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2025 MarsdenLR 2189
HIGH COURT SABAH & SARAWAK KOTA KINABALU
CARA KAYA SDN BHD – Appellant
Versus
EXCELRUN SDN BHD – Respondent
[Case No: BKI-22NCVC-84-6/2024]
A purchaser's change of use of property requires landlord consent per mutual covenants, and an interim manager's refusal to consent is valid if within contractual obligations.
Headnote:(A) Sale and Purchase Agreement 2013 - Mutual Covenants - Questions of law regarding the entitlement of the Plaintiff to alter the use of Parcel B and the Defendant's duty as interim manager - Plaintiff's request for consent to use as a spa was challenged; mutual agreement required for change of use was affirmed. (Paras 2, 8, 12, 27, 36, 43)
(B) Duty of Interim Management Corporation - The corporation is bound to enforce the contractual covenants and maintain compliance with the law; refusal to consent to renovation deemed reasonable and lawful. (Paras 15, 21, 42)
Facts of the case:
Dispute between a property purchaser and its developer concerning the permitted use of Parcel B, where the Plaintiff sought changes without sufficient authority and claimed damages. The developer maintained its obligation to uphold mutual covenants. The Plaintiff had previously changed the use of Parcel B with approval. (Paras 3, 4, 8, 16)
Findings of Court:
The Plaintiff's reliance on the notion of a bare trustee was unfounded as contractual obligations remained critical. No breach of duty by the Defendant was established. (Paras 19, 22, 43)
Issues: Whether the Plaintiff is entitled to change the use of Parcel B without the Defendant's approval; the extent of the Defendant's obligation. (Paras 2, 3, 41)
Ratio Decidendi: The court found that the Plaintiff was bound by the covenants in the sale agreement and that any changes to use required the Defendant's consent. The duties of the interim manager were to enforce existing obligations, affirming no contractual breach occurred. (Paras 20, 22, 43)
Result: Action dismissed with costs.
| Table of Content |
|---|
| 1. parties agreed on legal questions regarding use of parcel b (Para 3 , 4 , 5 , 10 , 11 , 12) |
| 2. plaintiff's arguments about being a beneficial owner (Para 15 , 17 , 18) |
| 3. trustee obligations and use rights in the spa (Para 20 , 22 , 24 , 27 , 29) |
| 4. management corporation's binding obligations under spa (Para 30 , 32 , 33) |
| 5. conclusion on the plaintiff's claims and costs (Para 43 , 44) |
[1] Both parties agreed that their dispute could be determined by the Court on questions of law/construction of documents without a trial pursuant to O 14A of the Rules of Court 2012.
[2] These were the questions:
(i) whether the Plaintiff as purchaser of Parcel B within the Lintas Station building is legally entitled to change the use of Parcel B without the agreement and/or approval from the Defendant which is the interim manager of the common property of the Lintas Station building;
(ii) whether the Plaintiff as purchaser of Parcel B within the Lintas Station building is legally entitled to change the use of Parcel B without the agreement and/or approval from the Defendant which is the interim manager of the common property of the Lintas Station building; and
(iii) whether the Plaintiff is entitled to damages to be assessed for the loss of rental and 5% gross revenue.
[3] For context, the Defendant is the developer of a 7-storey commercial-cum-multistorey car park building known as "Lintas Station.
[4] The Plaintiff purchased the 4th floor of Lintas Station from the Defendant as the developer vide a sale and purchase agreement dated 29 July 2013 ("SPA") containing Mutual Covenants in The Second Schedule which is specifically agreed to be read, taken and construed as an essential part of the SPA.
[5] The subject property is also referred in the SPA as Parcel B.
[6] The Plaintiff has paid the purchase price for Parcel B in full, and was given vacant possession of the 4th floor.
[7] By para 5(a) of the Mutual Covenants, the Plaintiff covenanted that it would use Parcel B as a car park area until the requisite approvals have been obtained for its use as a hotel.
[8] Clause 19(1) of the Mutual Covenants states:
"The Purchaser and his successors-in-title, permitted assigns, nominees, beneficiaries, tenants or otherwise to the said Parcel shall be bound by the terms of the Mutual Covenants referred to in the Second Schedule and the House Rules of Lintas Station which contains the terms and conditions regulating the use of the said Building by the unit owners and occupiers thereof and necessitated by the nature of the said Parcel being part of a sub-divided building, and the Purchaser and his successors-in-title, permitted assigns, nominees, beneficiaries, tenants or otherwise covenant that all persons occupying or coming onto the said Building shall be bound by the terms thereof."
[9] Clause 19(2) of the Mutual Covenants states:
"The terms of the Mutual Covenants shall upon the issuance of the subsidiary title to the said Parcel be deemed (so far as they are not inconsistent or contradictory) to be incorporated as the by-laws to be enforced by the management corporation for the said Building with unconditional consent of the Purchaser now given."
[10] On 8 October 2017, the local authority Dewan Bandaraya Kota Kinabalu gave its approval for the conversion of Parcel B to a hotel.
[11] On 13 September 2018, the Plaintiff told the Defendant that it wanted to change the use of Parcel B to office lots in view of unfavourable economic times. The Defendant agreed.
[12] Thus, the original use of Parcel B as a car park area was converted, with the consent of the Defendant pursuant to the SPA and exchange of correspondence, to that of office lots. Eventually, DBKK gave its approval for the use of Parcel B as office lots on 26 June 2019.
[13] On 11 March 2024, the Plaintiff sent a letter to the Defendant for its endorsement of its renovation plans for the use of Parcel B as a spa and wellness centre.
[14] A fortnight later, the Defendant declined
