In Yong Kein Sin & Anor v Perbadanan Pengurusan Springtide Residences [2023] 5 AMR 449, the High Court held, inter alia, that a by-law passed by the management corporation of a strata development authorising the management corporation to recover costs, fees and expenses incurred in enforcing any by-law against a parcel proprietor or occupier who is in breach of the same, or in defending any legal suits brought by a parcel proprietor or occupier, is valid and enforceable.
 
Facts
 
The plaintiffs are the registered co-proprietors of a residential unit in a strata development known as Springtide Residences, Penang. The defendant is the management corporation of the said development.
 
The following by-law (“said by-law”) was passed at the first annual general meeting of the defendant on 26 April 2013:
 
“Where any parcel proprietor had breached any by-law passed by the Management Corporation at its Annual General Meetings and where the General Management incurs any costs, fees or expenses whatsoever in enforcing the said by-laws, the Management Corporation shall recover as a debt all such costs, fees and expenses from the parcel proprietor or occupier on an indemnity basis and where the Management Corporation incurs costs, fees and expenses and whatsoever in defending any legal suits brought forth by the parcel proprietor or occupier, the Management Corporation shall recover all such costs, fees and expenses from the parcel proprietor or occupier concerned on an indemnity basis.”
 
The plaintiffs filed an originating summons (“O.S.”) seeking various reliefs from the High Court, including a declaration that the said by-law was ultra vires and void under the Strata Management Act 2013 (“SMA 2013”) and/or the Strata Management (Maintenance and Management) Regulations 2015.
 
The plaintiffs also sought to invalidate the invoices to recover the legal fee incurred by the defendant in defending claims filed by the plaintiffs before the Strata Management Tribunal (“SMT”) in Tribunal Claim No. TPSZU/P-0635-10/19 (“SMT 2019 claim”) and Tribunal Claim No. TPSZU/P-0068-02/21 (“SMT 2021 claim”) (collectively, “SMT claims”), and the defendant’s decision to deny the plaintiffs of their rights as co-proprietors including the right to attend and vote at any general meeting of the defendant by reason of their refusal to pay the said legal fee.
 
Decision of the High Court
 
The High Court dismissed the O.S. on the following grounds:
 
Res judicata
 
The issue concerning the liability of the plaintiffs to pay the legal fee arising from the SMT 2019 claim had been raised in the SMT 2021 claim and determined in favour of the defendant by the SMT, being a body with competent jurisdiction under the SMA 2013 to decide on the validity issue of by-laws. Hence, the principle of res judicata applied, and the plaintiffs are estopped thereby and by section 106(1) of the SMA 2013 from relitigating the issue under the O.S.
 
Laches
 
The plaintiffs did not challenge the validity of the said by-law notwithstanding that they knew of its existence at all material times and had in fact voted in favour of the said by-law at the annual general meeting on 26 April 2013. The plaintiffs are guilty of laches (i.e. unreasonable delay in commencing legal proceedings that renders it unjust to grant the relief sought) and the declaratory relief sought under the O.S. should be refused under section 32 of the Limitation Act 1953.
 
The said by-law
 
The Court held that a management corporation is expressly empowered to make additional by-laws by special resolution to regulate the “behaviour” of the unit owners of a development under section 70(2)(g) of the SMA 2013. In the opinion of Justice Quay Chew Soon, “behaviour” can include the conduct or action of a unit owner in initiating a legal suit against the management corporation.
 
The SMA 2013
 
The defendant is required under section 59(1)(h) of the SMA 2013 to enforce by-laws. Further, section 59(6) of the SMA 2013, inter alia, empowers a management corporation to recover any expenditure incurred in respect of any act that it is required or authorised (by the SMA 2013 or any other written law) to perform, from the unit owner as a debt. Such expenditure, in the opinion of the learned Judge, can include the legal fee incurred in defending legal suits initiated against the management corporation.
 
According to the Court, section 77(1) of the SMA 2013 appears to make the unit owners of a development liable to pay the amounts lawfully incurred by the management corporation by reason of the key words in that sub-section “payment of any amount lawfully incurred by the management corporation” and “guaranteed by the proprietors”.
 
Based on the foregoing provisions of the SMA 2013, Justice Quay opined that the legal fee of defending the SMT claims was lawfully incurred by the defendant in protecting the interest of the members of the management corporation and was incurred by the defendant in exercising its duty, and thus came within the ambit of “amount lawfully incurred” under section 77(1) of the SMA 2013. Hence, the Court concluded that such legal fee is sanctioned by the SMA 2013.
 
The Court also referred to section 143 of the SMA 2013 which stipulates, inter alia, that any judgment or order made against the management corporation shall have the effect as if the said judgment or order is made against all the unit owners. The learned Judge opined that this impliedly imposes an obligation or duty on the management corporation to defend legal proceedings brought against it, because if the management corporation does not do so, the judgment or order made against it will affect all the unit owners of the development.
 
The High Court referred to Innab Salil & Ors v Verve Suites Mont' Kiara Management Corp [2020] 12 MLJ 16, where the Federal Court held that that the SMA 2013 is social legislation that should be interpreted liberally in favour of the community (i.e. the members of the management corporation) over the interest of an individual unit owner. If “expenditure” in section 59(6) of the SMA 2013 and the “amount lawfully incurred” in section 77(1) of the SMA 2013 do not include the legal fee incurred by the defendant in defending legal suits initiated by the unit owners, then the whole strata community will have to bear such legal fee incurred in defending a legal suit initiated by any of the unit owners. It would be unfair to the other unit owners to bear the legal fee of the unsuccessful claims filed by the plaintiffs. Thus, it is axiomatic that the interest of the community of the strata development should prevail over the interest of an individual unit owner.
 
In response to the plaintiffs’ contention that they should not be denied the right to attend and vote at the general meetings of the defendant, the High Court referred to paragraph 21(2) of the Second Schedule to the SMA 2013 which, inter alia, disallows a proprietor from voting if, on the seventh day before the date of the meeting, all or any part of any other money due and payable to the management corporation in respect of his parcel are in arrears. The High Court said that in the present case, the recovery of the legal expense from the plaintiffs is because the expenses were incurred by the defendant in discharging the obligation imposed under the SMA 2013. The defendant paid the legal fee as a result of the SMT claims file by the plaintiffs. The defendant therefore has the right to recover the same from the plaintiffs under the said by-law and the SMA 2013.
 
Conclusion
 
The takeaways from this case are as follows. First, that a by-law duly passed at a general meeting of the management corporation of a strata development authorising the management corporation to recover legal fees incurred in defending proceedings brought by any unit proprietor in such strata development is valid and enforceable under the SMA 2013. Second, a proprietor who fails to pay such sum within the time frame permitted under paragraph 21(2) of the Second Schedule to the SMA 2013 will not be allowed to vote at the relevant general meeting of the management corporation.
 
In deciding that a by-law duly passed at a general meeting of a management corporation authorising the management corporation to recover legal fee from a unit owner as valid and enforceable, the High Court in the present case followed the decision of the High Court in Chew Chin Tai v Perbadanan Pengurusan Kondominium Selat Horizon [2015] 1 LNS 1196, a case decided under the now repealed sections 44(2) and 43(7) of the Strata Titles Act 1985. As there are minor differences between the provisions of the repealed sections and the SMA 2013, this decision has updated the state of the law by taking into account the differences in the law. The instant case extends the law on strata management by holding that a proprietor who does not reimburse the legal fee may be barred from voting at the general meetings of the management corporation until the fee is fully paid.
 
Case note by Jesy Ooi (Partner) and Engy Tan (Associate) of the Real Estate Practice of Skrine.