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Is a liquidator duty-bound to carry out the obligations of a developer?

Re Bandar Kinrara Properties Sdn Bhd (In Liquidation) [2021] 6 CLJ 599

The Respondent, Bandar Kinrara Properties Sdn Bhd (developer of Duet Residence) was wound up and subsequently liquidators were appointed.

FACTS

Upon the liquidators’ appointment, 2.5% of the sale and purchase price which was held by the vendor’s solicitors as stakeholder [“Stakeholder Sum”], was vested in the liquidators pursuant to Section 7A(6) of the Housing Development (Control and Licensing) Act 1966 [“HDA”].

The dispute arose when the joint management body [“JMB”] of Duet Residence then requested for a release of the Stakeholder Sum for the rectification of defects on common property amounting to at least RM3,313,656.84, and to apply for strata titles.

Two main arguments were raised by the liquidators in opposing the motion filed by the JMB:

  1. The JMB is not empowered under the Strata Management Act 2013 [“SMA”] to assume and/or enforce the rights of the purchasers under the sale and purchase agreements [“SPAs”] as they are not party to the SPAs; and
  2. The liquidators should be able to exercise their discretion in respect of the monies in the account so long as it is within the framework of the SPAs and the Housing Development (Housing Development Account) Regulations 1991.

FINDINGS OF THE COURT

The Judicial Commissioner Nadzarin Bin Wok Nordin in the Kuala Lumpur High Court held as follows:

  1. The JMB cannot be authorised to act on behalf of the purchasers under the SMA, despite the fact that there was a resolution passed to do the same at an extraordinary general meeting;
  2. Notwithstanding the same, the liquidators have stepped into the shoes of the developer and thus have assumed all obligations which in the ordinary course of business has to be fulfilled by the developer, to wit:
  • To apply for the strata titles;
  • To rectify all defects in the common property;
  • To apply the balance monies, if any, in accordance with the law of winding up ie, the payment of dividends to the unsecured creditors in a pari passu manner.

TAKEAWAY

A JMB is created by the SMA and its duties are limited to the four corners of the statute. Despite any resolution passed allegedly to allow the JMB to act beyond its powers, it is not within the JMB’s power to accept and act accordingly with the said resolution.

Any monies vested in the liquidator becomes an asset of the company and the appointed liquidator is duty-bound to carry out the obligations of a developer, unfortunately at times even facing insufficient funds to carry out all obligations.

Author
Senior Legal Associate at Chee Hoe & Associates.
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