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In the case of Dua Residency Management Corporation v Edisi
Utama Sdn Bhd and E&O Customer Services Sdn Bhd, an action was
brought by Dua Residency Management Corporation, the management
corporation of Dua Residency Condominium (“DRMC”) for
the following:
- That Edisi Utama Sdn Bhd (“Edisi”) as developer of
Dua Residency failed to adequately design and construct certain
common areas in Dua Residency; - That E&O Customer Services Sdn Bhd (“E&O
CS”) as property manager of Dua Residency failed to
adequately maintain and manage the common areas in Dua
Residency.
DRMC based its causes of action against Edisi on the
following:-
- Breach of contract;
- Breach of statutory duties; and
- Breach of duty of care.
DRMC’s cause of action against E&O CS was based on a
breach of duty of care.
The gist of DRMC’s case against Edisi and E&O CS was
with regard to alleged defects which resulted in water seepage from
the following areas:-
- The construction movement joints (“CMJs”);
- The Swimming Pool; and
- The Open Deck surrounding the Swimming Pool (“Open
Deck”).
The case against E&O CS
DRMC relied on the Scottish case of Martin Hines & Anor
v King Strurge LLP [2010] CSIH 86 where a property manager was
sued in negligence by tenants for failing to regularly check and
maintain a fire alarm system. DRMC further attempted to rely on the
Valuers, Appraisers and Estate Agents Act 1981
(“VAEAA”) and the fact that E&O CS should have been
registered under the same and the Property Management Standards
issued by the Board of Valuers, Appraisers and Estate Agents
(“the Board”) to allege that the statutory duties
prescribed in the Property Management Standards justified an
imposition of a common law duty of care.
It was argued on behalf of E&O CS that the VAEAA did not
apply to E&O CS and that it did not confer a private cause of
action to a management corporation. It was also argued that the
Property Management Standards did not have any force in law and
thereby was not binding on E&O CS. Furthermore, E&O CS at
all times acted on instructions of DRMC and its predecessor, the
joint management body, and thus did not have sole control over the
common property of Dua Residency.
The High Court found that although no formal agreement was
executed between DRMC and E&O CS, there was an implied contract
between the parties. Thus, as there was an alternative contractual
remedy, the existence of the duty of care is negated on policy
consideration. Notwithstanding this, the High Court also agreed
with the arguments of the counsel for E&O CS in that E&O CS
was not an independent and autonomous body that could unilaterally
make decisions as regards the maintenance and repair of the common
property in Dua Residency and thus this negates the existence of a
duty of care on policy consideration. The High Court also held that
the VAEAA does not confer a private law cause of action on
DRMC.
The case against Edisi
Breach of contract
DRMC relied on the clauses in the Sale and Purchase Agreements
(“SPAs”) executed between Edisi and the owners of the
units in Dua Residency and the three-fold implied terms principle
which was accepted in the Malaysia case The Khem On & Anor
v Yeoh & Wu Development Sdn Bhd & Ors [1995] 2 MLJ 663
in order to launch it’s cause of action under a breach of
contract. DRMC alleged that the defects in the CMJs, Swimming Pool
and Open Deck amounted to breaches of the terms in the SPAs and the
three-fold implied terms principle.
Counsel for Edisi argued that the there was plainly no contract
between Edisi and DRMC and that DRMC could not take the benefit of
the SPAs as it was not privy to the same. Reliance was placed on
the Singapore Court of Appeal case of RSP Architects Planners
& Engineers v Ocean Front Pte Ltd and another appeal [1995] 3
SLR(R) 653 (“the Ocean Front case”) which
expressly stated that a management corporation does not have a
cause of action in contract as against the developer as the sale
and purchase agreements for a development are intended to govern
the relations only between the developer and purchasers and clearly
a developer did not intend to extend the benefit of the provisions
in the agreements to others down the line.
The High Court agreed with the Ocean Front case and held that a
management corporation cannot sue a developer based on sale and
purchase agreements.
Breach of statutory duties
DRMC contended that Edisi had breached its statutory duties owed
to DRMC pursuant to the Uniform Building By-Laws 1984
(“UBBL”) which imposed a uniform minimum standard of
design and construction. In doing so, counsel for DRMC relied on
the case of X (Minors) v Bedfordshire County Council [1995] 2
AC 633 (HL) to establish that the UBBL conferred a private law
cause of action to proprietors and residents in a building as
against a developer.
Counsel for Edisi relied on the case of KL Eco City Sdn Bhd
v Tuck Sin Engineering & Construction Sdn Bhd & Anor [2020]
MLJU 435 and submitted that the UBBL, which was enacted
under the Street, Drainage and Building Act (“SDBA”),
was enacted to primarily govern the relationship between local
authorities and qualified persons. A developer is not defined as a
qualified person under the SDBA. Thus, the UBBL cannot confer a
private law cause of action to DRMC against a Edisi. This view was
also expressly stated in the case of KL Eco City
(supra).
The High Court agreed with the views stated in KL Eco
City and further stated that responsibility for any failure to
comply with provisions under the UBBL would lie with the qualified
persons defined under SDBA and therefore could not arbitrarily
interpreted to impose a statutory duty upon the developer which was
not within the contemplation of the legislation.
Breach of duty of care
DRMC alleged that Edisi owed a duty of care to DRMC to properly
and adequately design, develop and construct Dua Residency but that
Edisi had breached the said duty thereby causing DRMC to suffer
loss and damage.
There has been no case in Malaysia whereby a management
corporation has successfully brought an action under negligence
against a developer. Thus, DRMC relied on the Ocean Front Case
wherein the Singapore Court of Appeal had allowed a claim for
negligence by a management corporation against a developer. In
summary, the Singapore Court of Appeal based it’s decision on
the following:-
- That the developer is the party who conceived and developed the
entire condominium; - The developers had undertaken with the purchasers to construct
in a good and workmanlike manner, among other things, the common
property; - The developer was the original owner and first proprietor of
the property and upon incorporation, the developer formed the
management corporation. Thus, the management corporation was the
developer’s alter ego; - Once the management corporation was constituted, it took over
from the developer the control, management and administration of
the common property; - The management corporation in turn had its own statutory
obligations which are very much dependent on the developers having
exercised reasonable care and applied good workmanship in the
construction of the common property; - Thus, there existed a very close proximity in the relationship
between the developers and the management corporation. - It was therefore clearly foreseeable by the developers that if
in the construction of the common property, they failed to exercise
reasonable care and skill, the burden of making good any defects
arising from their failure would inevitably redound on their
successor, being the management corporation. - In considering the policy consideration, the amount recoverable
which is the cost of repair cannot be said to be indeterminate. The
class of persons involved is finite and definable thus imposing
such a liability did not result ‘in an indeterminate amount
for an indeterminate time to an indeterminate class’.
Counsel for DRMC applied the above points to the facts of this
case and submitted that accordingly, Edisi owed a duty of care to
DRMC. Counsel for Edisi contended that reliance should not be
placed on the Ocean Front case for the following reasons:-
- The Ocean Front case was decided against the backdrop of the
Singapore Building Maintenance and Strata Management Act which is
dissimilar to the Strata Titles Act 1985 and Building and Common
Property (Maintenance and Management) Act 2007 in Malaysia. In
Singapore, the management corporation is a direct successor of the
developer whereas in Malaysia, the joint management body (which
consist of the developer and the purchasers) is the successor of
the developer until the incorporation of the management
corporation. Thus, DRMC cannot be said to be a lone and direct
successor of Edisi; - In the subsequent Singapore Court of Appeal Case of Man
B&W Diesel SE Asia Pte Ltd and another v PT Bumi International
Tankers and another appeal [2004] SGCA 8 (“the PT Bumi
case”), the Singapore Court of Appeal had cautioned that
the Ocean Front case is confined to the peculiar facts of the case.
The PT Bumi case was adopted by the Malaysian Federal Court in
The Co-operative Central Bank Ltd v KGV & Associates Sdn
Bhd [2008] 2 MLJ 233.
The High Court Judge was of the view that there is no reason not
to adopt the analysis and conclusions of the Ocean Front case
herein. He held that although the applicable statutes in Singapore
and Malaysia are not identical, they are closely similar and the
differences did not really matter. The High Court Judge further
held that the critical consideration is that Edisi had been in
continuous participation in the maintenance and management of Dua
Residency although not alone solely. Thus, the High Court decided
that on the special facts of this case there is sufficient
proximity and hence it is just and reasonable to find a duty of
care owed by Edisi to DRMC to ensure that Dua Residency has
been constructed with good workmanship in accordance with agreed
specification and approved plans in the SPA.
The learned High Court Judge also noted that although there may
be a possible contractual remedy by the individual purchasers of
Dua Residency against Edisi, it would be an impractical remedy to
require all of them to sue. DRMC therefore is representing the
purchasers as the management and maintenance of the common property
is directly under the care and responsibility of DRMC as conferred
by statute. Furthermore, it was also noted that as held in the
Ocean Front case, contractual obligations did not preclude the
existence of a developer’s liability in tort under the
ordinary law of negligence to their purchasers and other parties
not privy to the sale and purchase agreements.
In conclusion, by virtue of the High Court’s decision
above, it may now be open to management corporations to bring an
action for breach of duty of care against a developer for the
developer’s failure to adequately and properly construct a
development in a good and workmanlike manner. Thus, developers have
to be aware of this possible liability and ensure that both the
design and construction of the buildings are up to standard and
supported by sufficient documentation to prove the same.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
