Funds in a maintenance account under the Strata Management Act may be garnished for debts, while sinking fund account funds are restricted to capital expenditures.

JUDGMENT

Faizah Jamaludin J:

Introduction

[1] This is the Appellant's appeal against the Sessions Court's decision on 17 June 2021 to dismiss its application for a garnishee order against the 2nd Respondent ("R2") to garnish the monies standing to the credit of the 1st Respondent's ("R1") maintenance account and sinking fund account maintained at the R2 bank.

[2] The appeal is allowed for the reasons set out in this judgment.

The Facts

[3] The Appellant is a company providing property management services. R1 is the joint management body ("JMB") of the subdivided building known as Scott Tower Condominium ("Scott Tower"). R1 is established under the Strata Management Act 2013 (" SMA "). A JMB is a body corporate established under s 17(1) of the . It comprises of the developer and the purchasers of the parcel units in the development.

[4] R2 is a bank. R1's maintenance account and sinking fund account for Scott Tower, which it holds under the SMA , is maintained at R2.

[5] R1 was appointed to provide building management services for Scott Tower by building managing agent Meridian Inc Berhad ("D1") and Cemerlang Land Sdn Bhd ("D2") on 7 January 2015. On 7 October 2017, R1 took over the management and maintenance of Scott Tower from D1 and D2.

[6] The Appellant had provided building management services. However, D1, D2 and/or R1 had failed and/or refused to pay the sums due and owing to the Appellant for the building service provided. On 8 January 2018, the Appellant terminated their services and demanded the sum of RM 237,029.18 due and owing to the Appellant. D1, D2 and/or R1 refused to pay the sums due and owing to the Appellant for the period from January 2016 to January 2018. The Appellant commenced action against D1, D2 and R1 at the Sessions Court for the sums due and owing. R1 was the 3rd defendant in the Appellant's action at the Sessions Court.

[7] On 19 July 2019, a judgment in default was entered against R1 for the sum of RM 135,411.20 together with interest at the rate of 5% per annum from 24 January 2019 until the date of full settlement, and cost of RM 1,000.00.

[8] On 21 October 2019, the Sessions Court allowed the Appellant's ex-parte application for a Garnishee Order against R2 ("1st Garnishee Order"). On 5 November 2019, R2 paid the sum of RM 32,513.65 to R1's solicitors in compliance with the said 1st Garnishee Order.

[9] On 5 February 2021 R1 applied for a second Garnishee Order against R2 for the balance of the judgment sum ("2nd Garnishee Order").

[10] On 17 June 2021, the Sessions Court dismissed the Appellant'ss application for the 2nd Garnishee Order. The learned Sessions Court Judge ("SCJ") held that the monies standing to the credit of R1's maintenance account and sinking fund account with R2 cannot be garnished because the accounts are held on trust pursuant to ss 10(4),11(4),23(1) and 24(1) of the SMA .

Analysis

[11] Sections 10 (4) and 11(4) of the SMA state that a developer shall hold the monies in the developer's maintenance account and the sinking fund account on trust for the purchasers.

[12] By virtue of the provisions in ss 10(4) and 11(4) of the SMA , the monies standing to the credit of the developer's maintenance account and sinking fund account do not form part of the developer's property.

[13] Sections 10 (5) and 11(5) of the SMA state that in the event the developer enters into any composition or arrangement with its creditors or has a receiving order or an adjudication order made against it or it goes into liquidation, the monies in the developer's maintenance account and sinking fund account shall vest in and must be held by the administrator, official receiver, trustee in bankruptcy or liquidator (as the case may be) and transferred into a maintenance account and sinking fund account in the name of the JMB.

[14] Additionally, prior to the expiry of the developer's management period, the developer is required under s 15(1)(a) of the SMA to transfer to the JMB, all balances of monies in the develo