In Badan Pengurusan Bersama Avenue K dan K Residence v City Properties Sdn Bhd & 7 Ors [2025] 2 AMR 593, the Court of Appeal set aside the High Court’s decision that there was a valid dispute on arrears pertaining to maintenance charges and sinking fund contribution by the respondents, therefore, they were entitled to vote in the upcoming annual general meeting (AGM) of the joint management body (“JMB”).
 
Facts
 
The appellant is the JMB of Avenue K and K Residence (“Project”). The first to eighth respondents are corporate bodies and individuals who are parcel owners of units in K Residence, collectively holding 78% of the share units in the Project.
 
The first respondent is the registered proprietor of the land on which the Project is situated, and the second respondent is the developer of the Project. The second respondent did not set up the JMB within the statutory period of 12 months but instead managed the maintenance charges and sinking fund contribution accounts for 10 years until the JMB was formed on 15 September 2018 pursuant to the first AGM.
 
The second respondent and the first respondent entered into several agreements which resulted in a contra settlement of utilities and services provided by the first respondent against the maintenance charges and sinking fund contribution payable by the second respondent. Furthermore, the respondents did not pay their corresponding maintenance charges and sinking fund contribution payments and the Project maintenance charges and sinking fund contribution accounts were not fully prepared nor audited.
 
During the first AGM of the JMB, the Commissioner of Building who attended the meeting decided that the first respondent and the second respondent were not entitled to vote due to the arrears of the maintenance charges and sinking fund contributions. Consequently, the JMB reversed the contra adjustments.
 
Thereafter, the respondents filed an originating summons seeking inter alia, declarations that the first and second AGMs of the JMB were invalid and that the respondents have a right to attend and vote in the upcoming third AGM.
 
Decision of the High Court
 
The High Court decided in favour of the respondents. The High Court held that the test in guiding its decision was whether there was actually a valid disputed arrears with reference to the authority derived from the Court of Appeal decision of Tetap Tiara Sdn Bhd v Pengurusan Perbadanan Jaya One & 21 Ors [2023] CLJU 2648 (“Tetap Tiara”). The High Court decided that there exists a valid dispute in respect of the arrears relating to paragraph 21(2) of the Second Schedule to the Strata Management Act 2013 (“SMA”), which ultimately entitled the respondents to vote without regard to the proviso in paragraph 21(2) which reads:
 
“(2) A proprietor shall not be entitled to vote if, on the seventh day before the date of the meeting, all or any part of the Charges, or contribution to the sinking fund, or any other money due and payable to the management corporation in respect of his parcel are in arrears.”
 
The High Court further opined that the respondents’ refusal to pay was neither negligent nor deliberate, but was based on contra adjustment of moneys owed between them.
 
Decision of the Court of Appeal
 
According to the Court of Appeal, the High Court erred by not reading and considering paragraph 21(1) and the proviso in paragraph 21(2) of the Second Schedule to the SMA together.
 
The Court of Appeal held that the High Court in deciding that the respondents could not be deprived of their voting rights due to disputed arrears failed to consider the proviso in paragraph 21(2) of the Second Schedule to the SMA which expressly prohibits a parcel owner from voting when arrears remain outstanding.
 
In coming to its decision, the Court of Appeal distinguished Tetap Tiara on grounds that it concerned an interlocutory injunctive relief in a writ action whilst the instant appeal involves final reliefs pursuant to an originating summons. The Court added that it is trite that an interlocutory injunction application may be decided purely based on the existence of a bona fide dispute (Keet Gerald Francis Noel John v Mohd Noor @ Harun bin Abdullah & 2 Ors [1995] 1 AMR 373, CA).
 
Conclusion
 
The Court of Appeal’s ruling reinforces paragraph 21(2) of the Second Schedule to the SMA that a parcel owner is not entitled to vote when maintenance charges or sinking fund contributions are in arrears. The question arises is whether payment of disputed arrears under protest or reservation could result in a different outcome. As the effect of the payment of a disputed sum under protest is that such payment, though made, does not imply an admission of liability for the sum paid, it is a moot point whether such payment will entitle the parcel owner to vote as he/she will not be caught by paragraph 21(2) on arrears. In conclusion, this case serves as a reminder to parcel owners to ensure that there are no arrears, even though in dispute, that could preclude them from voting at a meeting of a joint management body or management corporation of a stratified development.
 
This decision is noteworthy as the Court of Appeal has distinguished Tetap Tiara on the basis that it involves an application for interlocutory relief whilst the present case concerns an application for final reliefs.
 
Case Note by Jesy Ooi (Partner) and Cynthia Lam (Associate) of the Real Estate Practice of Skrine.