Malaysian Federal Court finds right of management corporation to collect arrears does not give it lawful preference as secured creditor

29 June 2020

Dubon (in liquidation) v Wisma Cosway Management Corporation [2020] 1 LNS 503

In Dubon (in liquidation) v Wisma Cosway Management Corporation, the issue before the Malaysian Federal Court was whether the right of a joint management body or a management corporation to collect and receive payment from a proprietor under sections 33 and 77 of the Strata Management Act 2013 (“SMA 2013”) gives it lawful preference as a secured creditor over the assets of a company in liquidation.

The Federal Court held that section 77 of the SMA 2013 does not support such a preposition and the wording “guaranteed” in the provision at best only denotes a statutory obligation between the management corporation and a parcel proprietor, which only entitles the management corporation to recover maintenance and other related service charges from a parcel proprietor. It has no effect on the rights of third party creditors in the insolvency regime. Furthermore, there is nothing in the language of section 77 of the SMA 2013 which purports to oust insolvency principles, such as the pari passu rule.