The recent case of Fu Loong Lithographer Pte Ltd and others v Mok Wing Chong (Tan Keng Lin and others, third parties) [2017] SGHC 97 highlights the question of the proper party to bring a claim against breaches of duty owed to or wrongs perpetuated on a MCST by a member of the council – should it be a subsidiary proprietor (“SP”) or the MCST itself? Also considered was the question of whether an SP could seek to make a derivative claim on behalf of an MCST.
Brief facts of this case:
- There were two camps of SPs – the Plaintiffs were in one camp whilst the Defendant (Chairman of the Council) was in the other camp.
- The Plaintiffs’ camp collectively holds the majority of the share values in the Development.
- The Plaintiffs had sought to table a resolution at an EGM directing the MCST to bring the claim against the Defendant, but the Defendant had ruled “out of order”. However, before the High Court Judge, the Plaintiffs elected not to proceed with their challenge to the Defendant’s ruling.
- The Plaintiffs sought various declarations that the Defendant had breached his duties as chairman, and an account of sums that the Defendant had improperly caused MCST 1024 to incur.
The case is instructive as the Court held that there exists at a minimum a distinction between breaches of duty owed to or wrongs perpetuated on a management corporation on the one hand, and wrongs done to an individual SP in his personal capacity on the other. Prima facie, claims in respect of the former are to be prosecuted by the MCST itself, while claims in respect of the latter may be pursued by the individual SPs concerned. This is because an MCST of a strata plan is a legal entity separate from the SPs of the lots comprised in the strata plan.
The Court also held that the MCST is a creature of statute. It may share some attributes of a corporation but it is important to bear in mind it stands outside company law and the Companies Act.
The fact is that there is no statutory provision in Singapore for an SP to bring a derivative action in the name and on behalf of an MCST.
The Court did agree with the suggestion that the concept of fraud on the minority could apply to strata developments and stated that he could “envisage that in some circumstances and appropriate cases, especially (but not limited to) where several SPs control the Council and the MCST and are abusing their position as such, other SPs might never be able to pass a resolution for the MCST to commence actions against wrongdoers who are in control”.
The Court concluded that there is no reason why an SP cannot, in appropriate circumstances, bring a common law derivative action in the name and on behalf of an MCST.
On the facts of this case, the Court did not allow the Plaintiffs to bring the derivative action.
It is thus imperative that early advice is sought so as to ensure that the facts and circumstances of the case are established so as to allow an SP to maintain a derivative action.
If you have any queries pertaining to this article, please feel free to contact Ms Valerie Ang at [email protected] or the Straits Law Director who usually attends to your matters.