Diora-Ace Ltd and others v Management Corporation Strata Title Plan No 3661 and others

Hoo Sheau Peng JC:

[1] This case is the sequel to the dispute in Originating Summons No 392 of 2014 (“OS 392/2014”) between a group of subsidiary proprietors and the management corporation of a condominium development known as “Riveria Gardens” (“the Development”). The grounds of decision in relation to the original dispute have been set out in Diora-Ace Limited and others v The Management Corporation Strata Title Plan No 3661 and another [2015] SGHC 88 (“Diora-Ace (No 1)”).

[4] As stated in Diora-Ace (No 1), the Plaintiffs own a total of 18 out of the 49 units in the Development, and hold 123 out of 321 of the total share value therein. On 29 April 2014, the Plaintiffs filed OS 392/2014, seeking a number of declarations that the MCST had acted in breach of the BMSMA. On the same day, the Plaintiffs issued the Notice which states:

[5] On 29 September 2014, the seventh plaintiff, I.Contemporary Living Pte Ltd (“I.Contemporary”), sent a notice to the MCST requesting an inspection of financial documents, such as financial statements, payment vouchers and bank books, under s 47 of the BMSMA. Two further reminders were sent on 8 October 2014 and 13 October 2014 respectively. The MCST replied on 13 October 2014 notifying I.Contemporary that they would accede to its request on 20 November 2014. On 17 October 2014, I.Contemporary’s then solicitors, Richard Lim & Co, sent a letter to the MCST demanding the immediate production of the financial documents requested for.

[6] The authorised representative of I.Contemporary was granted access to the documents on 20 October 2014. During this inspection, the representative discovered a letter of engagement dated 23 May 2014 by way of which the MCST engaged the law firm Cheo Yeoh & Associates LLC (“Cheo Yeoh LLC”) as its counsel. The letter of engagement stated that the scope of Cheo Yeoh LLC’s services to the MCST would comprise reviewing the documents, and advising on the merits of the claims in OS 392/2014 among other things. I.Contemporary’s representative also came across a cheque for a sum of $10,000 drawn in favour of Cheo Yeoh LLC.

[7] On 24 October 2014, the Plaintiffs commenced this action and sought, inter alia, the following orders:

(a) a declaration that the council of the MCST acted in breach or in threatened breach of s 58(3) of the BMSMA; and

(b) an injunction to prohibit the council of the MCST from acting in breach or in threatened breach of s 58(3) of the BMSMA.

[9] The Plaintiffs’ main case was that by using the MCST’s funds to engage Cheo Yeoh LLC as their counsel in the defence of OS 392/2014, the Defendants had acted in breach of the Notice and s 58(3) of the BMSMA. The Plaintiffs argued that the Defendants should have obtained a resolution by simple majority in a general meeting of the subsidiary proprietors to act against the Notice.

[11] At the outset, I note that the Plaintiffs applied for both declaratory and injunctive reliefs. It is settled law that the grant of these reliefs is discretionary. The main issue therefore was whether, in all the circumstances of the case, I should exercise my discretion to order the declaratory and injunctive reliefs prayed for.

[12] Section 58(3) of the BMSMA states:

[13] As stated above at [4], the Plaintiffs own 18 out of the 49 units (or lots) in the Development. These amount to more than one-third of the lots in the Development, and the Plaintiffs were therefore prima facie entitled to issue a notice under s 58(3) of the BMSMA to the secretary of the council of the MCST to prevent or oppose any decision made by the council.

[14] The Defendants did not dispute this. However, they argued that a notice made under s 58(3) of the BMSMA should be made in good faith and for a good reason. The Defendants’ case was that the Plaintiffs’ issue of the Notice was oppressive and an abuse of s 58(3) of the BMSMA. Section 58(3) was not intended to prevent a management corporation from defending itself in an action commenced by the issuer(s) of the notice.

[15] In support of their argument, the Defendants relied on Lark Lounge and Nite Club Pte Ltd v Management Corporation Strata Title Plan No 1420 [1997] 3 SLR(R) 945 (“Lark Lounge”) and a commentary on the case in Teo Keang Sood, Strata Title in Singapore and Malaysia (LexisNexis, 4th Ed, 2012) (“Strata Title in Singapore and Malaysia”).

[16] The facts in Lark Lounge are as follows. The plaintiff had purchased four lots in a strata development known as Balestier Point. The defendant was the management corporation of that strata development. The plaintiff sought the defendant’s approval to use the four lots as a karaoke and music lounge. As Balestier Point had a history of violence, gang clashes and vandalism which stemmed from the existing karaoke lounges, the subsidiary proprietors who owned more than one-third of the lots in the development wrote to the council of the management corporation objecting to having another karaoke lounge in the development. This objection was made under s 63(3) of the Land Titles (Strata) Act (Cap 158, 1988 Rev Ed), which is in pari materia to s 58(3) of the BMSMA.

[17] The plaintiff then applied to court for, inter alia, a declaration that the notice given by the subsidiary proprietors amounted to “obstructive and oppressive conduct” and was “an abuse of law and accordingly null and void and of no effect”. Goh Joon Seng J, as he then was, dismissed the plaintiff’s application for two reasons. First, Goh J stated that as the subsidiary proprietors were not party to the proceedings, no declaration could be made without them being heard. In the alternative, Goh J also found that in light of the history of violence, gang clashes and vandalism emanating from the existing karaoke lounges, the opposition of the subsidiary proprietors through the notice to the council was “not without good reason” (at [29]).

[18] Professor Teo, in Strata Title in Singapore and Malaysia, made the following comments on Lark Lounge (at p 327):

[19] I agree with the Defendants’ submission and Professor Teo’s observations. A notice should be given bona fide and for good reasons. The court should not assist a subsidiary proprietor to enforce the right under s 58(3) of the BMSMA, or to enforce a notice given thereunder, through the grant of a declaration or an injunction if there is bad faith. Doing so may unfairly prejudice the rights of the other subsidiary proprietors in the strata development.

[20] The Plaintiffs argued that the Notice was issued because the Plaintiffs did not wish the MCST to “incur legal fees unnecessarily” on the basis that the MCST would not “suffer any loss or detriment even if the orders sought in OS 392/2014 [were] granted”. This, the Plaintiffs said, was evidence of their good intentions.

[22] Clearly, the issuance of the Notice was a self-serving attempt to stifle the MCST’s right to defend against the action instituted by the Plaintiffs. By issuing the Notice in such terms, the Plaintiffs were effectively asking the MCST to capitulate to the Plaintiffs’ legal demands. Such a stifling of the right to legal advice and representation could cause the council or the MCST to suffer potentially unfair legal consequences. This was hardly a reasonable position to take.

[23] Indeed, the Plaintiffs had, by the first prayer of OS 392/2014, sought an order that the then council of the MCST be removed, and elections be held to elect a new council. While this prayer was subsequently withdrawn, the Plaintiffs only did so at the adjourned hearing on 24 December 2014, a number of months after OS 392/2014 was filed in April 2014. I did not see how it could be argued that such an order, if made without due consideration of the substantive merits, would not cause “any loss or detriment” to the council or the MCST. In the circumstances, the MCST was entitled to obtain legal advice on the import of such a prayer. Further, if the MCST had not defended the action in OS 392/2014 and the court had proceeded to grant the other declarations sought by the Plaintiffs, this could potentially have led to further consequential relief being sought not only by the Plaintiffs, but also by other subsidiary proprietors. It would have been neither fair nor just to allow the MCST to be exposed to the Plaintiffs’ claims without having a fair opportunity of being advised or heard.

[24] The Plaintiffs also argued that the council could have sought a resolution from the MCST in a general meeting in order to overcome the Notice. Section 58(2) of the BMSMA provides that:

[25] A notice issued by the subsidiary proprietors under s 58(3) of the BMSMA does not bind a management corporation. This makes sense under the scheme of the BMSMA, where the council of a management corporation performs a role akin to a board of directors in a company. In this regard, Professor Teo explains in Strata Title in Singapore and Malaysia (at p 305):

[26] Hence, while a notice issued under s 58(3) of the BMSMA restricts the council’s ability to make a decision on a matter, this does not bind the management corporation, which in a general meeting, may continue to exercise all the powers imposed on it by the BMSMA or the relevant by-laws.

[27] While it may be theoretically possible for a general meeting of subsidiary proprietors to be called for the passing of the appropriate resolution, I agreed with the Defendants that in the present case, it was not practical or practicable to do so. More importantly, it was unreasonable to expect such a step to be taken. The Notice was drafted in the widest possible terms, and was issued the same day OS 392/2014 was commenced. Faced with the legal action, it was not reasonable to expect the council of the MCST to expend considerable time and effort to convene an extraordinary general meeting to override the Notice before getting legal advice to even understand the Plaintiffs’ case against it and to prepare its defence.

[29] By the foregoing, I found that the Notice was tainted by bad faith, and was not given for good reasons. For completeness, I should add that as it transpired, in Diora-Ace (No 1), most of the Plaintiffs’ claims for declarations against the MCST were dismissed. The Plaintiffs also withdrew the first prayer, which had been contested by the MCST, as it was no longer necessary.

[32] For the same reason stated above, Mr Chang and Mr Heng should not have been added as defendants in the present action. The reliefs that the Plaintiffs sought were in relation to acts of the council of the MCST, and not of Mr Chang and Mr Heng in their personal capacities. There was thus no basis for the Plaintiffs to have commenced this action against them personally.