Does A Management Corporation Have A Right To Bring An Action Against A Developer?

• Published date: 30 May 2022
• Subject Matter: Corporate/Commercial Law, Real Estate and Construction, Contracts and Commercial Law, Construction & Planning, Real Estate
• Law Firm: Bodipalar Ponnudurai De Silva
• Author: Ms Brenda Rangithan and Maryam Jamilah

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:

1. That Edisi Utama Sdn Bhd ('Edisi') as developer of Dua Residency failed to adequately design and construct certain common areas in Dua Residency;
2. 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:-

1. Breach of contract;
2. Breach of statutory duties; and
3. 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:-

1. The construction movement joints ('CMJs');
2. The Swimming Pool; and
3. 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...