Federal Court allows Capital City owners to appeal in RM5.4mil suit

The 97 unit owners want to hold the developer liable for rentals owed by a management firm to them.

Owners of trading units in Capital City Mall, Johor Bahru, wanted a High Court judgment which allowed them to claim unpaid rentals owed by CCRM Management Sdn Bhd from the project developer, Capital City Property Sdn Bhd, restored. (Wikimedia Commons pic)

PUTRAJAYA:

 The Federal Court has granted 97 commercial unit owners at a Johor Bahru mall leave to appeal, in a bid to reinstate a High Court ruling that held a developer liable for a debt of RM5.4 million owed by a management firm.

The owners claimed the developer, Capital City Property Sdn Bhd, effectively controls CCRM Management Sdn Bhd, which owes them two years’ worth of rental payments.

In a unanimous decision yesterday, the three-man apex court panel headed by Chief Justice Wan Ahmad Farid Wan Salleh said the owners’ appeal had merit and ought to be heard in full.

Also on the panel hearing the leave application were Justices Ahmad Terrirudin Salleh and Azimah Omar.

The Federal Court said the owners had crossed the threshold for leave by questioning whether the court’s discretionary power to pierce the corporate veil extended to imposing liability on another corporate entity, rather than merely on individuals.

The Federal Court gave the owners 14 days to file their notice of appeal and ordered that the appeals record be filed within 90 days.

In 2020, the owners of trading lots at Capital City Mall sued CCRM Management for non-payment of rentals over a two-year period, and named Capital City Property as a co-defendant.

In their lawsuit, the owners said that between 2014 and 2016, Capital City sold the commercial units under the Capital City Project to the owners.

Simultaneously with the execution of the sale and purchase agreement, the owners entered into tenancy agreements with CCRM to let out the 97 commercial units to the management company for a period of two years from Oct 16, 2018.

The owners contended that CCRM breached the tenancy agreement by failing to pay rent for the entire tenancy period.

They also contended that the developer had effective control over CCRM’s management and should be held liable for the debt.

In 2021, the Johor Bahru High Court allowed the owners’ claim, lifting the corporate veil to hold Capital City liable for CCRM Management’s debt due to the nexus between the two companies.

Capital City appealed the decision.

In January, the Court of Appeal allowed the appeal, holding that the corporate veil could only be lifted to impose liability on individuals who were alter egos of the company, and not another corporate entity.

The owners were represented by NG Vinod, Awang Armadajaya Awang Mahmud and T Danaashini while Leng Wie Mun, Intan Maisarah and Leung Phooi San appeared for Capital City and CCRM. - FMT