Law of Limitation
Brief outline on law of limitation
(By Fariza Sanusi)
“Statute-barred” can be defined as the right of action that can be extinguished by the effluxion of time in accordance with the provisions in statute. For instance, when one party has failed to perform on time (in contract), the other party can sue and at this moment the appropriate limitation will begin to run. At the end of this period the action will normally no longer be maintainable.
Halsbury’s Laws of England, 4th. Edition, Volume 37 para. 17 page 24 on action states :
“Action means any civil proceedings commenced by writ or in any other manner prescribed by rule of court. It has a wide significance as including any method prescribed by those rules of invoking the court’s jurisdiction for the adjudication or determination of a legal right or claim of any justifiable issue, question or contest arising between two or more persons or affecting the status of one of them. In its natural meaning ‘action’ refers to any proceeding in the nature of litigation between a plaintiff and a defendant. It includes any civil proceedings in which there is a plaintiff who sues, and a defendant who is being sued…”.
It is possible for an action to be statute-barred for the purpose of court proceedings but not for the purpose of arbitration, or vice versa. For High Court proceedings the test is whether the plaintiff has issued his writ within the limitation period. For the purpose of arbitration, however, the test is whether or not the claimant has, within the limitation period, serve on the respondent a notice requiring him to appoint or agree to the appointment of an arbitrator requiring him to submit the dispute to the persons so named or designated.
Cause of action means the actual situation stated by the plaintiff; which if substantiated, entitles him to a remedy against the defendant. A cause of action normally accrues when there is in existence a person who can sue and another who can be sued and when all the facts have happened which are material to be proved to entitle the Plaintiff to succeed.
There are two statutes; which are related to limitation of action; namely the Limitation Act 1953 and Public Authorities Protection Act 1948. The Public Authorities Protection Act 1948 only applies for any suit, action, prosecution or other proceeding which is commenced in the Federation against any person for any act done in pursuance or execution or intended execution of any written law or of any public duty or authority or in respect of any alleged neglect or default in the execution of any such written law, duty or authority which the suit, action, prosecution or proceedings shall not lie or be instituted unless it is commenced within thirty-six months next after the act, neglect or default complained of or the case of a continuance of injury or damage, within thirty-six months next after the ceasing thereof.
Limitation Act 1953
Under Section 6 of the Limitation Act 1953 (LA 1953), actions of contract and tort and certain other actions, shall not be brought after the expiration of six years from the date on which the cause of action accrued. This includes actions founded on contract or on tort, actions to enforce a recognizance, actions to enforce an award and actions to recover any sum by virtue of any written law other than a penalty or forfeiture or of a sum by way of penalty or forfeiture.
An action upon a judgment shall not be brought after the expiration of twelve years from the date on which the judgment became enforceable and no arrears of interest in respect of any judgment debt shall be recovered after the expiration of six years from the date on which the interest is due. In the case of Perwira Affin BankBhd v Lim Ah Hee [2004] 2 CLJ 787, it was held by the Federal Court that Section 6 (3) LA 1953 applies to bankruptcy proceedings. A bankruptcy proceeding may be brought within 12 years from the date of the judgment. However, arrears of interest may only be claimed for a period of six years from the date of the judgment. As such, the bankruptcy notice was invalid as it contained arrears of interest outside the period of six years.
For actions to recover money secured by a mortgage or charge or to recover proceeds of the sale of land, Section 21 of the LA1953 clearly states that no action shall be brought to recover any principal sum of money secured by a mortgage or other charge on land or personal property or to enforce such mortgage or charge or to recover proceeds of the sale of land or personal property after the expiration of twelve years from the date when the right to receive the money accrued.
In the case of Tan Kong Min v Malaysian National Insurance Sdn Bhd [2005] 3 CLJ 825, the Federal Court determined three issues;
First Issue: Whether a claim for balance after sale is a claim founded on contract and therefore subject to the limitation period of six years under section 6(1)(a) of the LA 1953 or a claim for money secured by charge on land and thereafter subject to the limitation period of 12 years under Section 21 (1) of the Act?
Second Issue: If a claim for balance after sale is a contractual claim and therefore subject to the limitation period of six years under Section 6 (1)(a) LA 1953, when does the cause of action accrue and the limitation period begin?
Third Issue: If a claim for balance after sale is a claim for money secured by a charge on land and therefore subject to the limitation period of 12 years under Section 21 (1) of the LA 1953:
(i) when does the cause of action accrue and the limitation period begin?
(ii) is the interest component of the claim subject to section 21 (5) of the LA 1953?
(iii) for section 21 (5) of the LA 1953, when does the cause of action for interest in arrears accrue and the six years limitation period begin?
(iv) if the claim for the balance after sale consists of mixture of both principal sum and interest and the claim for interest is barred by section 21 (5) of the LA 1953, is the claim barred altogether?
It was held by the court as follows:-
[1] On the facts, s. 6 could not apply in view of the express exclusion of any action to recover money secured by any mortgage of or charge on land’ in s. 6(5)(b) of the Act. The action was thus not founded on a claim on contract under s. 6. The applicable provision was s. 21. Section 21(1) specifically refers to an action to recover moneys secured by a charge, which is an action in personam, whereas s. 21(2) specifically refers to a foreclosure in respect of mortgaged personal property; which is an action in rem. The limitation period was therefore 12 years from the date when the right to receive the money accrued or 12 years from the date on which the right to foreclose accrued, respectively. There was thus no need to answer question (2).
[2] It was obvious that prior to the auction, it would not be possible for the respondent to ascertain the exact amount that could be realized from the sale of the land and whether there would remain any excess amount due to the respondent. It followed therefore that the respondent could only enforce its right against the personal liability of the appellant under cl. 7 when the sale had been conducted and the excess amount due, if any, had been ascertained.
[3] A cause of action normally accrues where there is in existence a person who can sue and another who can be sued and when all the facts have happened which are material to be proved to entitle the plaintiff to succeed.In the instant case, the point in time where all the material facts were said to be in existence to render the cause of action complete would be after the sale had been conducted and the differential amount remaining due to the respondent had been ascertained. On the facts, the earliest possible date the respondent could bring an action against the appellant under cl. 7 was on 16 March 1992 – the date the property was sold by auction. Since the respondent’s cause of action arose on 16 March 1992, its action against the appellant filed on 17 January 1995 was filed well within the time prescribed in s. 21(1) of the Act.