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2025 MarsdenLR 2960
COURT OF APPEAL PUTRAJAYA
WAWASAN RAYA (M) SDN BHD & ANOR – Appellant
Versus
MARC SERVICE RESIDENCE MANAGEMENT CORPORATION – Respondent
[Civil Appeal No: W-02(NCVC)(W)-719-04-2023]
Management corporations cannot prohibit short-term rentals under the Strata Management Act, and courts must adhere to natural justice principles when striking out pleadings.
Headnote:(A) Strata Management Act 2013 - Section 2, 59, 70(2), 148 - Rules of Court 2012 - Order 18 r 19(1) - Management corporation's authority to prohibit short-term rentals (STR) - Court's power to strike out counterclaims - The court found that the management corporation lacks the authority to prohibit STR under the Strata Management Act and that the High Court's striking out of the counterclaim violated natural justice principles. (Paras 1, 20, 29, 39)
(B) Natural Justice - The court emphasized that a judge must remain impartial and cannot act on its own motion to strike out pleadings without an application from the parties involved. (Paras 22, 23)
(C) Legal Errors - The High Court committed multiple legal errors by deciding issues not agreed upon by the parties and misinterpreting the Strata Management Act and its regulations. (Paras 27, 29, 36)
Facts of the case:
The plaintiff, a management corporation, sought to prohibit the defendants from using their parcels for STR, claiming violations of house rules and by-laws. The High Court granted injunctions against the defendants, which were later appealed.
Findings of Court:
The appellate court found the High Court's decision flawed, ruling that the management corporation could not prohibit STR and that the injunctions were improperly granted.
Issues: The main issues included the authority of the management corporation to regulate STR and the validity of the High Court's striking out of the counterclaim.
Ratio Decidendi: The court ruled that the management corporation's powers do not extend to prohibiting STR and that the High Court's actions violated principles of natural justice.
Result: Appeal allowed; High Court's decision set aside.
JUDGMENT
A. Two Novel Questions
[1] This judgment raises two novel issues, namely-
(1) whether the "management corporation" (MC) [as defined in s 2 of the Strata Management Act 2013 ( SMA )] of a "development area" (as understood in s 2 ) can prohibit "Short Term Rental' (STR) of "parcels" (within the meaning of s 2 ) in the development area; and
(2) can a court on its own motion strike out a counterclaim by a defendant under O 18 r 19(1) of the Rules of 2012 (RC). This question also concerns the application of the two rules of natural justice.
[2] I had forwarded a draft of this judgment (Draft) to See Mee Chun and Lim Chong Fong JJCA. Both my learned sister and brother had expressed their agreement with the Draft.
B. Background
[3] We shall refer to the parties as they were in the High court.
[4] The plaintiff (Plaintiff) is the MC of a development area known as "MARC Service Residence" (Apartment).
[5] The 1st defendant company (1st Defendant) is the registered proprietor of three parcels in the Apartment. The 1st Defendant also rented five parcels in the Apartment.
[6] On 26 June 2019, the Sixth Annual General Meeting of the Plaintiff was held (Plaintiff's 6th AGM). At the Plaintiff's 6th AGM, there was a dispute on what was passed with regard to Agenda no 8, resolution no 3. (Resolution No 3).
C. Proceedings In The High court
[7] The Plaintiff filed a suit in the High court (This Suit) against 202 defendants (Defendants) who own parcels (Parcels) in the Apartment (Parcel Owners).
[8] In This Suit, the Plaintiff's Statement of Claim prayed for the following relief, among others:
(1) an injunction to compel the Defendants to comply with the Plaintiff's "House Rules" (HR) and the by-laws in the Third Schedule [By-Laws (3rd Schedule)] to the Strata Management (Maintenance and Management) Regulations 2015 (SMR) governing the use of the Parcels;
(2) an injunction to restrain the Defendants from violating the HR and the By-Laws (3rd Schedule) by "managing, maintaining and/ or operating" their Parcels for, among others, STR;
(3) an injunction to restrain the Defendants from, among others "advertising, contracting for booking and/or allowing dealing" their Parcels for, among others, STR;
(4) an injunction to compel the Defendants to remove all advertisements and listings from all Internet websites and other media which offer the use of the Defendants' Parcels for, among others, STR;
(5) the Defendants shall indemnify the Plaintiff if proceedings are taken by the authorities against the Plaintiff for violation of the HR and applicable laws;
(6) an injunction to restrain the Defendants from interfering with or preventing the Plaintiff from performing the Plaintiff's obligations under the SMA ;
(7) general damages; and
(8) costs on an indemnity basis
[9] On 20 December 2019, the Plaintiff obtained an ex parte interlocutory injunction from the learned High court Judge to restrain the Defendants from using their Parcels for STR until the disposal of This Suit (Ex Parte Interlocutory Injunction).
[10] The High court subsequently granted an inter partes interlocutory injunction on 21 February 2020 on the same terms of the Ex Parte Interlocutory Injunction (Inter Partes Interlocutory Injunction).
[11] The 2nd appellant company (2nd Appellant)-
(1) rented several Parcels;
(2) was not sued by the Plaintiff in This Suit; and
(3) was aggrieved by the Ex Parte Interlocutory Injunction and Inter Partes Interlocutory Injunction. Hence, the 2nd Appellant applied to intervene in This Suit as the 203rd Defendant (203rd Defendant). The Plaintiff consented to the intervention of the 2nd Appellant as the 203rd Defendant in This Suit.
[12] The 203rd Defendant filed a counterclaim against the Plaintiff and the members of the Plaintiff's Management Committee (203rd Defendant's Counterclaim).
[13] The High court, on its own motion, struck out the 203rd Defendant's Counterclaim with liberty to file afresh and with no order as to costs [High court's Suo Mot
