Ekuiti Setegap Sdn Bhd v Plaza 393 Management Corporation
Summary of the Case
The respondent management corporation sued Ekuiti Setegap Sdn Bhd, the registered proprietor of seven parcels in Plaza 393, for outstanding service charges, sinking fund contributions, quit rent, insurance and late payment interest.
Ekuiti Setegap relied on an alleged agreement under which it would maintain certain areas at its own cost and pay only a flat agreed amount to the management corporation. It also argued that the claim was time-barred.
The Court of Appeal held that the alleged agreement was unenforceable because parties cannot contract out of the statutory regime governing strata charges. The Court also held that the outstanding charges formed part of a running account. However, the Court accepted that charges levied on a square foot basis, instead of the statutory share unit basis, were unlawful.
Key Legal Issue
The key issue was whether a proprietor and a management corporation could validly agree on a charging arrangement outside the statutory framework, and whether a claim for accumulated strata charges could be defeated by limitation where the account was treated as a running account.
Decision of the Court
The Court of Appeal affirmed that a management corporation is a creature of statute and cannot act outside the powers conferred by the strata legislation.
The private agreement fixing a flat contribution was unenforceable. The Court also held that the account was a running account and therefore the limitation argument failed on the facts. At the same time, the Court recognised that charges should be imposed on the statutory basis, not on an unauthorised square-foot basis.
Court’s Reasoning
No contracting out of statutory charges
A management corporation and a proprietor cannot privately agree to exempt a proprietor from the statutory method of contribution. Any agreement that defeats the strata legislation is liable to be unenforceable.
Share units remain central
The statutory charging mechanism is tied to share units. Charging by square footage or other informal methods is legally risky unless expressly permitted by the applicable legislation.
Running account and limitation
The Court treated the maintenance account as a running account where unpaid charges were carried forward. This made it difficult for the proprietor to defeat the entire claim through a simple six-year limitation argument.
Practical Commentary by Shahrizan & Co
This case is important for developments where major proprietors, developers or anchor tenants claim special arrangements or side agreements with the management body.
In our view, management bodies should avoid private agreements that give selected proprietors preferential treatment outside the statutory scheme. Even if commercially convenient, such arrangements may be unenforceable and may create long-term governance problems.
For MCs and JMBs, this case also reinforces the importance of proper accounting. Statements of account, invoices, notices of dispute and payment records can become decisive evidence in recovery proceedings.
Key Takeaways
- Strata charges must be imposed within the statutory framework.
- Private agreements cannot override mandatory strata legislation.
- Charging by square foot is legally risky where the statute requires contribution by share units.
- Outstanding strata charges may be treated as a running account.
- MCs should preserve statements of account, invoices, payment records and dispute correspondence.
- Large proprietors should not assume that historical side arrangements are enforceable.
Who Should Read This Case
- Management corporations
- Joint management bodies
- Developers
- Major parcel proprietors
- Property managers
- Lawyers handling strata debt recovery
Related Legal Issues
Share units, maintenance charges, sinking fund, running account, limitation, private agreement, contracting out, statutory powers, strata debt recovery.
Disclaimer
This case summary is provided for general information only and does not constitute legal advice. Specific advice should be obtained based on the facts, documents, resolutions and applicable laws relevant to each strata development.