaysia Land Properties Sdn Bhd – Intervener) [2022] 2 AMR 712, the High Court held that by virtue of sections 34(2) and 69 of the Strata Titles Act 1985 (“STA”), an accessory parcel cannot be dealt with independently and must be used in conjunction with the main parcel.

Brief Facts
 
This case concerns a sale and purchase agreement (“SPA”) for the purchase of an apartment unit (“main parcel”) and 420 accessory car parks (including six that were reserved for the handicapped) between the plaintiff and the intervener, which is the developer of the building known as Waldorf & Windsor Towers. The defendant is the management corporation of Waldorf & Windsor Towers. The purpose of the purchase by the plaintiff was to continue the running of a car park business for commercial use.
 
The defendant alleged that the plaintiff is indebted to it for the maintenance charges and sinking fund for the 414 units of car parks maintained by the plaintiff, whilst the plaintiff contends that the defendant is not entitled to impose the back charges on the plaintiff as the 414 car parks are self-maintained by the plaintiff at all material times.
 
The plaintiff then filed this suit to seek, inter alia, a declaration that the back charges imposed by the defendant is null and void and for the maintenance charges and sinking fund to be fixed at RM0.09 per share unit pursuant to section 60(3)(b) of the Strata Management Act 2013.
 
The defendant in their defence and counterclaim did not dispute that the plaintiff self-maintained the 414 car parks at all material times, without the involvement of the defendant. However, the defendant challenged the plaintiff's ownership of the main parcel and the car parks.
 
The issues before the High Court
 
The issues before the High Court are as follows: 

The decision of the High Court
 
The High Court dismissed the plaintiff’s claim and allowed the defendant’s counterclaim against the plaintiff and the intervener. A summary of the reasons for the Court’s decision is set out below. 

The High Court Judge, YA Rozana Ali Yusof J held that section 4 of the STA defines “accessory parcel” as any parcel shown in a strata plan as an accessory parcel which is “used or intended to be used in conjunction with a parcel”, and that sections 34(2) and 69 of the STA prohibit the dealing/ transfer of the accessory parcels separately or independently of the main parcel. The accessory parcels must be used in conjunction with the main parcel which is for dwelling purposes and not a commercial unit. Following the decision of the Court of Appeal in Ideal Advantage Sdn Bhd v Perbadanan Pegurusan Palm Spring @ Damansara (and Another Appeal) [2019] 5 AMR 201 (upheld by the Federal Court in an unreported judgement), the High Court held that the renting of the 414 car parks amounts to “tenancy” or “tenancy exempt from  registration” which is a dealing within the meaning of section 205 of the NLC. Thus the Judge concluded that the letting out of the 414 car parks to third parties resulted in a breach of sections 4, 34(2) and 69 of the STA.
 
The learned High Court Judge further held that as the car parks were not used in conjunction with the main parcel, they are not accessory parcels as defined under section 4 of the STA, and are therefore common property. 

The High Court held that it is the intent of the legislature that common property under the STA cannot be disposed of, sold or contracted away. As such, the learned High Court Judge concluded that the sale of the car parks contravenes section 24 of the CA as the consideration and object of the SPA is for the 414 car parks to be rented out or used in a commercial manner and not in conjunction with the main parcel. Thus the High Court ruled that the SPA is null, void and unenforceable. 

As a general rule, the registration of the car parks in the plaintiff’s name is indefeasible and cannot be challenged unless it is shown that the title was obtained under the circumstances provided in section 340(2)(a), (b) and (c) of the NLC.
 
Following the High Court’s finding that the SPA had contravened section 24 of the CA and the registration of the 414 car parks in the plaintiff’s name was in contravention of the STA, the learned High Court Judge was of the view that the plaintiff had unlawfully acquired the titles from the intervener and/or that such titles had been obtained by the plaintiff by means of an insufficient or void instrument. The High Court was of the view that the plaintiff did not or was unable to show the main parcel and the 414 car parks were obtained in good faith and for valuable consideration to come within the proviso to section 340 that protects the interest of a bona fide purchaser for valuable consideration. As such, the court held that the titles obtained by the plaintiff are defeasible. 

Taking judicial notice of the decision of the Court of Appeal in Malaysia Land Properties Sdn Bhd v Waldorf & Windsor Joint Management Body [2014] 3 AMR 591 that relates to the same strata title as in the instant case, the learned Judge held that the intervener had misrepresented to the land office and led them to believe that the 414 car parks are used or intended to be used in conjunction with the main parcel, when in actual fact they are not. The intervener had also led DBKL (Kuala Lumpur City Hall) and/or the land office to believe that the required car parks for the serviced apartments have been complied with. Further, there was clearly a shortage of car parks as the 414 car parks were used to run a public car park business out of the 660 car parks allocated for such apartments in the approved plans. As such, the intervener and the plaintiff had breached the development order that was approved by DBKL. 

The intervener argued that the defendant is estopped from challenging the validity of the SPA in relation to the car parks as they had made full disclosure in the SPA.
 
As the SPA had breached the STA and the CA, the learned High Court Judge held that the defendant’s knowledge cannot neutralise the illegality and breaches of law on the part of the intervener and the plaintiff. The Judge added that it is trite law that estoppel does not operate against a statutory provision/ requirement as seen in the Privy Council case of Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] 1 MLJ 49. As such, the doctrine of estoppel is not applicable in the present case.
 
Comments
 
This decision has clarified the limits imposed by the STA on the use of, and dealings with, an ‘accessory parcel’. The decision by the learned Judge that an accessory parcel that is not used in conjunction with the main parcel is common property has serious ramifications as it negatives the ownership rights of the registered proprietor of the parcel and may entitle a management corporation to utilise or rent out the same. The decision has been appealed to the Court of Appeal.
 
Case summary by Witter Yee (Senior Associate) and Chew Sue Peng (Associate) of the Dispute Resolution Practice of Skrine.