Maintenance charges collected by a developer are trust monies for purchasers, not the developer's property, establishing fiduciary duties towards the purchasers.

JUDGMENT

Mohd Radzi Abdul Hamid J:

Matter Before This Court

[1] This is a decision at the end of a full trial on a claim instituted by the Plaintiffs against all Defendants arising from issues related to the transfer of monies from the 2nd Plaintiff ('LMC') to the 1st Defendant and the functions and duties of the 1st Defendant as the Joint Management Body of a property known as Kondominium Lagenda ('Lagenda'). This decision also relates to the Counterclaim instituted by all the Defendants against the Plaintiffs and one, Eng Song Huat who was at the material time a Director of the 1st Plaintiff ('Jeuro').

The Claim And Counterclaim

[2] Based on the Statement of Claim, the Plaintiffs' claim essentially rests on a claim that the 2nd to 5th Defendants who were Directors of LMC at the material time and also members of the Joint Management Committee of the Joint Management Body, Badan Pengurusan Bersama Kondominium Lagenda ('JMB') had wrongfully caused LMC to transfer to JMB the amount of RM438,945.00 being maintenance charges collected by LMC as the management corporation appointed by Jeuro. It is both the Plaintiffs' claim that those monies belonged to Jeuro and therefore those monies should be returned.

[3] It is the Defendants' case that all those monies do not belong to either Plaintiff but are monies held in trust for the purchasers and therefore those monies were legally and properly transferred to JMB as the Joint Management Body incorporated under the Building and Common Property (Maintenance and Management) Act 2007 on 20 May 2010 ('BCPA'). Since the monies were trust monies, all the Defendants cannot be said to have committed any wrong under the law in affecting the transfer of those monies and managing them under JMB's control and functions as the Joint Management Body.

[4] Further to that all the Defendants filed a Counterclaim against the Plaintiffs seeking:

(a) outstanding maintenance charges due from Jeuro for 6 units owned by it amounting to RM410,866.20 or alternatively for the amount of RM168,756.85 calculated from 20 May 2010 being the date of formation of the JMB;

(b) an order declaring that Jeuro as the developer of the Project had failed in executing their obligations to cause the issuance of strata titles to all purchasers pursuant to the Strata Titles Act 1985 ;

(c) an order declaring that an amount of RM919,468.44 or any monies received by Jeuro from the Ministry of Housing and Local Government or from the Housing Development Account are trust monies;

(d) an order declaring that all monies collected by the Plaintiffs from parcel purchasers/owners are trust monies; and

(e) for damages against all the Plaintiffs.

[5] After having considered the evidence and hearing submissions from very able Counsel, this Court finds and decides as follows.

Court's Deliberations

Plaintiffs' Claim

On The General Position Of The Law And Monies Collected By A Developer Prior To Coming Into Force The BCPA

[6] To begin with, the BCPA came into effect in the State of Melaka on 12 April 2007. It has been judicially held by the Federal Court in Badan Pengurusan Bersama Paradesa Rustika v. Sri Damansara Sdn Bhd, [2014] 1 MLJ 14 that the Act did not have retrospective effect. That being the position, the Federal Court held that prior to coming into force of the BCPA, all monies collected by a developer were monies collected under the contractual terms of the project's Sale and Purchase Agreements ('SPAs') and they form part of the developer's sinking fund that is to be utilized towards payment of management charges (see also decision in Sharon Lobo v. AAB Avenue 1 Sdn Bhd & Ors; Badan Pengurusan Bersama Cyber Heights Villa, Cyberjaya v. Tindak Murni Sdn Bhd; [2016] 2 AMR 445; and LCS Management Corporation v. Leisure Commerce Square Sdn Bhd; [2016] 1 AMR 135).

[7] It must be noted however the decision in Badan Pengurusan Bersama Paradesa Rustika (supra) did not touch on the issue of the legal status of those monies whether they are to be considered