JUDGMENT

Norsharidah Awang J:

Introduction

[1] This is the Plaintiff's application vide Originating Summons No. AA-24NCvC-377-08/2023. The Plaintiff, Kinta Ecocity Sdn Bhd, is the developer of a housing project known as Grand Retreats at Bandar Baru Sri Klebang, Chemor, Perak. The Defendant is the Grand Retreats Residents' Association (RA), registered with the Registrar of Societies in 2015 to represent the residents of the said project.

[2] The Plaintiff seeks declarations and orders as to the rightful recipient of the sinking fund collected pursuant to the Deed of Mutual Covenant ("DMC"), namely whether it should be returned to the defendant as the RA or to the individual purchasers, together with liberty for the plaintiff to set-off outstanding arrears of service charges prior to disbursement.

Brief Facts

[3] The Plaintiff, as developer, entered into Sale and Purchase Agreements with the purchasers of Grand Retreats. Alongside these agreements, the plaintiff also entered the DMC with purchasers.

[4] Under the DMC, the plaintiff was authorised to provide security and related services for Grand Retreats. For this purpose, the plaintiff collected monthly service charges and contributions to a sinking fund. The sinking fund was to be held in trust in a separate account.

[5] Over time, disagreements arose. Some residents refused to pay charges, leading to civil suits in the Sessions Court and later appeals to the High Court .

[6] During the appeal process, the Court directed that a residents' meeting be held to determine whether the defendant RA should take over the management of Grand Retreats. The meeting was held, and the majority present resolved that the RA should assume management responsibilities.

[7] The Plaintiff accepts that the RA has been formed but says it does not represent all 307 residents. This is because, out of a total of 307 residents, only 66 were present. The Plaintiff is concerned that if it pays the fund to the RA, non-members may later bring claims against it.

[8] At the same time, the plaintiff produced a schedule showing that a few residents still owe arrears of service charges. The Plaintiff argues it should be entitled to deduct these arrears before releasing the balance of the sinking fund.

[9] The Defendant claims that the RA is the proper body to receive the sinking fund on behalf of all residents. The Plaintiff should not be allowed to make deductions but should instead sue defaulting residents separately if it wishes to recover arrears.

Issues Before This Court

[10] There are two main issues before this Court :

i. Whether the sinking fund collected by the plaintiff should be handed over to the defendant RA or directly to the individual purchasers; and

ii. Whether the plaintiff is entitled to deduct outstanding arrears of service charges before paying over the sinking fund.

The Plaintiff's Submission

[11] The Plaintiff submits that the sinking fund was collected pursuant to the Deed of Mutual Covenant ("DMC") and is expressly held in trust for the purchasers. According to the plaintiff, this creates a legal obligation to ensure that repayment is made correctly. The plaintiff emphasised that not all the residents are members of the defendant Residents' Association ("RA"), and there is therefore a genuine concern of being exposed to double claims if the monies are paid to the RA alone. The plaintiff clarified that it has no objection to releasing the sinking fund but seeks the Court 's guidance and declaration on who is entitled to receive it.

[12] The Plaintiff also argues that a few residents remain indebted for service charges and that, in equity, it should be permitted to deduct or set off such arrears from the sinking fund before transferring the balance. Otherwise, the Plaintiff would be forced to commence numerous separate actions against defaulting individuals, which would be inefficient, costly, and unjust to those who have already fulfilled their obligations.

The Defendant's Submission

[13] The Defen