Court Of Appeal Strikes Down Bifurcated Management in Mixed Strata Projects as Ultra Vires — Unified JMB Control is Mandatory until the Management Corporation Stage

In Badan Pengurusan Bersama Gurney Paragon Residential v Hunza Properties Sdn Bhd & Ors [2026] CLJU 269, the Court of Appeal of Malaysia allowed the JMB’s appeal and held that the resolutions passed at the 1st AGM (14.10.2014) purporting to bifurcate the management and maintenance of a mixed-use development into separate residential and commercial regimes (with separate maintenance accounts, sinking funds and sub-committees) are ultra vires and void ab initio under the Building and Common Property (Maintenance and Management) Act 2007 (BCPA 2007) and the Strata Management Act 2013 (SMA 2013). The JMB is statutorily required to manage the entire development (one lot) as a single indivisible unit with one maintenance account and one sinking fund account. The Court directed the JMB to convene a fresh general meeting with all parcel owners (residential + commercial) to approve a proper budget and chargeable rates (differential rates permitted if “just and reasonable”/“fair and justifiable” having regard to usage). Payments already made by residential owners under the void resolutions are to be credited/adjusted against the new lawful charges rather than refunded.

Background of the Case

• Gurney Paragon is a stratified mixed development on one lot comprising two residential towers (220 units), an office tower (Hunza Tower), a shopping mall with retail podium, St Jo’s Heritage Building, and retail car park (collectively the “Commercial Component”).
• The JMB (Appellant) was established on 14.10.2014 under the BCPA 2007.
• At the 1st AGM, unanimous resolutions were passed (Agenda 2–4) to: (i) create a separate Building Maintenance Fund exclusively for the residential “Serviced Condominiums”; (ii) have that fund managed only by residential owners; and (iii) allow commercial parcel owners to set up their own independent funds and sub-committees.
• These resolutions mirrored clauses in the Sale and Purchase Agreements (SPAs) signed between 2007–2012.
• Commercial owners (1st and 2nd Respondents, wholly-owned subsidiaries of Hunza Properties Berhad) were not invited as proprietors, had no voting rights, and attended only as developers’ representatives. Subsequent AGMs followed the same practice.
• The JMB never spent any money on the commercial component and never invited commercial owners to vote on rates.
• In 2017, the JMB sued the Respondents for RM56,930,645.52 in arrears (maintenance charges + sinking fund contributions for Oct 2011–Nov 2017) and for handover of commercial common property (surface car parks, mall façade, retail podium, alfresco areas, etc.).

Court Rulings

High Court

The learned Judicial Commissioner upheld the bifurcation:

• Treated the BCPA 2007 and SMA 2013 as “social legislations” that are flexible and must produce a “just and reasonable” / “fair and justifiable” outcome.
• Held that it would be unfair to impose on the commercial owners charges fixed solely by residential owners.
• Ruled the 1st and 2nd Respondents not liable for the RM56.9 million claimed.
• Allowed the 2nd Respondent to continue self-managing its commercial common property.
• Declined the alternative remedy of ordering a fresh all-owners AGM (citing potential for further disputes given the 24.4% residential vs 75.6% commercial share-unit split).

Court of Appeal

The Court of Appeal unanimously overturned the High Court:

• The 1st AGM resolutions are ultra vires and void from the outset; no formal revocation is required.
• Under both statutes there can be only one JMB per development area and only one maintenance account + one sinking fund account. Separate commercial management is not permitted during the JMB phase (Sub-MCs are available only after the Management Corporation is formed).
• SPAs cannot contract out of the statutory scheme (s. 45 BCPA 2007; s. 149 SMA 2013). The Commissioner of Buildings’ decision cannot validate an illegal resolution.
• The developer and commercial parcel owners remain liable to contribute (including for unsold parcels).
• The JMB must convene a fresh general meeting with all parcel owners to table a proper budget and determine rates. Differential rates between residential and commercial parcels are permissible if shown to be just, reasonable, fair and justifiable having regard to actual usage and cost of common property.
• Residential payments made under the void resolutions are not to be refunded outright; they are to be credited/adjusted against the new lawful charges fixed at the fresh AGM.
• The appeal was allowed; High Court orders set aside.

Key Takeaways

1. Strict statutory compliance: Mixed developments cannot create de facto separate management regimes at the JMB stage; the statute mandates unified management until the Management Corporation stage.
2. Ultra vires resolutions are null: Unanimous passage at an AGM or SPA clauses cannot override mandatory statutory provisions.
3. Differential rates are possible: Differential rates between residential and commercial parcels are allowed only if properly proposed, justified by actual usage and cost, and approved at an inclusive meeting of all owners.
4. All owners must participate: Commercial owners cannot be excluded from rate determination even if they hold the majority share units.
5. Practical remedy favoured: Courts prefer regularisation through a fresh all-owners AGM with credit of past payments over full refunds or retrospective windfalls.
6. Social legislation approach: BCPA 2007 and SMA 2013 are protective statutes; courts will intervene to prevent unfair bifurcation while still allowing commercially sensible outcomes when done lawfully.