In Tetap Tiara Sdn Bhd v Pengurusan Perbadanan Jaya One & 21 Ors (and 2 Other Appeals) [2024] 1 AMR 499, the Court of Appeal held that a management corporation has a statutory duty to call for an annual general meeting (“AGM”) every year and to call for extraordinary general meeting (“EGM”) upon requisition in writing made by proprietors with the requisite locus. This is in accordance with the mandatory requirements set out in the provisions of the Strata Management Act 2013 (the “SMA”) and its schedules.
 
Consequently, the Court of Appeal set aside, among others, the High Court’s decisions that allowed two interlocutory injunctions restraining the management corporation from convening any AGM and EGM pending the disposal of a civil suit commenced by the proprietors.
 
BRIEF FACTS
 
The matter relates to the Jaya One development, a stratified integrated mixed commercial development in Petaling Jaya, Malaysia.
 
The 1^st to 21^st plaintiffs are the registered proprietors of the units in Jaya One.
 
The 1^st defendant is the management corporation of Jaya One (“MC”) and is named as a nominal defendant for purposes of benefit and/or compliance of the reliefs sought.
 
The 2^nd defendant was the developer of Jaya One and a majority shareholder of the 3^rd defendant.
 
The 7^th defendant is an individual who was a director and indirect substantial shareholder of the 2^nd defendant, a director of the 3^rd defendant, the first chairman of the joint management body (“JMB”) as well as the MC, and a member of the JMB and MC from August 2009 to June 2019.
 
The plaintiffs brought a civil suit against the defendants:

The claim by the plaintiffs in their personal capacities was discontinued and the plaintiffs proceeded with the derivative action only.
 
The dispute between the parties involves, among others, issues relating to the determination and imposition of maintenance charges and sinking fund contributions from 2009 to date.
 
DECISION OF THE HIGH COURT
 
Whilst waiting for the present suit to be heard, the MC (as 1^st defendant) and developer (as 2^nd defendant) filed applications in the High Court seeking the following injunctions:

All three injunction applications were heard together, and the High Court judge decided in the following manner:

Dissatisfied with the High Court’s decisions, the 2^nd, 3^rd and 7^th defendants appealed against the said decisions to the Court of Appeal.
 
DECISION OF THE COURT OF APPEAL
 
The Court of Appeal allowed all three appeals, thereby setting aside the High Court’s aforesaid decisions. In its judgment, the Court of Appeal first dealt with the appeals relating to the second and third injunction applications, and thereafter, with the appeal relating to the first injunction application.
 
Appeals against the decisions of the Second and Third Injunction Applications  
 
Whether the 1^st defendant can injunct itself from proceeding with the AGM and/or any EGM
 
In essence, the Court of Appeal was of the view that the MC is a creature of statute and hence it is the 1^st defendant’s duty as the MC to call for an AGM every year and to call for an EGM when required by the relevant parcel owners with the requisite locus and/or the Commissioner of Buildings (“COB”). The 1^st defendant was therefore required to exercise its powers under the SMA and not to act against it.
 
The Court of Appeal analysed the provisions of SMA and its schedules, in particular section 56 of the SMA and paragraphs 10 and 11 of the Second Schedule of the SMA and found that the word “shall” in the said provisions, which provide that a management corporation “shall hold an annual general meeting” and the AGM “shall be held once in each year”¹, and that the management corporation “shall convene an extraordinary general meeting upon a requisition in writing made by proprietors”²,  dictates the mandatory nature and requirement of an AGM and/or EGM.
 
Further, the Court of Appeal was of the view that the mandatory requirement for the 1^st defendant as the management corporation to hold its AGM once a year is fortified by  Regulations 34(1) and 34(2) of the Strata Management (Maintenance and Management) Regulations 2015 which provide that the management corporation shall hold its AGM in accordance with paragraph 10(2) of the Second Schedule of the SMA, and failure to hold any AGM is an offence and shall on conviction be liable to a fine or imprisonment.
 
The Court of Appeal did not agree with the 1^st defendant’s argument that paragraph 8 of the Schedule of the Courts of Judicature Act 1964 (“CJA”) gives the Court the power to extend time in respect of the holding of any statutorily required AGM and/or EGM under the SMA. According to the Court of Appeal, paragraph 8 of the CJA is a general provision and cannot be used to extend time in respect of the holding of any statutorily required AGM and/or EGM under the specific provisions of the SMA.
 
Based on the provisions in the SMA and its schedules, the Court of Appeal was of the view that there is no express provision in the SMA to allow the AGM and/or EGM to be postponed or a blanket prohibition of any AGM or EGM until full and final disposal of the main suit. In other words, the 1^st defendant as the MC must call for an AGM every year and EGM when requested by proprietors.
 
In addition, the Court of Appeal found the 1^st defendant’s argument that they are unable to prepare proper accounts for the AGM and that the COB had allegedly advised the 1^st defendant in a letter dated 11 October 2021 to apply for an injunction to be without basis. According to the Court of Appeal, the COB had in its letter of 15 November 2021 taken a firm stand that there is no provision in the SMA to allow for any postponement of the AGM and there is no provision in the SMA providing power to do so.
 
The Court of Appeal noted that the plaintiffs’ pleaded case against the defendants is based on the derivative action without the need to call an AGM and/or EGM. The plaintiffs can still pursue their claims even if the AGM and/or EGM is called. In the circumstances, the Court of Appeal agreed with the 2^nd, 3^rd and 7^th defendants’ argument that there was simply no good reason to stop the AGM or EGM, and instead there would be grave prejudice and substantial injustice caused to all parcel owners if AGM and/or EGM are to be injuncted as their statutory rights are impinged upon and taken away without basis.
 
With regard to the 1^st defendant’s undertaking to pay damages, which was given to court upon their injunction applications, the Court of Appeal noted that the funds were actually the funds of the parcel owners as a whole who are affected and are mainly not parties to this suit and have no right to be heard. In effect, the 1^st defendant was using the parcel owners’ monies to pay any damages in case the injunction is wrongly taken. The Court of Appeal was of the view that this was blatantly improper and more so, when the damage caused by taking away their rights by such injunctions cannot be adequately compensated by damages.
 
In summary, the Court of Appeal held that it is the statutory duty of the 1^st defendant to hold the AGM yearly and to hold the EGM when required in writing by the parcel owners. The Court should not defeat the mandatory requirement provided by the law. Further, the Court added that it would not condone or lend its hand to a party who takes advantage of its own wrongdoings and comes to court without clean hands.
 
Whether there existed bona fide serious issues for trial
 
The Court of Appeal answered this issue in the negative. The Court said that in respect of an interlocutory injunction, it is trite law that there must be a pre-existing cause of action i.e. there must be a main suit, before an interlocutory injunction can be granted to preserve the status quo pending the determination by the court of the rights of the parties. The Court of Appeal was of the view that the alleged cause of action in the main suit and the 1^st defendant’s co-defendant action had nothing to do with any alleged issue of AGM and/or EGM. The plaintiffs could still pursue their claim against the defendants even if the AGM and/or EGM is called. Hence, the Court was of the view that the serious issues to be tried in the claim itself have no relevance and do not support an injunction to stop an AGM and/or EGM.
 
Appeal against the decision of the First Injunction Application
 
Relying on paragraph 21(2) of the Second Schedule of the SMA, the 1^st defendant argued that the 2^nd defendant was not entitled to vote as invoices 1 and 2 for sewerage charges were in arrears.
 
The Court of Appeal however agreed with the 2^nd defendant that the 1^st defendant cannot rely on paragraph 21(2) of the Second Schedule of the SMA when the sewerage charges which the 1^st defendant claimed to be in arrears were still before the court and pending determination by the court. In other words, the purported sewerage charges were disputed and sub-judice pending court proceedings. Therefore, it would not be right not to allow the 2^nd defendant to exercise its voting right in the AGM and/or EGM which the 2^nd defendant is entitled under section 21(1) of the Second Schedule of the SMA.
 
Further, the Court of Appeal noted that the 2^nd defendant offered to deposit the amount of the disputed claim for the alleged outstanding sewerage charges into High Court pending the disposal of the 1^st defendant’s co-defendant’s claim. The Court of Appeal was of the view that there would not be prejudice or injustice to the 1^st defendant if they succeed in their co-defendant claim or in allowing the 2^nd defendant’s injunction application. Besides that, the Court of Appeal was of the view that it would cause more prejudice and injustice to the 2^nd defendant by preventing it from voting by reason of the alleged arrears in sewerage charges which would be irreparable and cannot be adequately compensated by damages.
 
CONCLUSION
 
This case is significant as it establishes the mandatory requirement for a management corporation to hold AGM yearly and/or EGM upon a valid requisition being made by proprietors in accordance with the SMA. It was made clear that court has no power to extend time in respect of the holding of any statutorily required AGM and/or EGM.
 
However, it should be noted that one of the reasons Court of Appeal held that the MC ought not to be restrained from convening an AGM and/or EGM was because the plaintiffs could still pursue their claims even if the AGM and/or EGM is called. It would be interesting to see whether court would decide in the same way if the circumstances differed.
 
As the plaintiffs’ application for leave to appeal was dismissed by the Federal Court, the Court of Appeal’s decision is final.
 
Case Note by Jocelyn Lim Yean Tse (Partner) of the Dispute Resolution Practice of Skrine.
                           
 

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