Leadmont Properties Sdn Bhd v PJ Centrestage JMB

Appellant(s): Leadmont Properties Sdn Bhd

Respondent(s): Pj Centrestage Jmb

Pencelah:

• Hong Leong Bank Berhad
• Malayan Banking Berhad

• YAA Datuk Hajah Azizah binti Haji Nawawi
• YA Datuk Azimah binti Omar
• YA Datuk Seri Mohd Firuz Bin Jaffril

• The developer of a mixed commercial development constructed the project and, after handing over management to the plaintiff (the joint management body/JMC), was found to have unilaterally applied to subdivide and register as its own accessory parcels several areas (342 car park bays, basement areas, landscaped areas, rooftops, a reception area and façade areas) that had not been designated as accessory parcels in any of the approved building plans.
• The developer subsequently sold these disputed areas to a related purchaser company (sharing common directors/shareholders), which in turn used them as security to obtain loans from two banks, executing deeds of assignment, powers of attorney and assignments of tenancy proceeds in the banks' favour (though no charges were ever registered on the strata titles).
• The plaintiff sued the developer, the purchaser company, the local authority and the two banks, seeking declarations that the disputed areas were common property, cancellation of the strata titles and related security instruments, and ancillary relief; the High Court allowed the claim in full, and the purchaser company and the two banks appealed (three consolidated appeals).

• Whether the Building and Common Property (Maintenance and Management) Act 2007 (BCPA 2007), rather than the subsequent Strata Management Act 2013, governed the classification of the disputed areas as "common property", given that the sale and purchase agreements, deeds of mutual covenants and the plaintiff's establishment all occurred while the BCPA 2007 was in force.
• Whether the developer's post-SPA/post-CCC unilateral amendments to the building plans, and its subsequent registration of strata titles over the disputed areas as accessory parcels, amounted to actual fraud under section 340(2)(a) of the National Land Code 1965 sufficient to render the resulting titles defeasible, and whether the corporate veil between the developer and the related purchaser company should be lifted.
• Whether the banks, as unregistered equitable chargees/assignees who took security over the disputed common property from the purchaser company, could rely on the proviso to section 340(3) of the National Land Code 1965 or the bona fide purchaser/financier defence to protect their interests despite the underlying illegality.

• The Court of Appeal held that the BCPA 2007 (read with the Strata Titles Act 1985) applied to the dispute, as the transactions, agreements and rights in issue arose and accrued while that Act was in force, and its statutory definitions of "common property" and "building" (being mandatory under section 45) could not be contracted out of or unilaterally varied by later amendments to building plans.
• The Court affirmed the trial judge's finding that the developer had, through misrepresentations to the land office, obtained subdivision and strata titles over what was always intended and used as common property, amounting to actual fraud within section 340(2)(a) NLC 1965 that rendered the purchaser company's registered titles defeasible; the corporate veil was also properly lifted given the common control and "sweetheart deal" nature of the sale between the developer and purchaser.
• The Court held that since the developer had no valid interest to transfer, the purchaser company likewise had none to assign to the banks, and the banks' unregistered equitable security interests were void and could not benefit from the section 340(3) proviso or the bona fide purchaser doctrine, particularly as the banks had failed to exercise adequate due diligence despite red flags in the property descriptions; all three appeals were accordingly dismissed with costs.