Can a management corporation suspend the usage of the common facilities or common services due to arrears owing by a proprietor, which arrears are disputed by the proprietor?

PERBADANAN PENGURUSAN 3 TWO SQUARE v. 3 TWO SQUARE SDN BHD [2020] 1 LNS 1377

• Perbadanan Pengurusan 3 Two Square is the management corporation (“MC”) for 3 Two Square (“Development”), which was developed by 3 Two Square Sdn Bhd (“Developer”).

• The Development is a mixed development comprising of 6 commercial blocks owned by various parcel owners including the Developer which owns the last block of the Development (“Block F”).

• The MC claims that the Developer had failed to make payment of its maintenance and sinking fund charges over several years, which arrears amount to RM4,751,805-52 as at 31 October 2019, and continues to accumulate with non-payment of the charges on a daily basis (“Arrears”), leading to the MC filing a suit against the Developer to recover the Arrears.

• The Developer on the other hand, disputes the validity of the sums claimed.

• The MC had issued two (2) written statutory notices for payment in Form 20 (“Notices for Payment”) pursuant to Regulation 31 of the Strata Management (Maintenance and Management) Regulations 2015 (“Regulations”).

• The above events culminated in the issuance of a letter dated 12 June 2020 from the MC notifying the Developer that the Arrears had not been paid and consequently, the MC was invoking its statutory powers pursuant to By-Law 6(5) of the Third Schedule of the Regulations to stop or suspend the usage of the common facilities or common services provided by the MC.

• The suspended services are as follows and was to continue until the MC is in receipt of the Arrears:

1. limiting the usage of lifts for Block F to only 1 unit at any given 1 time;

2. all toilets in every floor on Block F are closed except for toilets on the 7^th floor;

3. the chiller and cooling tower will be switched on from 8.00am to 4.00pm for Block F on weekdays only and will not operate on weekends and public holidays.

• On the same date, the MC affixed the suspension notices on the notice board of Block F.

• The suspension was implemented on 22 June 2020, leading the Developer to sue the MC on the basis that the suspension was unlawful.

• The Developer claimed that the amount of the Arrears was strongly disputed as the sums claimed together with the interest calculation was severely flawed on the following basis and it had in fact paid in full all the maintenance and sinking fund charges save for the charges unlawfully charged based on square footage:

1. the charging of maintenance and sinking fund charges ought to be according to number of share units and not square footage;

2. payment for electricity charges had been made by the Developer but which ought to have been borne by the MC;

3. double claim for electricity charges incurred in the common property was imposed;

4. the interest calculation stated in the running account could not be reconciled;

5. the MC had misapplied payments made by the Developer to disputed invoices and not invoices directed by the Developer.

The High Court dismissed the application by the Developer and found in favour of the MC. The court was of the view that the argument taken by the Developer that it cannot be a defaulter as there were no outstanding charges, and that it had disputed the legality of other charges imposed on it, is flawed. This argument would go against the clear wordings of By-Law 6(1) defining who a defaulter is. The recourse to suspension provided by By-Law 6(5) would then be meaningless as a defaulter can claim that outstanding charges are disputed to avoid the suspension.