Background
 
The recent decision of the High Court in Perbadanan Pengurusan Diamond F & Ors v Pesuruhanjaya Bangunan Kuala Lumpur & Anor [2026] 7 MLJ 848 clarifies the judicial boundary against administrative overreach by the Commissioner of Buildings and the bank’s obligations when presented with valid statutory documents.
 
The case concerns a stratified development known as Diamond F. The First Plaintiff is the management corporation of the development.
 
At the 9^th Annual General Meeting (“9^th AGM”), the Second and Third Plaintiffs, alongside the Second and Third Interveners, were elected as members of the management committee of the First Plaintiff. The Third Intervener thereafter applied to the Strata Management Tribunal (“SMT”) to challenge the Second Plaintiff’s election into the committee. While SMT’s decision was pending, the First Defendant, the Commissioner of Buildings Kuala Lumpur (“COB”) issued a “letter of recognition” to validate the Second Intervener, Third Intervener and Third Plaintiff as the legitimate committee members of the First Plaintiff. A copy of the letter was subsequently sent to the Second Defendant, a financial institution (“Bank”) where the First Plaintiff maintained an account.
 
After the hearing before the SMT, the SMT ordered that an annual general meeting be convened within 60 days from the date of its decision. Although the Third Intervener sought judicial review, the 10^th Annual General Meeting (“10^th AGM”) proceeded and elected a new committee comprising the Second Plaintiff, the Third Plaintiff and another individual. The new committee notified the COB and the Bank of the election results and that there is a change in the bank signatories for the First Plaintiff’s bank account.
 
The Bank sought verification from the COB and the COB replied by email that it could not confirm the 10^th AGM committee because the court had yet to decide the judicial review and advised the Bank to rely on the COB’s earlier letter of recognition. This was followed by the COB’s formal letter refusing to issue a fresh recognition letter on the grounds that the statutory declaration filed by the First Plaintiff regarding the election results was defective and that the audited accounts were not provided. The Bank declined to recognise Second and Third Plaintiffs as the signatories of First Plaintiff’s account on the ground that they were allegedly not the authorised committee members of the First Plaintiff.
 
The judicial review applications were subsequently dismissed. The First Plaintiff notified the Bank of the dismissal and requested that the Bank recognise the Second and Third Plaintiffs as authorised signatories for the First Plaintiff’s current account, but the Bank refused. Several months after the dismissal, the COB relented and issued a fresh letter of recognition for the committee elected at the 10^th AGM.
 
Decision
 
The principal issue before the High Court was about the power of a COB appointed under section 4(1) of the Strata Management Act 2013 (“SMA 2013”).
 
In determining this issue, the Court first referred to and applied the principle laid down in the Federal Court case of Badan Pengurusan Bersama Paradesa Rustika v Sri Damansara Sdn Bhd [2014] 1 MLJ 14 that no amount of consent or acquiescence by parties can confer upon the COB a power not granted by the SMA 2013 and that the powers and duties of the COB are circumscribed by the provisions of the said Act. The Court further referred to the Court of Appeal case of Muhamad Nazri bin Muhamad v JMB Menara Rajawali & Anor [2020] 3 MLJ 645 where the Court of Appeal held that what the SMA 2013 does not expressly or impliedly authorise is to be taken as prohibited.
 
The central question was therefore whether the COB was entitled to keep the SMT’s awards in abeyance and insist on awaiting the decision of judicial review application when there was no stay order granted by the High Court, and directing the Bank to be guided by the COB’S earlier ‘letter of recognition’.
 
The Court took the view that the determination must be based on the SMA 2013 and/or other laws and regulations governing the function of a COB and management corporations. Based on the provisions of the SMA 2013 and the Second Schedule, the Court held that the COB’s roles are administrative and supervisory in nature, and that the COB has no adjudicatory power. The COB’s duty is confined to ensuring that the Annual General Meeting (“AGM”) is convened and that certified true copies of the documents stipulated under paragraph 7(8) of the Second Schedule, namely the audited accounts of the management corporation and the auditor’s report which had been presented during the AGM, the resolutions passed at the AGM and the minutes of the meeting, are filed within 28 days of the AGM. Any dispute concerning the validity of the general meeting falls within the jurisdiction of the SMT (if the dispute was within its jurisdiction) or the High Court.
 
While judicial review proceedings could potentially result in a different ruling, the burden lay on the Interveners to obtain a stay order, which they failed to do. In absence of an injunction or stay order, the COB was bound to accept the certified true copies filed under paragraph 7(8) or an SMT award (if any) which satisfy the requirements.
 
The Court held that the SMA 2013 does not empower the COB to impose additional requirements, such as statutory declarations in a particular format or other additional documents to be filed by the newly elected committee members to prove their identity.
 
Accordingly, the Court found that the COB had erred in its replies to the First Plaintiff and in advising the Bank to continue relying on the earlier “letter of recognition” to determine the authorised signatories of the First Plaintiff’s bank account. However, the Court declined to award damages against the COB, holding that the facts did not justify such relief.
 
The secondary issue before the Court was whether the Bank should be held liable for declining to recognise the new committee members as signatories after receiving the COB’s letter.
 
For this issue, the Court acknowledged the necessity for banks to verify the identity of signatories to prevent fraud. Nevertheless, the Court found that the Bank had erred in insisting upon a “letter of recognition” from the COB despite having received sufficient documentation verifying the new committee members. Had the Bank suspected forgery or questioned the authenticity of the documents, freezing the account might have been justified. However, the Bank’s decision was predicated solely on disputes concerning the legality of the 9^th AGM, which was not a valid ground for freezing of a bank account even under its own terms and conditions. The Court further held that the Bank could have sought for court’s directions through an interpleader application but did not do so.
 
Consequently, the Bank’s erroneous decision deprived the First Plaintiff of the use of its funds, amounting to a breach of contract. The Court therefore ordered the Bank to pay interest at the rate of 4% per annum on the account balance, calculated from 8 February 2022 (the date of the Bank’s letter to the First Plaintiff’s solicitors) until the release of the account.
 
Comments
 
This decision reinforces the principle that the statutory limits of the COB’s power are strictly circumscribed by the provisions of the SMA 2013. Management corporations and committee members must be cognisant of these statutory limits and not assume that decisions by the COB are the cure to all disputes between parcel owners and management committee members or among management committee members inter se.
 
However, it is our considered view that the learned High Court Judge’s observation that the COB has no adjudicatory power ought to be confined to the relevant issues of the case, as there are other provisions within SMA 2013 which empowers the COB to determine and decide disputes, such as sections 12(7) and 12(8) of SMA 2013, which, inter alia, confer power on the COB to review and determine the maintenance and sinking fund charges imposed by the developer.
 
On the banking side, the Court balanced the bank’s duty to guard against scams and fraud with the requirement for reasoned, evidence‑based action. A bank presented with compliant statutory documents must either identify specific, articulable grounds for suspicion or pursue proper procedural alternatives, such as an interpleader to seek court directions.
 
 
Case Note by Ashok Kumar Mahadev Ranai (Partner) and Lim Chin Lun (Associate) of the Construction and Engineering Practice of Skrine.