[2020] 3 MLRA 555

Federal Court, Putrajaya
Azahar Mohamed CJM, David Wong Dak Wah CJSS, Rohana Yusuf, Mohd Zawawi Salleh, Nallini Pathmanathan FCJJ
[Civil Appeal No: 02(f)-50-05-2019(J)]
21 May 2020


Nallini Pathmanathan FCJ:


[1] In the field of insolvency, the law on the rights of secured and unsecured creditors, as well as that relating to priorities and preference payments, is well settled in statute, and consequently by case-law, which provides both certainty and judicial precedent.

[2] This appeal was necessitated by reason of a failure to apply these well-settled principles. This judgment serves primarily to restate certain fundamental principles of law in this area.

[3] The sole leave question allowed by this court on 9 May 2019, reads:

"Whether the right of a Joint Management Body or a Management Corporation to collect and receive payment from a proprietor under ss 33 and 77 of the Strata Management Act 2013 respectively, gives it a lawful preference as a secured creditor over the assets of a company in liquidation?"

[Emphasis Ours]

[4] In essence the question before us relates to whether s 77 of the Strata Management Act 2013 ('SMA') has the effect of elevating the status of a debt incurred under it, to that of a secured or preferential debt within the insolvency regime, where the proprietor of the parcel concerned is in liquidation, or is bankrupt.

[5] In other words, do payments received or recovered by a Management Corporation ('MC') as a debt, from the proprietors of properties held under the SMA who are in liquidation or bankrupt, enjoy priority or preference over other creditors, equivalent to that accorded to secured creditors under an insolvency regime.

[6] This question requires a consideration of s 77 of the SMA, and how its provisions are to be construed in light of the insolvency regime as statutorily governed at the material time by s 292 of the Companies Act 1965 (now s 527 of the Companies Act 2016).

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