THE UPDATE SCOOP (#8/2024)
Discoverability of Actual Loss and Not Contingent Loss as the Start of Limitation Period for Negligence │ Tort/Limitation
By TAY & HELEN WONG – June 4, 2024
A claim in civil matter is subject to limitation bar, which means a claim must be filed in court within the period prescribed under the statute of limitation failing which it will be time- barred and denied of access to remedies. A claim or cause of action based on torts of negligence or breach of contract is generally six years from the date on which the cause of action accrued: section 6 (1) of the Limitation Act 1953. The critical question is when does the limitation period begin to run in a claim based on negligently prepared agreement: does it start from the date of the impugned agreement or the date of infringement or threat of infringement of the claimant’s right caused by the impugned agreement ?
That was the question of law before the Federal Court case of Julian Chong Sook Keok & Anor v Lee Kim Noor & Anor [2024] 4 AMR 237. The facts are fairly simple. The respondents/solicitors (D) prepared both the sale and purchase agreement (the SPA) and construction agreement (dated 22.4.2004) for the appellants/purchasers (P) to purchase landed property. D did not conduct any land search on the property; and left the column in the SPA for details on ‘Name of Bank/Financier” blank. This signified that the property was unencumbered and not charged to any bank. On 15.6.2011, the developer was wound up. In November 2011, P received a letter from the land office informing them that the landowners who did not have letter of disclaimer would be required to pay a redemption sum to Bank Islam Bhd which was the chargee of the property in order to redeem it. In February 2012, in a meeting at the land office, P learnt that their property was charged to Bank Islam Bhd. On 2.9.2014, Bank Islam Bhd issued a formal notice to foreclose or proceed for an order of sale (the Foreclosure Notice) and demanded the redemption sum of RM900,000. On 28.7.2015, P sued D for professional negligence and negligent misstatement.
P succeeded at the re-trial at the High Court. The Court of Appeal (COA) however overturned the decision by ruling that the claim was time-barred as the six-year period started to run from the date when the SPA was executed in April 2004, and not from the date P discovered the damage in September 2014. The COA chose to follow its decisions in AmBank (M) Bhd v Abdul Aziz bin Hassan & Ors [2010] 7 MLJ 663 and Vista Specialist Eye Centre Sdn Bhd v Dato’ Loo Son Yong & Anor Appeal [2016] 1 LNS 1127.
The Federal Court disagreed with the COA decisions. The apex court noted the claim was founded not on the contractual relationship between the parties but in tort of negligence. That being the case, the cause of action was complete only when damage was suffered and not from the act which caused the damage. There must be actual as opposed to only a prospective or contingent loss or damage which might never be incurred. Therefore, D’s negligence in the preparation of the SPA only gave rise to a contingent loss, dependent on whether Bank Islam Bhd would enforce the charge. When the bank did by issuing a formal notice to foreclose or proceed for an order of sale on 2.9.2014, that was when there was damage suffered by P. Thus, P’s claim initiated in 2016 was not time-barred.
In doing so, the apex court endorsed the COA decisions in AmBank (M) Bhd v Kamariyah bt Hamdan & Anor [2013] 5 MLJ 448 and Sabarudin Othman & Anor v Malayan Banking Berhad [2018] 1 LNS 357 which recognized the principle of knowledge or discoverability of the breach with reasonable diligence as material for the purpose of determining when a cause of action in negligence had accrued. Accordingly, the highest court of the land answered that the COA decision in AmBank (M) Bhd v Abdul Aziz bin Hassan & Ors was no longer good law.
On a separate but related note, the apex court also drew attention to the amendments made to the Limitation Act 1953 by the new section 6A which was however not applicable to the case as it was filed before the new section came into force on 1.9.2019. The new provision generally allows an action for damages for negligence not involving personal injuries (i.e. non-personal injury negligence claims) to be brought within the latter of the following limitation periods:
(a) six (6) years from when the cause of action accrued; or
(b) three (3) years from the date when the claimant had knowledge or ought to have known:
(i) the material facts about the damage in respect of which damages are claimed;
(ii) that the damage was attributable, in whole or in part, to the act or omission that is alleged to constitute negligence; and
(iii) the identity of the defendant.
Where situation in (b) applies, no action shall be brought after 15 years from the date on which the cause of action accrued.
It is advisable for parties involved in transactions which are governed by the law of Malaysia to be aware of the new provisions which will have impact and implications on any non-personal injury negligence claims arising therefrom.
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Tags: [Section 6 Limitation Act] [accrual of cause of action] [negligence] [actual or prospective or contingent loss] [latent damages]